Why Not Soak the Rich?

· Thursday, December 9, 2010

For the last two years, $250,000 in annual income has become an arbitrary line in the sand of a renewed class war. Those above it must alone have their income taxes raised. Those below are deemed more virtuous and so deserving of a tax cut.

But what exactly is "rich"? Zillionaires such as Warren Buffett, Bill Gates or George Soros surely are. But these wealthiest individuals have so much money at their disposal that they don't care much about income tax rates. Their tax lawyers have found ingenious ways to divert millions of what would be owed to Uncle Sam by funding tax-free pet causes, private foundations and favored charities -- in a way not true of those who make far less than a million dollars a year.

Is annual income a good gauge of wealth? Who is richer -- the architect in Monterey, Calif., who makes $250,000 a year and pays $700,000 for a modest house while picking up the full tab of $40,000 a year for his daughter at a private liberal arts college, or the engineer in Utah making $100,000 a year with a house twice as large at half the cost, with a son on a need-based scholarship at the university? Should annual income alone trump all other considerations when the costs of living vary widely by region, and eligibility for billions of dollars in federal and state subsidies is predicated on income levels?

By the same token, what exactly is "poor" in a globalized world of cheap imported TVs, cell phones and high-tech gadgetry available to most Americans at Walmart and Target? The middle class has better access to what were once called luxury items than did the super-wealthy just two decades ago.

How do we define tax "cuts"? Were the George W. Bush income tax rates really "cuts" for the rich? Or were they across-the-board cuts only in comparison to the higher Clinton rates? In turn, were the Clinton rates actually "hikes" on top of the George H.W. Bush "hikes"? Both upped the lower Reagan rates, which in turn had been "cuts" from the higher Carter rates. In fact, every president's newly adjusted income tax rate is derided mostly on partisan political grounds as either a counterproductive hike that "kills small business" or an unfair "trickle down" cut.

Income taxes don't occur in a vacuum. That the "rich" should pay 39.5 percent on their income might seem justified in isolation. But what about property, state income, payroll and other taxes that together can take up to 65 percent of some incomes in high-tax states?

In addition, income taxes are already graduated, as one pays a higher percentage on income the more one makes. Yet 50 percent of Americans pay no income taxes, while 5 percent of taxpayers pay nearly 60 percent of the total collected. The result is that half of Americans are likely to favor both higher entitlements that they may well receive and higher income taxes that they most certainly will not pay.

Did the staggering annual national deficit arise from a lack of revenue or out-of-control spending? California manages to have the highest income, sales and gas taxes and the largest deficits. Over the last decade, federal income tax revenue -- and budget deficits -- increased almost every year.

Income levels are not static. Belonging to the upper brackets is not always a matter of privilege or inheritance. Some Americans go in and out of the top tax brackets depending on the economy. Others are "rich" only for a few years in their 50s and 60s -- making far less before and after.

If we prefer high rates, we will see either more tax avoidance or a certain reluctance to work an extra day, buy new equipment or hire a new employee -- given than any additional income will be mostly eaten up in taxes. Those who make over $250,000 are those who would be more likely to hire new employees, and they usually can do it far more efficiently than the federal government.

Finally, if the goal is to increase federal revenue, then it is wisest to keep taxes as they are. That encourages Americans to make as much as they can, hire and buy, and thereby enrich the nation at large. But if the aim is instead to ensure that we mostly end up about the same, then raising taxes on the already highly taxed might make us more equal -- and collectively all poorer as well.

(C) 2010 TRIBUNE MEDIA SERVICES, INC.


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Comments

J

For decades Republicans have pursued the strategy of reducing taxes with the idea that this will limit Democrat vote buying spending. This has not worked. It is time for a new strategy. Reducing taxes without spending reduction only shifts the burden to less obvious places, like inflation. To have a robust economy just reduce federal spending. Without the Fed sucking all the oxygen out of the capitol markets business will take off like a moon rocket.

Posted December 9, 2010 at 1:22:17 AM


Will

What do you get when, in politics and the tax laws, you confuse high income with high net worth? Nothing.

The rich (high net worth) shield or relocate their money. The high income earners (those falsely accused of being "rich") either stop producing (voluntarily or not) or refuse to invest.

Imagine what America could have been and done if it had only taxed spending instead of production.

Posted December 9, 2010 at 7:45:39 AM


Chris Baker

The government wouldn't need nearly so much money if they stuck to actual constitutional functions such as defense. 90% of the federal budget is unconstitutional. Leave that money in the hands of people to invest as they choose. Do away with business taxes and see how fast businesses bring back their manufacturing to our country. Watch the unemployment rolls devolve into only those completely unwilling to work. Do away with Departments of energy, education, HUD etc. and let those employees get jobs in the private sector where they will be producing something of value. Let people be responsible for themselves and their own retirement, medical care etc. If people need charity, well, charity is for churches. Taking the peoples money involuntarily and giving it to others isn't charity, it's stealing.

Posted December 9, 2010 at 11:54:03 AM


Mike McGinn

Consider the following (R = "rich", income > $250K, P = "poor", income < $250K):

Amount paid for a gallon of Milk - R: $3.45, P: $3.45

Amount paid for a gallon of regular gas - R: $2.95, P: $2.95

Amount paid for a 40" flat screen TV - R: $500, P: $500

Amount paid for a 2010 Ford Focus - R: $16,290, P: $16,290

Amount paid for our federal government - R: billions (and they need to pay even more), P: next to nothing (and they've paid far too much already)

So, why is it that in the normal world people pay for what an item costs, regardless of their income level, yet when it comes to our government the "rich" should pay for everything while the "poor" should be doled out benefits and goodies at no cost to them?

Posted December 9, 2010 at 11:55:53 AM


William

Mike, it's easier to buy a lot of poor peoples' votes than votes from the rich. And the poor, as the demoncrats know, can vote in anonymity multiple times. Even after they're dead.

Posted December 9, 2010 at 12:02:04 PM


TheVonz

As I keep saying - why is it NOT discriminatory for me to pay more taxes (higher rate) than anyone else??

We should have Fair-tax or Flat-tax immediately.

2012 is too late.

Posted December 9, 2010 at 12:21:08 PM


veritaseequitas

Flat tax, cut government spending, eliminate most government programs, disband the unions.

Posted December 9, 2010 at 12:25:12 PM


Steve

For you flat-tax activists, recognize that you're weaving one noose of many that congress will hang on you. Just like the original income tax, targeted at the top 1% only, they indexed it until now it applies to the majority.

And you'll have to convince fools like deomoncrats that a FLAT TAX is NOT a VAT TAX which is what they REALLY want.

Posted December 9, 2010 at 12:33:19 PM


veritaseequitas

Vonz - our tax code IS discriminatory as is our system of entitlements. For a country that vociferously resists racial profiling, goes to ridiculous lengths to not discriminate according to race, religion, national origin, gender, disability, age, marital status, or sexual orientation, we are only too happy to discriminate against high wage earners and reward those who refuse to work or educate themselves properly so they can get a decent paying job. All so the politicians can have a political football to kick around at election time or when they are intent on further enslaving the American people to the government by passing ridiculous legislation.

Posted December 9, 2010 at 12:36:13 PM


Caseace

And we wonder why originally that only landowners could vote.

Posted December 9, 2010 at 1:37:52 PM


Howard Last

Just follow the Constitution as written. Every law, regulation, rule, bureau, department, agency, etc. not authorized by the Constitution must be abolished or repealed NOW. Every crook and/or mental midget in Washington that does not do this must be removed from office NOW. The 16th amendment must be repealed if it was ever pealed in the first place. Anyone say a snowballs chance in Hell. James Madison call your office.

Posted December 9, 2010 at 3:03:38 PM


mrkim

I'm going to have to agree whole heartedly with Chris Baker above, while thanking him sincerely for extending logic into this discussion.

If the fed. govt. were pared to its Constitutionally defined wants, needs and entitled powers much of the problems we now face would be non-existent.

Only through the unconstitutional expansion of fed. govt.. extension of powers it was never intended to possess, much less wield, do we have the current burgeoning (unconstitutional) federal agency budgets, level of taxation, or (unconstitutional) entitlement programs that make it all completely insupportable.

Quite honestly, neither party is prepared to admit the reality of the unconstitutionality of these agencies, agree to Constitutional limitations of governmental regulation nor the unconstitutionality of the entitlement programs they have legislatively created.

Sadly, sanity and reason have little part in what the federal govt. enacts as law :>/

Posted December 9, 2010 at 3:30:23 PM


RAS

Caseace - I hear you. For quite some time I have felt that people who derive a large portion of their "income" from government programs should have their right to vote rescinded. No matter how you look at the situation, their vote is a conflict of interest. And our politicians exploit that fact.

Of course, if these people could work their way back into a position of self-reliance, then by all means their voting rights would be restored. Until then, it makes no sense to grant them access to the federal purse strings - they'll vote for the biggest cash cow every time.

Posted December 9, 2010 at 3:48:38 PM


Glenn Klotz

"The government wouldn't need nearly so much money if they stuck to actual constitutional functions such as defense. 90% of the federal budget is unconstitutional." I think kind of nonsense sums up the "real" position of the right. Oh and then this gem. "For quite some time I have felt that people who derive a large portion of their "income" from government programs should have their right to vote rescinded." This is why nobody with a brain takes you people seriously. What's next gassing the poor?

Posted December 9, 2010 at 6:42:28 PM


Doktor RIktor Von Zhades

1) Flat tax - Everyone pays, and I mean EVERYONE, even welfare recipients, surely there has to be a way. If they can tax SSI, then welfare should be a no brainer. 5% for individuals 10% business. No deductions, no refunds, eliminates the need for the IRS.

2) No non-tax status for non-profit organizations. I think they should share in the tax burden as well, see how quick they are to start BECOMING a for profit organization.

3) Tax exempt status for only the truly physically/mentally disabled, and for US Military personnel and their immediate families while on active duty.

4) Politicos receive NO SALARY, period. Your living expenses will be paid for by the taxpayer for you and your immediate family.You will be provided with an adequate but very modest home or apartment. No junkets to Aruba, no private education for children, (unless you pay for it). Basically no free ride anymore period other than basic necessities of life. If you think you can work for the American people under these conditions, then you are welcome to serve.

Posted December 9, 2010 at 6:57:42 PM


David

I pay State tax, Federal tax, and Social Security tax on MY earnings so I can pay sales tax on the food my family eats and tax the seeds I use to grow more food, the heat we use to stay warm and the electricity we use to pump our water and the lights to see, and the gas we use to go to the store to get the taxed lumber, nails, tools, etc we use to build the improvements on our land that we pay property tax on (and they will take from us if we don't pay-so we don't really own it despite having paid for it) so we can pay MORE property tax because we have improved "our" land, so my family can be taxed again on the assets I have purchased and leave to them when I die, and all so that "our" government employees can write write MORE tax laws and laws violating my Constitution and my rights, put more people on the government payroll to be paid for with MY earnings at higher wages and benefits than mine, give MY earnings to those who haven't earned it, refuse to protect American companies and American jobs from illegal foreign competition, create laws which essentially assure that American jobs will be lost to overseas compeitors, send MY earnings to foreign nations who fight against us and foreigners within our nation who demand MY earnings for "free" education/healthcare/welfare and bankrupt our entire nation.

I can imagine few things more absurd.

Posted December 10, 2010 at 7:46:27 AM


Joel

Glenn Klotz, are you serious? You really didn't argue very well on the first point you *think* you made. If you were familiar with the Constitution, you would know that there is a problem with how much control the Federal governemnt has taken on themselves. As for the point about folks who pay no taxes having their right to vote rescinded, that amounts to an aristocracy. There is no easy solution there, but one of the founding fathers said (I think it was) that when those who pay nothing into the system realize they can vote to take from those who work to give to those who don't, the Republic is doomed.

Posted December 10, 2010 at 1:56:38 PM


Savage Henry

Glenn... Gassing the poor? Really? That is SO 1942.

Think about it like this. We “evil” Conservatives want money, right? Well, if we GIVE all of our money to the poor we are not serving our cause very well. If we let the poor all starve to death, we have to tax our rich buddies and make actually work, and that won't do at all. The best option is to put the poor to work – good jobs, with real wages too! None of that minimum wage garbage.. That way they can build monuments to us (like bridges, schools, and luxury cars). Once they are all gainfully employed, we can stop giving out large sums of money, and end a whole slew of wasteful programs. Instituting a National Sales Tax in place of the Income Tax would keep you happy by punishing evil rich people for buying luxury items - see, they would raise their own taxes, and they would LOVE IT! Wanna pay more taxes, go buy another Bently and then donate it to a worthy charity. Items such as food, medicine and other necessary items would not be taxed at all.

I just don't know how I am able to live with myself, I am so mean and hateful. Golly Glenn, you sure do make me feel foolish.

Posted December 10, 2010 at 2:34:07 PM


Joseph Randolph

Socialists take from the few and give to the many. People concerned with making money, and in particular those who make lots of it, socialists despise. But socialists use the rich and their hated money to stoke the hatred of the masses for the rich and their monstrous amount of money. Meanwhile, the masses that constitute way more people—the statistic is overwhelming—are the ones socialists appeal to in their hatred of the moneyed minority. Socialists claim to be about equality, but they classify and demonize as they conquer.

Joseph Randolph, author of Debilitating Democracy

Posted December 10, 2010 at 2:43:22 PM


James

Taxing success, or even taxing blue collar is unfair and unequal no matter what you do. The solution is to have a Federal sales tax on all goods and services. As such taxes are based on spending, spend more taxed more, spend less taxed less, save more, more money for capital improvements! And, then eliminate all un-necessary Federal spending. Eliminating spending can be done with each and every Federal agency in the same manner they recently eliminated Military Bases. Each office, agency, department go through a "most efficient organization" study by an outside source and meet those goals within two years and repeat that process every ten years. With all public employee unions de-certified during the study/re-organization! Public employee unions, by their very nature, run contrary to the public they serve. If they can close the bases they can trim the civil service rolls. Flat sales tax, lean government, problem solved? Somebody just has to step up to the plate and get it done!

Posted December 10, 2010 at 2:51:57 PM


jwfan

I'm nowheres near the "rich bracket" (less then $40,000 all my life) but as long as those who make much more have earned their $$ legally, then they should be allowed to. Everyone should pay federal taxes in REASONABLE brackets.

This includes the total of 47% of families that pay NO federal taxes but still get federal $ or aid back in some way for being considered "poor".

Since this 47% has to pay nothing to the feds to run this country on the backs of the 53% that do, the adults of those families should voluntarily donate time & work to the local government weekly, perhaps 15-20 hours, in local community services to help out. Even if it amounts to picking up paper from the streets. -- I'm going to stop for now, this reminds me of our ex-communty service provider, Obama, and I'm getting suddenly nauseated. And the Band plays on ...

Posted December 10, 2010 at 2:53:44 PM


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