Mourning Obamanomics and the 95/5 Rule

I was just getting into the groove of Obamanomics when those bitter, religious Massachusettsite gun-clingers went brain dead and voted for a bitter, religious, gun-clinging, truck-driving evil Republican. Hope is gone. Change can’t come. Change filled with hope remains but a misty dream. No “chopange” for me.

I have to admit – I was lulled in by that simpleton “Joe the Plumber” early on. Turns out his name wasn’t really Joe, or he wasn’t really a plumber, or something, but the point is when the media pointed out some little quirk in his personal story I should have followed them in reviling “Joe.”

I couldn’t see then how putting an ordinary citizen under the microscope to shut down his message had anything to do with the quality or accuracy of his message. In fact, I thought it was unfair. Kind of reminded me of the propaganda tactics I learned about when we studied Triumph of the Will and Birth of a Nation in that introductory film class in college.

But I gave up my concern for fairness, for logic, for honesty, and for intellectual consistency as soon as I realized what was at stake: the 95/5 rule.

You see, then-candidate Obama had just said he wouldn’t raise taxes on families making less than $250,000 per year. He also said 95% of taxpayers would receive a tax cut, while 5% would have their taxes go up. I got lost in the math of taxes, leading to my obsession over fairness, which caused me to miss the greater point.

Roughly half of income earners pay no income taxes. Okay, to be fair, the whole group together pay less than 3%, but it’s close to none. That means about half pay all the income taxes. Somewhere around 25% of income earners pay over 80% of all income taxes – which sounds suspiciously like the old 80/20 rule, which is nowhere near as good as the new 95/5 rule, which you will soon see.

But to continue with the confusing math (Who likes math anyway? Just the nerdy brother on that TV show Numb3rs), around 10% of income earns pay 70% of income taxes. That’s more than two-thirds.

That means one out of ten pays for seven out of ten.

5% of income earners pay over 60% of all income tax.

And the top 1% of income earns pay over 40% of all income tax.

Now, you might just assume that the top 1% of income earners EARN over 40% of all income. But it doesn’t work that way.

Our income tax is progressive. That means the more you make, the higher your rate is. The less you make, the lower your rate is. So, for example, imagine Alice and Emma. Alice earns $40,000 per year. Emma earns $60,000 per year. Emma earns 50% more, or one and a half times what Alice earns. If we just had to use elementary math we would say Emma pays 50% more in taxes. So if Alice paid $4,000 in taxes, Emma would pay $6,000. They would both be paying one-tenth of their income in taxes.

But progressive taxes say the more you make, the higher your rate. So they both pay 10% tax – $4,000 – on the first $40,000. Emma pays 15% on the rest of her income – another $3,000 in taxes. Alice pays $4,000 in taxes and Emma pays $7,000. Emma makes 50% more than Alice but pays 75% more than Alice pays in taxes. That’s progress!

But it gets better. For those who don’t pay attention – and most citizens fit this category, because half pay little or no taxes so rates don’t matter – every time Congress cuts tax rates, they tend to exempt more and more people from paying income taxes. In fact, the share of income tax paid by the bottom half of income earners has dropped from 7.5% to just under 3% in the past 30 years! That means fewer and fewer people are paying taxes.

So a tax change comes along and Congress says you don’t have to pay taxes on the first $10,000 you earn. Both Emma and Alice get a $1,000 tax break! Alice pays $3,000 in taxes and Emma pays $6,000 – which is now double.

Over time, with a steady income and more exemptions for the bottom 50% of earners, Alice might see her taxes nearly disappear. One day she pays only about $1,500 per year in taxes. A woman named Melissa earns five times as much, $200,000 per year, and pays maybe $30,000 in income taxes. She earns fives times as much. She pays twenty times as much in taxes. More progress!

Then those sneaky fiscal “conservatives” suggest a cut in tax rates. Melissa will get a $3,000 tax cut. Alice will only get a $500 tax cut. That’s what progressive taxers call “tax cuts for the wealthy on the backs of the working people.”

Alice’s tax cut is one-third of her tax bill, but since her tax bill is so low one-third doesn’t look like very much. Melissa’s tax cut is only one-tenth of her tax bill, but since her tax bill is so high it looks like a lot.

And now Melissa pays $27,000 in taxes and Alice pays $1,000. Melissa pays twenty-seven times as much as Alice pays, although she earns only five times as much. That didn’t seem fair before I got the 95/5 rule.

Before the 95/5 rule, I had a different understanding of the statistics. My view was too simple. To me it was like ten friends going out to dinner, all having similar food, and winding up with a total bill of $100 – just for the sake of the math, even though that’s a really low number. At the end one of the meal one is given a bill for $70, two get a bill for $10 each, and two get a bill for $5 each. Five pay nothing.

That would be perfectly fair if the people offered to pay for the group in advance, but in this very imperfect analogy the people at the table have the power to vote and force others to pay while they eat for free. That seemed unfair, until I got the 95/5 rule.

The 95/5 rule says we can all have whatever we want, and by the power of our votes, enforced by the hand of the government, we can make 5% of the country pay for it. That’s like 19 people going out to dinner at a restaurant we would never pay to go to on our own, and sending the bill to a guy who doesn’t get to join us.

This idea is amazing. It’s radical. Heck, it’s even revolutionary!

Opponents of this very straightforward progressive idea suggest that rich person – Mr. or Ms. 5% – will run off somewhere so they won’t have to pay for us. But, really, where would they go? The rest of the Western world already has pretty high tax rates for those high-income earners, and they won’t have all the conveniences in a developing country, so they’re stuck.

I think the Democrats in Congress took the wrong focus with the 95/5 rule and that may have cost us all. Not everyone wants health insurance. Charitable organizations all over the nation run non-profit hospitals and clinics and have historically provided care for people who can’t afford it. Emergency rooms are mandated by law to care for people who walk in, and insurance companies are required to pay a portion of the cost to hospitals for providing indigent care. On top of that, millions who are eligible for insurance and can afford it don’t bother. It’s a crapshoot, and many are willing to gamble.

Only the sick or the injured care that much about health insurance.

But everyone drinks water. Everyone likes electricity. Lots of people use natural gas or heating oil to stay warm. That’s where they should have started.

Imagine if, instead of universal health care, the government had promised us universal water service. If we don’t expect people to pay for their own health care, why in the hell do we require them to pay for their own water? Water is fundamental. We can die of dehydration in a short time. Personal hygiene prevents the spread of many infections. And we think people should pay for their own water? Why?

This program would have been nearly universal from the beginning. No worrying about how to provide care to tens of millions of newly insured people. Only those in rural areas without the infrastructure would miss out on national water care. All the rest of us would have the option of keeping our current service at the current rate or signing up for the federal government’s public option. Water for everyone! Paid for by one family out of twenty. Who wouldn’t want free water? And, really, who can afford to pay for water?

Imagine trying to survive without electricity. Why weren’t we offered an electric utility public option? Sign up and have your electricity paid by one family out of twenty! And, really, who can afford to pay for electricity?

Same for natural gas and heating oil. These would have been a much better place to start. And, really, who can afford to pay for natural gas or heating oil?

Heck, it would have made more sense to have the public option for universal car insurance instead of universal health insurance. Everyone with a car has to have insurance to get it registered, right? And, really, who can afford to pay for auto insurance?

I was just starting to see the beauty of this plan and all the potential for an easier life. I was seeing government-run utilities, government-run auto insurance, a government-run public option for cable, a government-run public option for cell phone service, and maybe – finally – a government-run public option to make the iPhone affordable. It still costs way more than I want to pay, but I’ve been jonesin’ for one for months now.

Any of you rich fat cats willing to buy nineteen of us iPhones? I bet you’ll get a great group discount. I mean, really, who can afford to pay for an iPhone?

Everything was lining up for my life to get better. I was just starting to understand what the woman in the famous clip below is talking about when she said of Obama during the election, “I won’t have to worry about putting gas in my car, I won’t have to worry about paying my mortgage… If I help Him, He’s gonna’ help me.” [capitalization believed to be in the original]

But those Massachusettsites blew it. That wasn’t a tea party. It was a Kool-Aid party. Stupid Kool-Aid drinkers.

Now we’re all going to have to pay our own way.