USA Today: Tax Bills in 2009 at Lowest Level Since 1950

Although you'd never know it thanks to the ineffective media and the ill-informed extremists on the front pages, income taxes are currently quite low from an historical perspective:

Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century.

A recent article from USA today gives further details. Sorry, extremists, sometime the facts just won't conform to your agenda.

Quote of the Day

"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat."

-Theodore Roosevelt

"Imagine if the Tea Party Was Black" - Tim Wise

Anti-racist writer and speaker Tim Wise has written a very thought-provoking and insightful commentary on race in America. Please check it out: Imagine if the Tea Party Was Black.

President Clinton is Right

Everyone should read President Bill Clinton's recent Op-Ed piece in the NYTimes. It is very timely, given the current political climate of partisanship, hate-mongering, and extremism. We would all do well to heed his wise words:

...Finally, we should never forget what drove the [Oklahoma City] bombers, and how they justified their actions to themselves. They took to the ultimate extreme an idea advocated in the months and years before the bombing by an increasingly vocal minority: the belief that the greatest threat to American freedom is our government, and that public servants do not protect our freedoms, but abuse them. On that April 19, the second anniversary of the assault of the Branch Davidian compound near Waco, deeply alienated and disconnected Americans decided murder was a blow for liberty.

Americans have more freedom and broader rights than citizens of almost any other nation in the world, including the capacity to criticize their government and their elected officials. But we do not have the right to resort to violence — or the threat of violence — when we don’t get our way. Our founders constructed a system of government so that reason could prevail over fear. Oklahoma City proved once again that without the law there is no freedom.

Criticism is part of the lifeblood of democracy. No one is right all the time. But we should remember that there is a big difference between criticizing a policy or a politician and demonizing the government that guarantees our freedoms and the public servants who enforce our laws.

We are again dealing with difficulties in a contentious, partisan time. We are more connected than ever before, more able to spread our ideas and beliefs, our anger and fears. As we exercise the right to advocate our views, and as we animate our supporters, we must all assume responsibility for our words and actions before they enter a vast echo chamber and reach those both serious and delirious, connected and unhinged.

Civic virtue can include harsh criticism, protest, even civil disobedience. But not violence or its advocacy. That is the bright line that protects our freedom. It has held for a long time, since President George Washington called out 13,000 troops in response to the Whiskey Rebellion...

Half of American Households Pay No Federal Income Taxes

For all the complaining that we hear in the media about income taxes, it might be surprising to find out that half of households aren't assessed any federal income taxes:

...About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization...

...In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment...

More detail is available in this article.

Quote of the Day

I'm sure I am not the only one who has noticed the destructive effect that partisan bickering and angry extremism are having on our national discourse. I think this old quote is appropriate for the current political atmosphere:

“Partisanship is our great curse. We too readily assume that everything has two sides and that it is our duty to be on one or the other.”-- James Harvey Robinson (1863–1936)

Americans' Sense of Entitlement Can Negatively Impact Personal Finances

Over at Yahoo! Finance, Laura Rowley has an insightful column on personal finance. She draws some interesting conclusions about the psychology of Americans who look for shortcuts and get-rich quick schemes instead of following basic, boring "standards":

...[It] inspired me to think about how much of my financial life is governed by "the standard" -- principles so often repeated they've become cliches: Live within your means; build your skills and get a higher-paying job; stick to a budget; remain debt-free (except for a mortgage); save monthly for big goals, including college and retirement; learn about investing, risk and taxes so you do the right things with your savings; and yes, research deals and clip coupons. It ain't as sexy as speculating in commodities, but it's worked for me.

...For others, looking for solutions "short of the standard" comes from an entitlement mentality. As a recent article in Psychology Today noted, our discontent is culturally afflicted. We optimistically -- and rightly I think -- believe in progress, in mobility, in the power of good ideas to prevail in a free market. But at the same time, the media often casts personal freedom as life with a menu of infinite choices. When something isn't making us happy, we can erase the old and pick something new! We can live a rich life! Perfection -- or at least endless improvement -- is our destiny.

"The result is an ongoing self-appraisal of how your personal life is going, like having a continual read-out of your emotional heart rate," Andrew Cherlin, sociology and public policy professor at Johns Hopkins, told Psychology Today. "You get used to the idea of always making choices to improve your happiness."

Cherlin was talking about the problems of applying the value system of the free market to one's spouse or romantic partner -- but the same issues arise with money. When the goal of life becomes personal happiness, it's easy to internalize the message that we are entitled to more. Welcome to a never-ending sprint on the hedonic treadmill.

I agree with Laura's view. Personal finance is not the mysterious conundrum that some people make it out to be. Actually, it is pretty straight-forward if you are willing to take the path of patience, self-discipline, and common sense.