Monthly Archives: November 2017

Why Warren Buffett pays 0% social security tax

Social Security is billed along with Medicare (health care for the poor) as an anti-flat tax called FICA where middle class workers pay 7.65 -15.3%, and rich people pay essentially 0%. The reason that Warren Buffet and other rich people pay 0%, on a percentage basis, far less than their secretaries, is that there is a FICA cap of $127,200 currently, and he earns far more than $127,200. Buffett’s secretaries pays 7.65%, or which 6% approximately is social-security payment, and the rest Medicare. Buffett’s company then matches the 7.65% — a situation that applies to virtually every employee in the US.

A self employed person though, a gardener say, pays both the employee and employer portion or 15.3%. The same $127,200 cap applies, but since few gardeners make more than this amount, they are likely to pay 15.3% on all earnings, with no deductions. FICA really socks the poor and middle class, and barely touches a rich man like Buffett. This is the tax-inequality that most needs addressing, in my opinion, and one I have not heard discussed.

A short history of FICA

A visual history of FICA rates (right), and of the salary cap (left). Medicare contributions were added in 1966.

As I write this, there is a debate about tax reform that mostly involves income tax, but not at all FICA. Income tax could be improved, in my opinion, and should be. We could remove some exemptions that are being abused, and we should lower the general rates, especially for foreign-earnings, but the current income tax isn’t that bad, in my opinion. Buffett likes to brag about the high rate he pays, but it’s not a bad rate compared to the rest of the world. And Buffett benefits from a lot of things we don’t. His income is taxed at a lower rate than a worker’s would be since most of it is unearned. And, like most rich folks, he has exemptions and deductions that do not apply to most. He can deduct cars, private airplanes, and interest; most folks don’t deduct these things since they don’t spend enough to exceed the “standard deduction”. I’m happy to say these issues are being addressed in the current tax re-write.

The current, House version of the GOP tax proposal includes a raise in the standard deduction and a cap on interest and other deductions. There is a general decrease in the tax rate for earnings, and a decrease for earnings made abroad and repatriated. I’d like to see tariffs, too but they do not appear in the versions I’ve seen. And I’ve very much like to see a decrease in the FICA rate coupled with a removal of the salary cap. Pick a rate, 4% say, where we collect the same amount, but spread the burden uniformly. Why should 7.65%-15.3% or the workmanship wages got to the window, the orphan, and healthcare of the poor, while 0% of Buffett’s go for this?

Some other tax ideas: I’d like to see shorter criminal sentences, especially for drugs, and I’d like to see healthcare addressed to reduce the administrative burden.

Robert E. Buxbaum, November 17, 2017. In the news today, the senate version puts back the tax exemption on private jets. The opposite of progress, they say, is congress.

Penicillin, cheese allergy, and stomach cancer

penecillin molecule

The penicillin molecule is a product of the penicillin mold

Many people believe they are allergic to penicillin — it’s the most common perceived drug allergy — but several studies have shown that most folks who think they are allergic are not. Perhaps they once were, but when people who thought they were allergic were tested, virtually none showed allergic reaction. In a test of 146 presumably allergic patients at McMaster University, only two had their penicillin allergy confirmed; 98.6% of the patients tested negative. A similar study at the Mayo Clinic tested 384 pre-surgical patients with a history of penicillin allergy; 94% tested negative, and were given clearance to receive penicillin antibiotics before, during, and after surgery. Read a summary here.

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Orange showing three different strains of the penicillin mold; some of these are toxic.

This is very good news. Penicillin is a low-cost, low side-effect antibiotic, effective against many diseases including salmonella, botulism, gonorrhea, and scarlet fever. The penicillin molecule is a common product of nature, produced by a variety of molds, e.g. on the orange at right, and used in cheese making, below. It is thus something most people have been exposed to, whether they realize it or not.

Penicillin allergy is still a deadly danger for the few who really are allergic, and it’s worthwhile to find out if that means you. The good news: that penicillin is found in common cheeses suggests, to me, a simple test for penicillin allergy. Anyone who suspects penicillin allergy and does not have a general dairy allergy can try eating brie, blue, camembert, or Stilton cheese: any of cheeses made with the penicillin mold. If you don’t break out in a rash or suffer stomach cramps, you’re very likely not allergic to penicillin.

There is some difference between cheeses. Some, like brie and camembert, have a white fuzzy mold coat; this is Penicillium camemberti. it exudes penicillin — not in enough to cure gonorrhea, but enough to give taste and avoid spoilage — and to test for allergy. Danish blue and Roquefort, shown below, have a different look and more flavor. They’re made with blue-green, Penicillium roqueforti. Along with penicillin, this mold produces a small amount of neurotoxin, roquefortine C. It’s not enough to harm most people, but it could cause some who are not allergic to penicillin to be allergic to blue cheese. Don’t eat a moldy orange, by the way; some forms of the mold produce a lot of neurotoxin.

For people who are not allergic, a thought I had is that one could, perhaps treat heartburn or ulcers with cheese; perhaps even cancer? H-Pylori, the bacteria associated with heartburn, is effectively treated by amoxicillin, a penicillin variant. If a penicillin variant kills the bacteria, as seems plausible that penicillin cheese might too. Then too, amoxicillin, is found to reduce the risk of gastric cancer. If so, penicillin or penicillin cheese might prove to be a cancer protective. To my knowledge, this has never been studied, but it seems worth considering. The other, standard treatment for heartburn, pantoprazole / Protonix, is known to cause osteoporosis, and increase the risk of cancer.

A culture of Penicillium roqueforti. Most people are not allergic to it.

The blue in blue cheese is Penicillium roqueforti. Most people are not allergic.

Penicillin was discovered by Alexander Fleming, who noticed that a single spore of the mold killed the bacteria near it on a Petrie dish. He tried to produce significant quantities of the drug from the mold with limited success, but was able to halt disease in patients, and was able to interest others who had more skill in large-scale fungus growing. Kids looking for a good science fair project, might consider penicillin growing, penicillin allergy, treatment of stomach ailments using cheese, or anything else related to the drug. Three Swedish journals declared that penicillin was the most important discovery of the last 1000 years. It would be cool if the dilute form, the one available in your supermarket, could be shown to treat heartburn and/or cancer. Another drug you could study is Lysozyme, a chemical found in tears, in saliva, and in human milk, but not in cow milk. Alexander Fleming found that tears killed bacteria, as did penicillin. Lysozyme, the active ingredient of tears, is currently used to treat animals, but not humans.

Robert Buxbaum, November 9, 2017. Since starting work on this essay I’ve been eating blue cheese. It tastes good and seems to cure heartburn. As a personal note: my first science fair project (4th grade) involved growing molds on moistened bread. For an incubator, I used the underside of our home radiator. The location kept my mom from finding the experiment and throwing it out.

Forced diversity of race is racist

Let me browse through some thoughts on efforts to address endemic racism. I’m not sure I’ll get anywhere, but you might as well enter the laboratory of my mind on the issue.

I’d like to begin with a line of the bible (why not?) “‘Do not pervert justice; do not show partiality to the poor or favoritism to the great, but judge your neighbor fairly.” (Lev. 19:15). This sounds good, but in college admissions, I’ve found we try to do better by showing  favoritism to the descendants of those who’ve been historically left-out. This was called affirmative action, it’s now called “diversity”.  

In 1981, when I began teaching chemical engineering at Michigan State University, our department had race-based quotas to allow easier admission to the descendants of historically-disadvantaged groups. All major universities did this at the time. The claim was that it would be temporary; it continues to this day. In our case, the target was to get 15% or so black, Hispanics and American Indians students (7 in a class of 50). We achieved this target by accepting such students with a 2.0 GPA, and not requiring a math or science background; Caucasians required 3.0 minimum, and we did require math or science. I’m not sure we helped the disadvantaged by this, either personally or professionally, but we made the administration happy. The kids seemed happy too, at least for a while. The ones we got were, by and large, bright. To make up for the lack of background we offered tutoring and adjusted grades. Some diversity students did well, others didn’t. Mostly they went into HR or management after graduation, places they could have gone without our efforts.

After some years, the Supreme court ended our quota based selection, saying it was, itself racist. They said we could still reverse-discriminate for “diversity,” though. That is, if the purpose wasn’t to address previous wrongs, but to improve the class. We changed our literature, but kept our selection methods and kept the same percentage targets as before.

This is a popular meme about racism. It makes sense to me.

This is a popular meme about racism.

The only way we monitored that we met the race-percent target was by a check-box on forms. Students reported race, and we collected this, but we didn’t check that black students look black or Hispanic students spoke Spanish. There was no check on student honesty. Anyone who checked the box got the benefits. This lack of check bread cheating at MSU and elsewhere. Senator Elizabeth Warren got easy entry into Harvard and Penn, in part by claiming to be an Indian on her forms. She has no evidence of Indian blood or culture Here’s Snopes. My sense is that our methods mostly help the crooked.

The main problem with is, I suspect, is the goal. We’ve decided to make every university department match the state’s racial breakdown. It’s a pretty goal, but it doesn’t seem like one that helps students or the state. Would it help the MSU hockey squad to force to team to racially match the state; would it help the volleyball team, or the football team?  So why assume it helps every academic department to make it’s racial makeup match the state’s. Why not let talented black students head to business or management departments before graduation. They might go further without our intervention.

This is not to say there are not racial inequalities, but I suspect that these diversity programs don’t help the students, and may actually hurt. They promote crookedness, and divert student attention from achieving excellence to maintaining victim status. Any group that isn’t loud enough in claiming victim status is robbed of the reverse-discrimination that they’ve been told they need. They’re told they can’t really compete, and many come to believe it. In several universities, we gone so far as to hire “bias referees” to protect minorities from having to defend their intellectual views in open discussion. The referee robs people of the need to think, and serves, I suspect, no one but a group of powerful politicians and administrators — people you are not supposed to criticize. On that topic, here is a video of Malcolm X talking about the danger of white liberals. Clearly he can hold his own in a debate without having a bias referee, and he makes some very good points about white liberals doing more harm than good.

Robert Buxbaum, November 5, 2017. In a related problem, black folks are arrested too often. I suggest rational drug laws. Some financial training could help too.