Category Archives: Government

What Do Foxxy and Her Cohorts Pay?

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There’s a new website called LegiStorm that allows you to look up what the members of Congress pay their staffs.  My US Representative is Virginia Foxx and she paid her staff $167,538.89 from 1/1/06-3/31/06, or in other words the first quarter of the year.  If the payroll stays consistent then her payroll for Foxx’s staff for the year will be about $670,000. If you include the Congresswoman’s salary of $165,200 for the year then the overall payroll for her office is $835,200. Here’s the breakdown by staffers with quarterly income and then the estimated yearly amount:

  • Rep. Foxx, Member, $41,300.00 ($165,200.00)
  • Richard Hudson, Chief of Staff, $27,941.67 ($111,766.68)
  • Deana Young Funderburk, Legislative Dir., $18,750 ($75,000.00)
  • W Todd Poole, District Director, $15,000.00 ($60,000.00)
  • Robert Honold, Legislative Asst., $11,000.01 ($44,000.04)
  • Amy Auth, Press Secretary, $9,624.99 ($38,499.96)
  • Christopher Wall, Legislative Asst., $9,000.00 ($36,000.00)
  • Michael Church, District Caseworker, $8,750.01 ($35,000.04)
  • Aaron Whitener, Field Rep, $8,375.01 ($33,500.04)
  • Mary Carpenter, Executive Asst., $8,000.01 ($32,000.04)
  • Joshua Wall, Constituent Liaison, $7,749.99 ($30,999.96)
  • Erica Shrader, Legislative Corresp., $7,500.00 ($30,000.00)
  • Rebecca Potts, Constituent Liaison, $6,750.00 ($27,000.00)
  • Emily Beth Richardson, Constituent Liaison, $6,624.99 ($26,499.96)
  • David Ward, Jr., Staff Asst., $6,458.33 ($25,833.32)
  • Teddie Hathaway,Shared Employee, $5,499.99 ($21,999.96)
  • Carrie Church, Part-time Employee, $3,750.00 ($15,000.00)
  • Lindsay Moore, Part-time Employee, $3,000.00 ($12,000.00)
  • Nicole Gustafson, Shared Employee, $3,000.00 ($12,000.00)
  • Jeff Stockdale, Staff Asst., $763.89 ($3,055.56)

So if you include Rep. Foxx herself you could look at her office as a small business "owned" and financed by we members of NC’s 5th Congressional District with 20 employees, 14 of whom are full time, and a total payroll of about $835,000.  This is another reason why we truly need to work hard to hold our representatives accountable; not only are they setting the direction for our country they are also a considerable investment of our money and resources.  And remember this is payroll; it doesn’t include other expenditures of the Member’s office or even the employees’ benefits.

Now I’m not being critical of Rep. Foxx or her employees here. (If you look at the comparison of all NC Representatives she has the second lowest payroll).  No one is getting rich off of these salaries, especially those who are working in her DC office.  Even Mr. Hudson’s six-figure salary doesn’t go that far when you take into account the DC housing market.  And those lower level staffers who work in DC aren’t in it for the money.  They’re either doing it out of idealism, or they’re putting their time in before they leave the Hill to make their financial futures on K Street, or maybe both.  Still, this is a significant investment of our taxpayer finances and we need to keep an eye on it.

So how does Rep. Foxx compare to her NC counterparts in the house?  Here’s the payroll for each Rep.’s office, including the member’s pay, for the first quarter of 06 with projected annual numbers in parentheses:

  • Rep. Butterfield, D-1st, $266,157.44 ($1,064,629.70)
  • Rep. Etheridge, D-2nd, $258,866.49 ($1,035,465.90)
  • Rep. Jones, R-3rd, $257,483.31 ($1,029,933.20)
  • Rep. Price, D-4th, $268,588.22 ($1,074,352.80)
  • Rep. Foxx, R-5th, $208,838.89 ($835,355.56)
  • Rep. Coble, R-6th, $277,340.42 ($1,109,361.60)
  • Rep. McIntyre, D-7th, $283,688.05 ($1,134,752.20)
  • Rep. Hayes, R-8th, $227,819.41 ($911,277.64)
  • Rep. Myrick, R-9th, $272,511.11 ($1,090,044.40)
  • Rep. McHenry, R-10th, $202,645.39 ($810,581.56)
  • Rep. Taylor, R-11th, $246,365.99 ($985,463.96)
  • Rep. Watt, D-12th, $267,562.67 ($1,070,250.60)
  • Rep. Miller, D-13th, $262,803.37 ($1,051,213.40)

So if you total it up North Carolina’s payroll just for our members of the House of Representatives is $3,300,670.76 for the first quarter of ’06 which projects to $13,202,682.52.  In my next post I’m going to look at North Carolina’s Congressional delegation in a little more detail.

Iraq for Sale

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If there’s one area that I think most people can agree on the war, whether they’re ‘fer it or agin’ it, I think most would agree that profiteers are the lowest of the low.  There’s a new movie out (and yes it looks like it was made by some lefties) that I’m hoping comes out on Netflix soon or I’ll end up buying it.  It’s called Iraq for Sale and if you visit the site you’ll find that there’s a blog and all kinds of other information to be had there.

I’ve often written about the soaring real estate prices in DC throughout the late 90s and early 00s, but they didn’t really take off until after 9/11.  The late 90s could be explained by the tech explosion (many people don’t realize how much of the internet/telecomm infrastructure was based in the DC area) but I think the early 00s can only be explained by the huge run up of defense spending after 9/11 and through the beginning of the war.  DC has always grown rapidly during wars, but I think this expansion was particularly sharp because of all the money flowing to contractors who then created very high paying jobs (contractors pay their people much better than the government/military pays theirs).

I want to see this film, but I also want to see more hard hitting reporting done on the contractors.  Some of these companies are making HUGE money on the war, much more so than in past conflicts because so much more work that used to be done by military personnel is being done by contractors.  I want to see how the money is being spent with contractors, what the contractors are delivering in return and exactly how much lucre some of these companies’ executives are getting at the cost of American blood.  Personally I think it’s a non-partisan issue, and if some people see that kind of questioning as an attack on certain leaders of the country then I’d say that’s a tacit acknowledgement of exactly what many of us suspect is going on. 

Screw it, I’ll just say it: George, Dick and Don’s friends are getting awful fat off of this little adventure in Iraq.

More on Diebold’s Electronic Voting Machines

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I’ve written before about the dust-up over the proposed use of electronic voting machines here in Forsyth County, NC.  That dust-up led to the resignation of the longtime director of elections because the Board of Elections wouldn’t support her proposal to use the Diebold machines, and over time the Board of Elections has been proven correct in their negative assessment of the machines.

Ed Cone has a piece about the trouble election officials are having with the Diebold systems being used in the Maryland primaries.  Things are so bad that Maryland’s governor is calling for a return to paper ballots for the November elections.  David Allen, whose been on top of this issue for a long time, has some interesting comments himself.

This is VERY important stuff and we need to get it sorted out by November since this mid-term election has the potential to have the greatest impact on our country’s future as any mid-term election in a generation.  And we definitely need to have all this figured out before ’08. Is there any doubt that ’08 will be the most important presidential election in decades?

Follow the Money

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One thing I’ve learned in all the years I’ve done marketing is that you base your decisions on your customers’ actions rather than their words.  I can’t tell you how many survey’s I’ve done asking customers if they are interested in a product at a certain price, had the vast majority say "Heck yeah!" and then when I launched it had about 10% actually buy it.  They weren’t lying, it’s just that when it came time to actually pony up some money they decided they didn’t really need that product after all.

The lesson I took out of this is that if you really want to know what people value just look at how and where they spend their money. I think the same can be said of society in general, and that’s what makes looking at how our government spends our money so interesting.  After doing a little research I was able to find the following numbers (source: http://nationalpriorities.org), and I’m using all the zeroes to make sure we all understand that this is a buttload of money:

Overall Federal Spending FY06: $2,470,000,000,000

Mandatory (i.e. entitlement) Spending: $1,500,000,000,000
Here’s how the mandatory spending breaks down:

  • Social Security: $510,000,000,000
  • Income Security: $285,000,000,000
  • Medicare: $285,000,000,000
  • Health: $195,000,000,000
  • Net interest payments on national debt: $180,000,000,000
  • Veteran Benefits & Services: $45,000,000,000

Discretionary (what Congress allocates each year) Spending: $960,000,000,000
Here’s how the discretionary spending breaks down:

  • National Defense: $518,000,000,000
  • Education, Training, Employment & Social Services: $86,400,000,000
  • Health: $57,600,000,000
  • Other*: $57,600,000,000
  • Income Security: $48,000,000,000
  • International Affairs: $38,400,000,000
  • Administration of Justice: $38,400,000,000
  • Veterans Benefits & Services: $28,800,000,000
  • Transportation: $28,800,000,000
  • National Resources & Environment: $28,800,000,000
  • General Science Space & Technology: $28,800,000,000

*Other is defined as energy, agriculture, commerce and housing credit, community and regional development, general government and the administration of Medicare and Social Security.

I’m still kind of sifting through all this and trying to figure out what it means, but I can tell you that I’m pretty surprised that our spending on science and technology is only  1.17% of federal spending, or that one discretionary category, national defense, is the largest segment at 20.99%.  I had assumed that Social Security would be the largest but it is a little less at 20.65%.

I understand that some of these numbers are generalizations; for instance there is definitely quite a bit of money spent on science and technology (R&D) that is probably under the national defense umbrella, and it does lead to some technological breakthroughs that are then licensed to businesses, but it is a relatively paltry sum.  Still, these broad numbers give us a sense of where our tax dollars are going, and it’s important to keep them in mind as we debate the future priorities of our country.

We also need to keep in mind where all this money comes from.  Here’s a breakdown:

Total FY06 Revenue: $2,000,000,000,000
Here’s how it breaks down:

  • Individual Income Taxes: $894,000,000,000
  • Social Insurance: $774,000,000,000
  • Corporate Income Taxes: $227,000,000,000
  • Other: $159,000,000,000

So 44% of the country’s revenue comes from the individual income tax, 39% from social insurance taxes and a little over 11% from corporate income taxes.  Keep in mind that the social insurance taxes are mostly funded by payroll deductions on individuals (6.2% for Social Security and 1.45% for Medicare) with an equal amount paid by their employers.  So if you take half of the social insurance and apply it to individual taxpayers they are contributing just over 64% of the revenue and if you apply the other half to corporate taxpayers they are contributing just over 30%. (These are definitely not specific numbers since social insurance also includes things like unemployment and general retirement, but I think it’s close enough).

What’s interesting to me is that the percentage of revenue from individual income taxes has remained steady over the last fifty years at 44% while the percentage from corporate income taxes has decreased from 27% to 11%.  I have a sneaking suspicion that the reduction in corporate income taxes is probably directly correlated with the growth of business PACs and their influence on K Street. 

It’s also interesting to note that the Social Security and Medicare taxes are only applied to the first $84,900 of income so higher salary earners actually pay a lower tax rate than those under the $89,400 line.  And 75% of taxpayers pay more in Social Security and Medicare taxes than they do in income taxes, which highlights how many are near or below that $84,900 line.

After looking at these numbers, and keeping in mind that we’re coming up on a rather important mid-term election, I think we, as a society, need to decide what our priorities are.  We need to figure out if we want to continue electing people who are spending our money as highlighted above, or if we want to change our spending habits.  Do we pick on the silly pork barrel projects like the "bridge to nowhere" or do we concentrate on the big fish like defense, medicare and social security? Of course we should do both, but I suspect that if we took care of any one of the big three we would do as much as we would if we tackled every single pork barrel project.

We also need to decide how we’re going to pay the bills.  Do we continue to with our current tax policies or do we restructure them to relieve some of the stress on individual taxpayers?  Do we phase out income tax in favor of a federal sales tax?  Or do we keep the income tax but simplify it and go to a "flat" tax? Many people call these regressive taxes because the disproportionally impact the poor, but is this true?  And if it is do we as a people believe that the wealthy should contribute more since our society has allowed them to prosper? Do we continue to levy Social Security and Medicare taxes at the current level or do we raise them or lower them?

Questions like that last can’t be answered in a vacuum, but rather are contingent on answering questions related to spending, i.e. should we even continue with Social Security?  Much like losing weight is about diet AND exercise, setting the course for our country is about taxing AND spending and I think it’s high time we got serious about both.

I’ve Been Thinking About Taxes

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Before I get started I want to say one thing: when I write about taxes I reserve the right to change my mind, just as I do when I write about other topics.  Okay.

I’m in the middle of a little self-education campaign re. America’s tax system.  The reason I’m doing it is that it occurred to me that while I’ve always complained about paying taxes, I’ve never really understood them.  I mean when I entered the work force I had no idea what Social Security, Medicare/Medicaid or FICA was.  I just knew there was a chunk of change being pulled out of every paycheck to be held by the government for when I was an old geezer, and what 16-25 year old cares about that?

Then a few years ago I started reading that Social Security probably wouldn’t be there when I retired, or that the government was dipping into social security to pay for stuff.  My little English-Lit brain kind of went, "Huh?" and then moved on because I had things like kids and work to worry about.

Now, though, I want to take the time to understand.  I want to know what income taxes are, why we have them and why our tax system is so complicated.  So I went on-line and bought a bunch of used books and I also went to the library to check out one book in particular, David Cay Johnston’s "Perfectly Legal."  It’s been a real eye opening experience.

Side note: I don’t agree with some of Johnston’s recommendations but I
found a lot of his background information fascinating and some of his
arguments compelling.  Definitely a worthwhile read, as is his coverage
of the IRS for the New York Times.

I still consider myself on the front end of the learning curve on income taxes, but after reading Perfectly Legal and starting in on a history of taxes in America (Federal Taxation in America: A Short History, by W. Elliott Brownlee) I can say that I think the following:

  • Income taxes are absolutely necessary.  While we can all argue about how much we should pay in taxes and about how much government we should fund (i.e. what the government should do with the money) I think we can all agree that part of being in our society is contributing to the common well-being of the nation and income taxes are an effective means to that end.
  • Income taxes can be fair, but currently aren’t.  I’ve read a lot of arguments for flat taxes and federal sales taxes, but I have to say that if the income tax system is fixed properly I think it has the most potential to be the most equitable.
  • Republicans and Democrats are both responsible for the current state of the income tax system. 
  • Our income tax system is unnecessarily complex, and that complexity hurts the middle class most and helps the upper class most.
  • The system is complex because the various loopholes and incentives that create the complexity benefit Congress’ most influential constituency, what Johnston calls the political-donor class.
  • The reason that the middle class is hurt the most by this system is that most people within the middle class have what I’d call normal income; wages and salaries.  They also have a higher share of their income taxed for Social Security.  The wealthy, especially the extremely wealthy, get most of their income via interest on their equities, stock options, etc.  Also, the average middle class person is taxed before they get their money while the wealthy are taxed after they’ve had their money in their pockets for a while.
  • The debate about taxes needs to start with a debate about defining income. We need to define income before we can get serious about tax reform.
  • We also need to debate the goals of the country, the fiscal priorities of the country, while we debate tax reform.  We may discover that we can reduce all of our taxes if we get serious about cutting back on what we expect the government to do.
  • The average American is woefully ignorant of the tax system, how it works and its history.  I’m willing to bet that the vast majority of Americans don’t know that income taxes didn’t exist until 1913 or that the top income tax rate during WWII was 90%.  Puts the current top tax rate in a different perspective doesn’t it?
  • Finally, there is no one in power that has an interest that would be served by fixing the system.  I wouldn’t count on anyone in power today to fix this thing.  It will have to be a remarkable grassroots effort.

Here’s the biggest thing I’m struggling with: should the wealthy pay a higher percentage of their income in taxes?  The rationale for this "progressive" taxation is that the wealthiest have accrued the greatest gains from our society and thus should pay a requisite share.  On the other hand if I make $100,000 and you make $1,000,000 and we both pay 20% then I’m paying $20,000 and you’re paying $200,000.  It looks to me like you’re already paying more.

Of course the reality is that in today’s system my $100,000 is actually less because I’ve had Social Security taken out of a huge chunk of it.  In fact you paid the same amount of Social Security on your one million as I did on my 100k, so right there I’m playing catch up.  And you’re much more likely to have loopholes to exploit and to have paid a tax lawyer to find them for you.  So in today’s system maybe we need you to pay 35% to make it equitable.

But if we redefine income to include all money we gain in the year no matter how we gain it, and do away with the loopholes and then come up with a tax rate that will serve the country’s needs, do we need to have a progressive tax?  One point here is that we’d probably want to have a lower rate (or  no tax) for the truly poor, but above that line we might be able to have one fair rate.

I’ve also read the argument that if we went this route we’d kill the incentives for investing in public companies, which is a key driver of economic growth.  I don’t know if I buy that though, since you’re still basically making money for doing nothing other than gambling on a company’s success, and that’s pretty easy money.  Can’t see the possibility of paying income taxes on easy money reducing its allure.  (I’m thinking that Greensboro blogger David Boyd might be prepared to debate/educate me on this point).

But, here we come to another sticking point for me: how do we tax someone who hasn’t realized the gain yet?  In other words if I’ve invested in Microsoft and the company gains 10% on the year, should I get taxed on the capital gains now or should I get taxed when I actually sell the stock and get the cold, hard cash?  I guess I could pay the capital gains now and then if I lose money the next year claim a deduction, but then we start getting back into complexity don’t we?

So like I said, I’m on the front end of this process and I have a long way to go, and I’m sure my thoughts will evolve on these matters.  But one thing I’m pretty certain will not change is my feeling that the system is broken, it’s not fair and we need to fix it for the good of our country.

Accountants, Lawyers & Congress

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Venture capitalist Brad Feld has a blog post called The Accountants Strike Back in which he has a series of observations that begin with "Accounting is the only profession where…" Let’s just say he’s not high on the accounting profession.

I’ll give you some samples below and you tell me if you agree that for most of them you could substitute "law" or "being a member of congress" for "accounting" and still be completely accurate.  To me these "industries" might be the true Axis of Evil:

Accounting is the only profession where you can completely screw
everything up (see Enron, WorldCom, Kmart, etc..) and your “punishment”
(so long as you aren’t Arthur Andersen) is that the “powers that be”
enact all sorts of legislation (SOX, Option Expensing, 409A, FASB 123,
etc.), that create a full employment act for your profession, radically
increase your fee structures, and make everyone in your profession
better off than when everyone thought you were doing a good job and
maintaining the public trust.

Accounting is the only profession that actively tries to get rid of
most of its clients, but at the same time tries to bleed every last
cent out of them on their way to being fired.

Accounting is the only profession that doesn’t care if their processes
negatively impact your business, what your opinion of them is, or
whether or not you are a happy customer.

Accounting in the only profession whereby a new regulation comes down,
a client alert is sent out and not a single client can understand
anything that is on the printed page.

Tax Cheats

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David Cay Johnston is a New York Times reporter who wrote Perfectly Legal, a book I highly recommend if you want to: a. Get thoroughly pissed off and b. Get a better understanding of how our tax system does and/or does not work. Johnston has an article in today’s Times about how, according to a report from the US Senate Permanent Investigations subcommittee, tax cheating by the superrich is out of control.  Here’s some excerpts from the article:

The report details how the Quellos Group, a tax shelter boutique
based in Seattle, “concocted a tax shelter” using $9.6 billion “worth
of fake securities transactions that were used to generate billions of
dollars of fake capital losses.”

Senator Levin said that when
investigators asked for trading records they were first told the trades
were private, over-the-counter transactions. He said investigators
asked for trading tickets or other evidence of who owned the $9.6
billion worth of stock and were told the stocks were never owned by the
parties involved.

“They just wrote down numbers on paper and
claimed losses,” he said. “It was just like fantasy baseball, except
the taxes not paid were for real.”

And more:

The investigation, which took 18 months, involved 74 subpoenas, 80
interviews and the collection of more than two million documents, and
yet Senator Levin said “the six cases we present are just examples,
just a pinhole look.”

The 400-page report recommends eight
changes, some of them aimed at going after the law and accounting
firms, banks and investment advisers that the report says enable tax
schemes that rely on complexity, secrecy and compartmentalizing
information so that advisers can claim they had no idea that the
overall transaction was a fraud.

“We need to significantly
strengthen the aiding and abetting statutes to get at the lawyers and
accountants and other advisers who enable this cheating,” Senator Levin
said, adding that “we need major changes in law to stop the use of tax
havens” by tax cheats.

And finally this:

The report details a scheme created for Mr. Saban to avoid more than
$300 million in taxes from sale of his half interest in the Family
Channel and related properties.

Mr. Saban told Senate
investigators that he never understood the transactions but undertook
them after asking two questions of Mr. Wilk and his personal tax
lawyer, Matthew Krane.

Mr. Saban said he asked whether the deals
were legal and whether a major law firm would certify them as proper.
The two lawyers, Mr. Saban said, answered “yes to both,” so he went
ahead.

Later, when Mr. Saban learned that he had paid $54 million
in fees to Quellos; Cravath Swaine & Moore, a New York law firm;
and others for what turned out to be what the report described as fake
transactions, he said he felt “misled, lied to and cheated.”

Lewis
R. Steinberg, who as a Cravath Swaine partner helped design the deal
and wrote an opinion letter attesting that it was more likely than not
to work as a tax shelter, told Senate investigators last week that he
relied on assurances from Quellos and Mr. Johnson that real
transactions took place, not fake trades. Mr. Steinberg, who is now at
UBS Securities, another firm named in the report, is a prominent tax
lawyer and in 2004 was chairman of the tax section of the American Bar Association.

After reading Perfectly Legal and Conspiracy of Fools I’m convinced that we’ll never see tax-reform or even an even playing field because the real white collar crooks and crook-enablers are in the legal and accounting professions and they have an inordinate influence on the Hill and throughout the halls of federal and state governments.  Unfortunately I think Senator Levin and his allies are fighting a lost cause.

Another Reason That Forsyth County’s Election Board Was Right

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If you’ve been following the saga of the Forsyth County’s Election Board over the last year or so you’ll remember that the former director of elections left because the board would not support her recommendation that the county adopt Diebold’s paperless ballot system for future elections. In a post last May I linked to several pieces that really made the board’s stance look like a good one and now there’s some new information that show the Diebold machines are even more susceptible to fraud than previously realized and of course that makes the board’s decision look even better.

Hanging chads anyone?

Winston-Salem Government’s Use of Eminent Domain is Stupid and Immoral

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Winston-Salem, NC wants to seize some property for redevelopment using eminent domain despite the fact that they have not exhausted their other options.  You can read the entire story here in the Winston-Salem Journal, but here are the highlights:

  • The city is trying to redevelop a strip of land on Liberty Street between the Smith Reynolds airport and downtown. They’ve set aside $500,000 to acquire all the lots.
  • One landowner, Charles Baldwin, has a competing offer for the land from Firetree Ltd., a company that wants to build a halfway house there.
  • The city is offering $145,000 for the land and Firetree is offering $172,500.  The property is appraised by the city at $172,000, which means they are taxing Mr. Baldwin based on that number but offering to buy it for $27,000 less.  The city claims that the difference is because of environmental issues with the property, but since the city acknowledges those issues exist doesn’t that mean their tax assessment should reflect the lower value?  That’s the immoral part of this whole thing.
  • The city is suing to seize the property using eminent domain, but one component of eminent domain law is that the landowner be compensated fairly.  In what universe does an offer that is more than 15% less than an existing offer OR assessed valued by the city constitute fair compensation?  And what genius figured that suing would cost the city less than $28,000 which is really all they’d have to offer to get the land?  That’s the stupid part of this whole deal.

I truly hope that the city gets slapped around on this deal.  Whether or not you support eminent domain in concept I think any reasonable person would find it unconscionable that the city would tax a landowner at a higher assessed value than they are willing to pay for the land themselves.  Simply put that is total bull excrement.

Sen. Stevens Should Fire the Aid that Prepped Him for This

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Sen. Ted Stevens of Alaska, the champion of the "Bridge to Nowhere," got up in front of God and country to defend his stance on the telecommunications bill working its way through Congress.  Here’s a brief excerpt from Wired:

I just the other day got, an internet was sent by my staff at 10
o’clock in the morning on Friday and I just got it yesterday. Why?

Because it got tangled up with all these things going on the internet commercially…

They want to deliver vast amounts of information over the internet. And
again, the internet is not something you just dump something on. It’s
not a truck.

It’s a series of tubes.

And if you don’t
understand those tubes can be filled and if they are filled, when you put your message in, it gets in line and its going to be delayed by
anyone that puts into that tube enormous amounts of material, enormous
amounts of material.

Huh?  Seriously, if the Senator doesn’t mind coming off looking like a dumbass then he’s fine, but if he does mind then he ought to fire whoever got him ready for this appearance.  No one expects him to understand all the technical nuances of the internet, but he should at least know the difference between "email’ and "internet".