During his recent rallies to galvanize support for his “American Jobs Act,” President Obama stated that he wanted to ensure that millionaires paid the same percentage of taxes as secretaries.  While this is a great soundbite, this statement is inflammatory and demonstrably false.  “Millionaires” in this country, which according to President Obama’s definition now includes small business owners and job creators along with the likes of Warren Buffett and Bill Gates, pay a significantly higher portion of their salary to federal income tax, and pay a disproportionate amount of the entire tax burden.

When President Obama states that high income earners are paying less tax then the middle class, he cites the example of Warren Buffett, a multi-billionaire who only pays 17.4% of his taxable income.  However, Mr. Buffett is an anomaly in the upper tax bracket, because most of his income is earned through capital gains, which is taxed at a relatively lower 15% rate (IRS, February 2011).  According to figures compiled by the nonpartisan Congressional Budget Office (CBO), those making over $1 million per year pay an average tax rate of 23.3%, while those making between $30-50,000 dollars pay an average tax rate of 7.2%.

Most people in the upper tax brackets are not receiving stock options as compensation, and are therefore subject to the same progressive tax structure as “secretaries.”

Under the current tax system, millionaires don’t just pay a higher tax rate; they also are responsible for a much higher percentage of income taxes paid.  Again, the most recent CBO statistics available demonstrate that the top 1% of wage earners contribute nearly 40% of all income taxes paid in this country.  The bottom 50% of America’s wage earners contribute only 3% of all income taxes.  Additionally, under the current tax structure created under the Bush tax cuts, lower income citizens received a new lower tax bracket as well as the Earned Income Tax Credit, which has enabled further reductions to their tax burden.

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Bill Gates of Microsoft fame (or infamy)  visited the Claremont Colleges this past week. You can watch that visit here. What follows is a transcript typed by one of my associates of that event.

Gates, after discussing his foundation’s work, had harsh words for America’s health care system.

Our health care system has huge problems. It’s got equity problems where the poorest in the country of all the rich countries our poorest quarter get the worst health care so the accessibility is a huge problem.

We spend 17.8 % of GDP, the number two, which is Switzerland, spends 12.3% so you have — it’s mind blowing — you have over a five percent of GDP difference. That means that one out of every twenty people in the country are excess people in our health care system that other countries that get better results than we do, don’t have.  If you take inefficiency disadvantage like that, than you take how much we spend on defense versus everybody else, and how much we spend on legal stuff versus everybody else, you can start to say, ‘Wow. How do you stay competitive with those things?’ So our medical system has to change. I happen to like the Swiss system and the German system the best, which are not a single payer Canadian or British type system, but I’d take any rich country’s medical system over ours. Ours is provably the worst. [Audience laughter]. It is the most expensive and the least equitable.

Gates walked back a bit from that statement. “Now you have to be a little careful, because everybody else drafts off of us. We do a lot of the research. We do more basic research, our consumers pay more per drug. What other countries do is watch what happens here. If something is cost-effective, they adopt it, usually with about a three-year lag. Many of the things we do, like care at the end of life, or various therapies that are unbelievably expensive,  they just don’t adopt those things. “

In other words, the Europeans have death panels.

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American Federation of Teachers’ President Randi Weingarten has been doing her best to make sure Big Labor has a say in education reform.  She wants to drive the train.  The National Education Association, on the other hand, is taking the tact of putting dynamite under the tracks.

While Weingarten says all the right things and uses all the necessary poll-tested phrases, she really wants to maintain the status quo.  No tenure reform.  No need to judge teachers by any measure other than seniority.

But in an interview with Newsweek, she made this curious statement, in response to Bill Gates saying, “We need to measure what they do, and then have incentives for the other teachers to learn those things:”

“Football teams do this all the time,” Weingarten responded. “They look at the tape after every game. Sometimes they do it during the game. They’re constantly deconstructing what is working and what isn’t working. And they’re jettisoning what isn’t working and building up on what is working, and doing it in a team-like approach.”

That’s correct – they do. It’s too bad that public education does not operate more like the NFL.

Here’s an idea. Let’s have the NEA and AFT become the owners of a new NFL franchise. For a lack of a better name, we’ll call the new team the Thugs.

Players on the Thugs’ roster would receive tenure after two years, like they do in New York City Public Schools.

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California’s progressive-era experiment in direct democracy was supposed to elevate the voters above the special interests, allowing voters make law themselves through the statewide initiative process. That this process is now virtually owned by the special interests is yet another example of the immutable Law of Unintended Consequences in government.

A brief perusal of the California Secretary of State’s initiative campaign finance disclosure website shows that some $120 million dollars has been raised by 53 groups supporting or opposing California’s nine November ballot initiatives. By comparison, California’s two major candidates for governor have raised or given to their campaigns $176 million to date, exclusive of independent expenditures and political party spending on both sides.

Initiative spending

What’s common about most of this spending is that it is fairly transparent in that we know the identities of the people, the labor unions and the companies writing the checks. Sure, there are cut-out committees that ship money to each other in an attempt to obfuscate their spending, but, with a spreadsheet and enough patience, a person can figure out who is funding whom.

For instance, you can crack open the disclosure page for the biggest No on Prop. 23 committee and see that they’ve raised more than $23 million. This includes $1 million from Hollywood director James Cameron, $700,000 from America’s richest man, Bill Gates, millions more from rent-seeking Silicon Valley venture capitalists who hope to grow wealthier off the economic pain of average Californians. You can also see that the National Wildlife Federation gave $3 million. Sadly, here is where campaign disclosure gets weak, because the National Wildlife Federation doesn’t have to disclose its donors since contributions on an initiative are considered nonpartisan and thus, not subject to the stringent disclosure rules as money destined to directly influence a partisan campaign.

This oversight is especially egregious when it comes to Prop. 22, a densely written amendment to the California constitution (already the third-largest in the world) that consumes eight pages of fine print to accomplish its purpose: constitutionally lock in redevelopment agency protections to protect them from pressure to reform.

California’s redevelopment agencies are supposed to target so-called “blight.” What they often do instead is use eminent domain to take property from one set of owners and give it to another so as to increase the tax base for a city.

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“Ever since Teddy Roosevelt first called for reform in 1912, seven presidents — Democrats and Republicans alike — have taken up the cause of reform time and time again,” President Obama said in a statement hailing the Christmas Eve Senate vote to take over 1/6 of the nation’s economy.  “Such efforts have been blocked by special-interests lobbyists who have perpetrated the status quo that works better for the insurance industry than it does for the American people.”

Note the date of TR’s “calling” for reform. It’s 1912.  Nationalized health care was part of the platform of the Progressive Party that year and every year thereafter. Americans are more familiar with the name Theodore himself gave to that third party bid. After being shot by a would-be assassin in Milwaukee, TR said it takes more than a single bullet to stop a Bull Moose. Instantly, the colorful sobriquet was applied to the Progressive Party.

What did Theodore himself think of his new-found allies, the Progressives? He was sincerely committed to reform. And he certainly thought he had been cheated out of the Republican Party presidential nomination in 1912. After all, he had won all the state party primaries in the limited number of states that held them. But TR also recognized that some of his Progressive supporters went over the top. For them, he coined the wonderful phrase, “the lunatic fringe.”

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