| Questions from an Econ 101 test Obama failed while attending Occidental College |
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Here are questions that our President, Barack Obama, failed in his Intro to Econ class while attending Occidental College. Let’s see how well you fair on these common sense questions. 1. True or False: A lower corporate tax rate is better for business growth and growth of tax revenue. 2. Raising the capital gains and dividend taxes affect which of the following groups: a. The super-wealthy b. Small businesses owners c. Large businesses d. Unions e. All of the above 3. True or False: The rich don’t pay their fair share of income taxes. 4. The government is more efficient than the private sector at distributing which of the following services: a. Postal service b. Food distribution c. Health care d. A & B only e. A & C only f. B & C only g. All of the above 5. The best, most efficient, and equitable way to fix Social Security is to: a. Raise the age at which you collect benefits b. Lower the amount of benefits paid out c. Rework the $90,000 cap on taxable income d. Raise the Social Security tax e. A & B f. A, B, & C g. There is not enough information available to answer this question Let’s see how you faired compared to our President: 1. True or False: A lower corporate tax rate is better for business growth and growth of tax revenue. a. Obama’s answer: False b. Real answer: True i. Why: Let’s look at it from a common sense issue: If you get a 10% raise from work, do you have more money to spend? Are you more likely to buy more goods and services? More likely to upgrade your home, take a vacation, or go out for dinner? Of course you are! The corporate tax rate is the same way – when businesses have more money they are more likely to spend it on things like new office furniture, new hardware, new hires, more advertising, and bigger Christmas bonuses. Additionally, the private sector is far more efficient at putting those extra dollars into the economy. How many months do you typically wait to get your tax refund? This is money above and beyond “the fair share” the government should be taking – and they keep it for months and months, interest free. When you have that extra money you put it into the economy immediately. You don’t have to spend it either – simply but putting that money into your bank you allow the bank to lend more money to businesses and individuals to pursue their dreams. 2. Raising the capital gains and dividend taxes affect which of the following groups: a. The super-wealth b. Small businesses owners c. Large businesses d. Unions e. All of the above Obama’s answer: A The real answer: E i. Why: The capital gains tax rate is a tax on the profit you made on some sort of investment. Remember those Ken Griffey Jr. rookie cards you bought for $0.10 when you were 6? Well, if you were to sell those today, you’re supposed to pay a “capital gain” on it. But that is just a mirco-example, let’s look how it plays out day-in, day-out for millions of Americans. 1. Yes, the super wealthy will pay this. Buying and selling in an investment portfolio will (hopefully) create capital gains. While many middle class people have investment accounts, most of their money is tied up into retirement accounts – which are taxed similarly to your paycheck. 2. Many small business owners set up their businesses as S-Corps. Owners typically draw a salary from the corporate and any and all profits must also be taxed. Instead of paying all of that money as ordinary income tax (like you do with your paycheck), owners typically take some of that money as a “dividend” and it is taxed (at least until 2010) at a much lower 15%. These small businesses owners typically pay 35%-45% in income taxes on their salary portion. 3. Large businesses, typically set up as a C-Corp, actually get taxed twice. They get taxed on their profits and then they get taxed on any distributed dividends. C-Corps themselves typically own shares of themselves (meaning Microsoft owns shares of Microsoft stock). Any dividends paid to shareholders are taxed and, as a shareholder, the Corporation receives those dividends and is then taxed AGAIN. This means that if a corporation pays out a dividend it comes up short on the short end of the stick. 4. Yes – the Unions that the Democrats have in their pockets feel the pain with the capital gains tax rate. Does your company offer shares of stock (or employee ownership) as an incentive for you? Guess what, if you ever sell that stock and make a profit, you will pay a whole lot of taxes. Many people are fine with that, as am I, but the more you have to pay in taxes, the less you’ll have to spend on other things. 3. True or False: The rich don’t pay their fair share of income taxes. a. Obama’s answer: True b. Real answer: Its subjective, but by all tangible measurements the answer is false i. Why: In 2006, the IRS reports that the top 1% of wage earners in America paid 39.9% of the taxes while earning 22.1% of the income. This makes their earnings-to-tax ratio 0.55. Additionally, their average tax rate was 22.79%. This group makes at least $388,806 per year. ii. The top 5% of wage earners paid 60.14% of all the tax revenue while earning 36.66% of the nation’s income. This makes their earnings-to-tax ratio 0.61. Their average tax rate was 20.68%. This group earns at least $153,542. iii. The top 50% of wage earners pay 97.01% of all the tax revenue while earning 87.49% of the nation’s income. This makes their earnings-to-tax ratio 0.90. This group earns at least $31,987 and pays, on average, 13.98% of their income in taxes. iv. The bottom 50% of wage earners pay 2.99% of all the tax revenue while earning 12.51% of the nation’s income. This makes their earnings-to-tax ratio 4.18. This group earns less than $31,987 and pays 3.01% of their income in taxes. v. As you can see, by any rational measurement, the “rich” already pay their own fair share. The lowest 50% get to keep 7.5 times more of their income than the top 1% and 6.8 times as much as the top 5%. 4 The government is more efficient than the private sector at distributing which of the following services: a. Postal service b. Food distribution c. Health care c. A & B only d. A & C only e. B & C only f. All of the above i. Obama’s answer: F ii. Real answer: A Anyone who works with federal agencies knows how incredibly inefficient they are. The postal service, having a monopoly on daily letter service, wins because there is no competition. Food costs, however, are grossly over-paid. The National School Lunch program says it costs $2.66 to prepare each meal for students. That is nearly double what it costs the average homeless shelter to provide a meal to the masses. And do we really need to get into health care? Ask anyone on Medicade how easy it is to move through the system. 5. The best, most efficient, and equitable way to fix Social Security is to: a. Raise the age at which you collect benefits b. Lower the amount of benefits paid out c. Rework the $90,000 cap on taxable income d. Raise the Social Security tax e. A & B f. A, B, & C g. There is not enough information available to answer this question Obama’s public answer: G Obama’s answer he shares with his professor: D Real answer: F i. Why? On the campaign trail Obama was asked how he would fix Social Security. He answered by saying more studies needed to be down. This is a coward’s answer. Every administration since Carter has known that a financial apocalypse is headed our way and no one has done anything about it. The CBO has made recommendations to every administration and no one has heeded it because the answer is unpopular. And everyone knows that Obama is in love with people loving him – he won’t do anything to rock the boat. Social Security is doing things that it was never intended to do: paying people for decades. In the beginning the average recipient received less than 24 monthly payments. Why? Because they soon died. Thanks to modern medicine people are living decades longer but adjustments have not been made to account for this. True, the Bush administration wisely pushed the retirement age back for some by anywhere from a few months to a two years, but this is like plugging the dam with your finger. Real change needs to be made. The Boomers are starting to take benefits and many will live another 20 to 30 years. This means that many of them will collect SS for 50% of the total number of years they worked. They will collect exponentially more than they ever paid in. Pushing the retirement age to 70 will immediately fix the issue. However, the Boomers, the ones who ushered in the age of immediate gratification, won’t like that. By lowering benefits to something more sustainable (a 40% drop) will solve the problem. Boomers will collect benefits longer but the lower payout will help keep things in check. Unfortunately the Boomers have proved themselves poor savers. As of 2007 the median Boomer had less than $50,000 saved for retirement. Who knows where that is in today’s economy. Currently, individuals don’t pay SS tax (you pay 6.2% and your employer pays 6.2%) on income over $106,000(ish). This could be raised to something like $250,000. Why not eliminate it completely? Because then the highest earners would get HUGE checks from the government. The amount you get back is based upon the amount you pay in. Pay in a lot, get a lot out. Pay in a little, get a little out. However, don’t be fooled by the lies Obama and the Democrats will definitely tell in the next few years: those on the lower end get a much higher percentage back than those on the high end. What is the solution? Do a combination of all three. Will this happen? Of course not – it will take a strong decision maker and someone with the wherewithal to stand against the backlash. Obama is, of course, the Jellyfish President. He is spineless and won’t take a stand like this. So, how did you fair? Were able to get the answers to these basic economic principles? Or are you, like our President, an idiot when it comes to the economy? |