Thread: Taxing the "rich"? No, ruining America!

Exclusive: December 7, 2010 - Comments (16)

Taxing the "rich"? No, ruining America!

By: Nathaniel Davidson

President Obama has long been an envy-mongering demagogue, and is not above Marxist class warfare rhetoric. For example, he insists that the "rich" aren't paying their 'fair share', just as Hillary Clinton has said, as well as Tim Geithner, himself a tax cheat.

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Their ilk oppose cutting taxes, claiming that it will "cost the government money". Of course it doesn't; it means that it takes less from us. This betrays the statolatry of the Left: they believe the State really owns everything, while we taxpayers should be grateful for any money it generously allows us to keep.

The fairness fallacy

As I've said before, the word "fair" should be abolished from politics, since it means diametrically opposed things to different people. For example, I can actually agree with Obama and his minions—but only by taking the opposite meaning: the rich are not paying their 'fair share' precisely because they are paying too much. The top 1% of Americans pay 40% of all federal income taxes, and the top 10% pay as much as 70% in total. Conversely, the bottom 40% pays close to nothing.

I think it's 'fair' that people should pay the same proportion. President Reagan thought the same, and he cited the biblical tithe as a precedent: if God prospers a person five times as much, then he should pay five times as much, not twenty times or more.

And our top corporate tax rate, federal and state combined, is 35%, second only to Japan in the industrialized world. The OECD average is 19.5% and the world average is 18%.

Raising taxes?

The Left love to talk about "raising taxes", but they can do no such thing. All they can raise is the tax rates; this doesn't always lead to increased total tax revenues. Lefties claim this because they fondly imagine that people in the real world won't change their behavior. But if people keep less of what they earn, they are less likely to take entrepreneurial risks or take higher-paying higher-responsibility jobs.

Similarly, companies are moving operations from America to low-tax countries, costing the government $60 billion in revenues annually. And even within America, people and companies are moving from tax-gouging states like California, New Jersey and New York, costing these states a fortune. Low-tax states that don't kill the golden goose reap the benefits of these business refugees. (Even without this, corporate taxes are a legal fiction: they are just passed onto customers.)

In fact, the reverse is true: tax cuts have increased tax revenues. Republican presidents Coolidge, Reagan and Bush cut tax rates, and the economy boomed as people worked harder and were more entrepreneurial. So not surprisingly, the total tax revenue boomed as well.

Take "Silent Cal": he and his predecessor Warren Harding inherited an economy devastated by WW1, and unemployment nearly 12%. They rejected what would now be called 'stimulus' spending—for the radical reason that it was unconstitutional, as well as taking jobs from the private sector. Instead, they slashed the top tax rate to 25%. The result? The 'Roaring 20s', a time where entrepreneurs developed Kleenex, scotch tape, the zipper, sliced bread, and especially the radio, and unemployment plummeted to 2%.

And none other than JFK, an icon of the Left, was very outspoken on the need for tax cuts to increase tax revenue:

"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased—not a reduced—flow of revenues to the federal government."

"Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort— thereby aborting our recoveries and stifling our national growth rate."

Compliance waste

Even more rapacious than the overt confiscation is the cost of trying to comply with the IRS forms. When the income tax was first introduced under Woodrow Wilson in 1913, the form and instruction were only four pages. Now it's grown to 176 pages, thanks to politicians buying votes with tax breaks. The tax code itself now is 3,784,745 words long, not counting the 2009 and 2010 changes, according to John Stossel. For comparison, the King James Bible has only 783,137. But the IRS is always here to help: the IRS now lists 1,909 publications, forms, and instructions for download.

Stossel cites a survey from the National Taxpayer Union (NTU), showing that compliance with this monstrosity takes Americans a total of 7 billion hours, or "the equivalent of 3.7 million employees working 40-hour weeks year-round without any vacation". The cost of this compliance runs to $103 billion for individual taxpayers alone, not counting state, local or corporate taxes.

A solution?

I have much sympathy with the "Fair Tax", except for its crass question-begging name, as said above. This proposes replacing the current unfair monstrosity with a 23% tax on consumption, which would be a vast improvement. There would be some unfairness on retirees who have already paid income taxes to earn their nest egg, and would then be hit with a huge consumption tax when they spend. And could we trust our greedy politicians to keep their word to replace the income tax, instead of adding this one on top—as has happened in other countries and indeed in most of our states?

I think that Steve Forbes' "Flat Tax Revolution" has a better chance. This proposes a flat tax of 17%, with abolition of the death tax, tax on savings, capital gains taxes, and no taxes on social security benefits. It's even better, since Forbes proposes that a family of four would pay no federal income tax on its first $43,765 of income and would pay only 17 cents on every dollar it earned over that. This system is more like that of the biblical writers, Reagan and our Founding Fathers. Even more importantly, the tax return form could be completed on a postcard.

But even more important than all of these is cutting government spending drastically—if it were not for over-spending, they would be less need for high taxes in the first place.

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Kathyet
_________________
"In matters of style, swim with the current. In matters of principle, stand like a rock".

Thomas Jefferson

The flat tax is not the better option over the FairTax, because it still invades privacy, it still supports a tax industry, it still taxes corporations, it's still a tax on income and earnings and a disincentive to the whole purpose of productivity and work which is income and earnings, and there's no reason on God's Green Earth for a family of 4 that earns $43,000 a year to not to contribute to the cost of their government at least when they spend above the poverty line like everyone else.

And as for Seniors, they will no longer pay any tax on their income, and they like every other US citizen or legal permanent resident will be eligible for a Rebate of all the taxes charges on their spending on essentials and necessities up to the poverty line like everyone else plus they won't have to traipse out into the weather to hunt down their tax preparer carrying their little or large envelope of documents, receipts and proof of income, traipse back to pick up the documents and tax return, then traipse down to the post office to mail the damn thing, and they won't have to hand out $100 to $400 for the return every year or be forced to hand over 17% of their income to the federal government. Instead they'll do nothing except check their bank statement once a month to see their Rebate deposit o $203 a month for a single or $406 a month for a couple and then spend as they please, paying tax as they go as they see fit to choose and when they do, there's no difference in the prices they pay because the FairTax is taxed on new goods and services which have no embedded taxes, because all taxes on income and earnings of producers and providers are eliminated by the FairTax.

www.fairtax.org