Are rich Americans paying their share of taxes?

Yes, and more, writes Scott A. Hodge of the Tax Foundation here. Citing the most recent Internal Revenue Service data  (through 2007), the richest 1 percent of individual U.S. taxpayers paid 40% of total federal income taxes. The poorest 95% paid 39%. (The 4% next-richest paid the rest.)

But the richest 1% are paying more because they also make a growing portion of U.S. income - over 20%, writes Catherine Rampell on the New York Times website here.

That still seems like the rich pay more than their share. But income tax is only half the story, writes Casey B. Mulligan of the University of Chicago here.

Social Security and Medicare payroll taxes now collect almost as much as the personal income tax, Mulligan writes. They're collected mostly, not from the rich, but only on the first $106,000 of family income. That burden - that tax -falls mostly on poor and middle-class workers, and their employers. (Though you could argue, aren't their employers rich?)

"One AIG subsidiary, the National Union Fire Insurance Company of Pittsburgh, shows what can happen by heavily relying on affiliates... At the end of 2008, more than a third of National Union’s portfolio was invested in the stock of other AIG companies, which are not publicly traded. National Union might not be able to sell all of these shares, and it is not clear what it could get for them. Many states bar insurers from investing that heavily in related companies..

"National Union’s biggest reinsurance partner is American Home Assurance, an AIG. subsidiary that has taken $23.1 billion of obligations off National Union’s hands. In a New York filing, American Home reports total assets of $26.3 billion, but part of that consists of assets that cannot be used to pay claims, like furniture... In addition, American Home has 'unconditionally' guaranteed the obligations of 16 other AIG subsidiaries, bringing the total it might have to pay to $140.6 billion...

"Like New York regulators, Pennsylvania regulators say they do not see a problem. 'The insurance companies remain strong and are probably the most valuable assets within the AIG structure,' said Joel Ario, Pennsylvania’s insurance commissioner. 'To the best we know it, we think the companies are sound.' "

Of course, if Commissioner Ario didn't think that, he'd have to take over National Union, AIG's lead U.S. property and casualty unit. Which would make for an interesting set of discussions with the Federal Reserve, which currently oversees AIG and the federal taxpayers' investment that keeps it afloat, and whose goal is to protect the financial system, while PA and other states are charged with protecting policyholders.

UPDATE: PA Insurance Commissioner Ario tells me he has two beefs with the Times story. One, he says state insurance examiners are well aware of AIG's internal investments. "In order to understand National Union, you have to trace their financial obligations all the way through. We do that." 

Two, he says policyholders read these kinds of stories and worry their insurance policies will be worthless. But "the policyholders are the most protected group in here. They are first in line, if there were a problem, to be protected under the state (property and casualty insurance) guaranty fund." Which means small policyholders, at least, will get paid even if the company were to fail.

He agreed the Fed and the states have different goals re AIG, but said they have a "mutual interest in cultivating the asset." I asked if AIG would be weaker when it sells and spins off business lines, as planned. He said that's an interesting question. One of the things they're watching from Harrisburg, and Albany, and Dover, and Sacramento... 

UPDATE 2: Ario and acting NY insurance supervisor Kermitt Brooks have sent a letter protesting "inappropriate assertions based on incomplete information" to the Times:  "We are convinced, based on a complete, broad and deep ongoing review of all current material information, that the claims-paying abilities of these companies remains appropriate. If this status changes, we are prepared and fully able to step in on behalf of policyholders and protect their interests." And taxpayers, and the US financial system? That's not the state regulators' job...

"Gross domestic product contracted at a less-than-projected 1 percent annual rate after shrinking 6.4 percent in the prior three months, the most in 27 years, Commerce Department figures showed today in Washington. Revisions showed the economic downturn last year was even deeper than previously estimated," Bloomberg News reports here.

Have to take Bloomberg's word. Commerce hasn't posted the figures on its page, last we checked. What good is it?

"The economy was forecast to shrink at a 1.5 percent pace, according to the median estimate of 78 economists surveyed by Bloomberg News... Last quarter's decline was the fourth in a row... the longest losing streak on record."

When the President sits down at the White House tonight for a beer with Harvard Prof. Henry Louis Gates Jr. and Sgt. James Crowley, the Massachusetts cop who famously arrested Gates for getting mouthy, all three will be drinking foreign-owned brews, complains Anat Baron, Los Angeles-based director of the movie Beer Wars and former manager of Mike's Hard Lemonade.

"The president keeps saying it will be entrepreneurs that take us out of the recession. Well, there's plenty of American-owned, entrepreneurial beers available around the White House," Baron told me from home in Los Angeles.

Foreign-owned? "Obama’s press secretary says he’ll be drinking a Bud Light. It’s the No. 1 beer in America in terms of sales. It's made by Anheuser-Busch, which for $52 billion was sold last year to Belgian beermaker Inbev."

Why's Obama drinking that stuff? "He was seen at a Wizards game with a Budweiser. He’s trying to show he’s a populist. An all-American guy. He’s been quoted not wanting to drink a designer beer, a frou-frou beer."

So what's Obama's beer record? Campaigning in Pennsylvania, "he was seen drinking a Yuengling. It was great he had a Yuengling. Didn't that start out as a coal miner’s beverage?" You betcha - in hard-coal Pottsville, Pa., 90 miles up the Schuylkill from hereabouts. "And for his inauguration he drank a local Chicago beer. Goose Island. That's what they call a craft beer." 

So why Bud, after Yuengling and Goose Island? "You think the president made this choice? His handlers chose. They picked the easy choice. He’s supposed to be the president of change. I understand why he drinks (Bud) at sporting events. It's all they have. But at the White House he has free choice. When the president chooses a burger, does he go to McDonald’s? He goes to the local burger joint.

"We hear Sgt. Crowley is drinking a Blue Moon. That's marketed as being made by Blue Moon Brewing Co. But it's actually owned by Coors," and distributed in partnership with Miller. 

Aren't those good American beer names? "Miller now is owned by South African Brewing. Coors is owned by MolsonCoors, of Toronto." Blue Moon "is made in Toronto, in the Molson brewery.  The craft brewers will tell you Blue Moon is a faux craft beer. Sold next to Sam Adams and Sierra Nevada. But it is sold by a conglomerate."

How about Prof. Gates? "He's drinking a Jamaican beer. Red Stripe. It's mostly owned by Diageo, the world’s largest liquor company." Based in London. A colonial beer. 

"So you’ve got a British-owned beer, a Belgian-owned beer, and a half-Canadian, half-South African beer. There are 1400 small American breweries. He could choose a Sam Adams."

Or, she added, "Yuengling would have been a great choice. It’s the oldest American brewery. And it’s American-owned." UPDATE: PhillyDeals didn't know (but should have), and readers have pointed out, that Yuengling is still the subject of a Teamster Local 830 boycott, confirms the local's Danny Grace. That makes "Vitamin Y" an unlikely choice for a labor-backed President.

Joe Trahern, former Washington lobbyist for General Motors and a former aide to ex-Senate Democratic Leader Tom Daschle (D-S.Dak.), four other Democrats in Congress, and President Clinton, has joined Comcast Corp. as Senior Director of Federal Government Affairs, which means he'll lobby Congress.

Also, Rudy Brioche', former legal advisor to Federal Communications Commission member Jonathan S. Adelstein and an ex-aide to U.S. Sen. Frank Lautenberg, D-N.J., joined Comcast Tuesday as Senior Director of External Affiars and Public Policy Counsel, which means he'll help draft legislation strategy. Statement (from Tuesday) here.

Comcast - under executive vice president David L. Cohen, who actively oversees the lobbying group - is following the national tilt toward the Ds, after the departure last year of Comcast Republicans Kerry Knott, senior vice president for government affairs, and Brian Kelly, senior director of federal government affairs.

It's back to the future for Comcast, which like other cable companies leaned Democratic in the old days when their natural adversaries the entrenched TV networks were more or less Republican, but bulked up on GOP staffers after 2000, when that made sense during the Bush adminstration. Though it's not clear that hiring Republicans helped Comcast any when Comcast critic Kenneth Martin chaired the FCC. Will Comcast's Democrats do better under Obama?

Cigna Inc. profits from health insurance, the Philadelphia company's biggest business, rose to $177 million for the second quarter, from $154 million in the first quarter, even though premiums and fees slipped to $2.86 billion, from $2.91 billion, as membership in Cigna plans fell to 11.2 million, from 11.4 million in the first quarter. Also down from 12.1 million a year ago.

That means an after-tax profit margin on health insurance of 5.4%, up for the quarter and for the year. How do you get more from less? By laying off workers (Cigna announced cuts in January), jawing down vendor prices, and cutting real estate costs, said spokesman Chris Curran. More on Cigna corporate earnings, which rose overall thanks mostly to favorable interest-rate movements, in the company's reports here.

No recovery yet. Corporate America is making money mostly by cutting people and other costs, not boosting sales.

Second-quarter earnings are out and, as usual, most publicly-traded U.S. firms are reporting they beat the projections that analysts published - which were based on what the companies had been feeding the analysts. They like to look like they're doing better than expected.

But as economist Ed Yardeni tells clients in a note today, parsing the Standard & Poor's 500 industry-by-industry: "All ten sectors have a positive earnings surprise, but just five have a positive sales surprise so far." Emphasis added.

That's better than the first quarter, when 8/10 sectors had "positive earnings surprise", but just 2/10 had "positive sales surprise." But that doesn't mean sales were up for half of companies. It just means they beat their own low self-generated expectations: If you told people you thought sales could drop 10%, and they only fell 5%, that's a "positive surprise." But companies do that consistently. It's still not growth.

As Yardeni notes, "51.8% of the companies have a positive sales surprise, but just 25.6% of the companies have sales up year-over-year." That means, at three-quarter of companies, sales fell, compared to a year ago.

It's probably good that companies are profitable. That keeps share prices from collapsing, which helps pension plans and other investors. Maybe it will lead companies to invest in new products and plants, and hire people. But until that happens large scale, we're not out of this recession. 
 

Essent Guaranty, Inc., www.essent.us, a Radnor company formed by former Radian mortgage-insurance executive Mark Casale, has gotten the go-ahead from Pennsylvania Insurance Commissioner Joel Ario to start selling insurance. The National Association of Insurance Commissioners has also cleared Essent for "expedited" approvals in other states, the company says. "We look forward to working with Essent," said California insurance official Jill Jacobi in Essent's statement.

Could be good news for the Philadelphia area if Casale continues hiring, since other area financial companies have slowed hiring (Vanguard, ING) or cut jobs (Advanta, PNC, Wachovia).

A bipartisan group of dairy-state Congressmen are forming a Congressional Dairy Farmers Caucus, presumably to lobby for higher milk prices, which have collapsed, to the special loss of all the farmers (and their bankers) who expanded as dairy prices inflated in the mid-2000s.  

US Reps Joe Courtney, D-Conn., and Peter Welch, D-Vt., are co-chairmen, joined by Pennsylvania's Joe Sestak and Chris Carney, New York's Chris Lee, Florida's Tom Rooney, and Harry Teague of New Mexico. Nobody so far from the biggest dairy-producing state, California.  But Jaime Castaneda and Dana Brooks from the National Milk Producers' Federation joined the honorable reps in a kick-off press conference this morning.  

Their statement: "The Caucus will serve to educate members and their staff on issues of concern to the dairy industry while also serving as a means to build consensus on legislation impacting the dairy industry.  Dairy farmers nationwide have suffered tremendously as milk prices have collapsed and milk production costs exceed the selling price. Prices have fallen approximately 50 percent this year and this Caucus will work with industry leaders, dairy economists, producers and processors to reach common sense bipartisan solutions to address the current dairy crisis. Historically, the dairy industry has been plagued by price volatility, but the current crisis threatens the future of the entire dairy industry. "

We'd like to know how much "addressing the current dairy crisis" will cost us in cents per gallon.