Thursday, April 15, 2010

Death and Taxes

Today is 'tax day' in America; the deadline to submit your tax documents to the government. This is an occasion marked by the perennial caterwauling from the right wing - many call today 'Theft Day' to represent their frustration with paying taxes.

One of the most common complaints is how 47% of American households don't actually pay any income tax; because they make too little money or qualify for exemptions or credits according to current tax law. As Fox News, with their usual impartial charm, argued:
"Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem." Full story here.
This has led to many right-wingers demanding that a 'flat' income tax be introduced. They argue that forcing the burden of taxation onto the rich is counterproductive, as the rich are the ones who apparently 'create jobs' and their wealth 'trickles down' to the rest of America eventually.

The right wing suggest that the rich and the poor should both pay an equal percentage of their income; sharing the burden equally despite this idea being completely idiotic.

There are dozens of reasons why introducing a flat tax into the American system would be an absurd idea; most notably the fact that America already has a 'stealth' flat tax.

MSN wrote an article back in 2007 that points out how - factoring in sales tax, state and township taxes and the rest of the myriad tariffs Americans are forced to pay - almost everybody in the country already pays a flat rate of about 40% in tax. Read the article here.

The second reason is slightly more complicated; based on the concept that not everybody's income is rated equally. Those on the lower end of the scale, earning $30,000 a year or so, find their unavoidable bills - like tax, groceries, gas and rent - chewing up as much as 70% of their income. Those making $300,000 a year will find the percentage of their income used to pay essential bills is much, much smaller - leaving them with a lot more disposable income.

To force poor and rich to pay an equal percentage of their income in taxes has a disproportionately negative effect on those making less. What might look like an 'equal' tax rate on paper would effectively be far, far higher on those with less disposable income, because it takes a much bigger chunk out of their effective income.

The third reason why the flat tax is a ridiculous idea attacks the concept behind it. The right wing argue that taxing the rich has a negative effect on the economy; as the wealthy 'create jobs' and their income 'trickles down' to benefit the rest of us. This is the notion behind 'Reaganomics' and is, essentially, a complete load of horseshit.

Giving tax breaks to poorer people will actually boost the economy more than tax breaks for the rich, because poor people are more likely to spend that money. Boosting the economy involves circulating the wealth back into the system. Giving tax breaks to the rich means that income is more likely to wind up sitting in a trust fund, a stock portfolio or a bank account. The rich already have more disposable income than the poor, so it's dubious to assume that giving them tax breaks would make them spend more.

Besides, there's a very convincing case to be made that the richest Americans don't pay nearly their fair share in taxes. Warren Buffett argues: "Frankly, an economy where my receptionist pays a lot higher tax rate than I do does not strike me as a just economy."

And while Republicans often deny it, evidence proves that the truly wealthy in America are already well-shielded against the taxation system. Exemptions, credits and 'breaks' provide lucrative ways for individuals and corporations to dodge what they're *meant* to be paying.

"The richest families in our country pay a lower tax rate than the people who take care of their children, or who teach in their schools, or who would put out a fire if their house were to start to burn," said Gene Sperling, spokesperson for think tank The Center for American Progress.

Another case in point? Exxon made $35 billion in profit during the latest gas crisis, but didn't pay a single penny in corporate tax in America last year.

Don't get me wrong - I'm no fan of taxation. One of the reasons I wanted to live in America was because a working couple could live within their means in the USA, whereas in the UK we barely made ends meet. I believe lowering taxes would have an enormous benefit on the economy (hence why Obama introduced a second tax refund to follow Bushes, which helped sustain the economy.)

However, I am a fan of everybody paying their fair share and this is just another example of the right wing attempting to shove the burden of taxation onto the middle and working class; who arguably pay more than enough already.


One Salient Oversight said...

Actually what might work is a flat tax along with a flat subsidy to go along with it.

So you might pay, say, 20% of your income no matter how much you earn, and then you get back $10,000, no matter how much you earn.

Which means you end up with a non progressive tax along with a fairly nice redistribution of wealth to balance it out.

The only good thing about as flat tax is that it is simple to enforce.

Andy said...

Roland, I have a lot of disagreement with what you wrote, and when I have time, I'll let you know why.

But, I definitely agree that a flat tax is NOT the way to go here in the US. I'm actually for scrapping "income tax" altogether...

I'll get my thoughts together, and get back with you.

I'm sure you can hardly wait! ;)

Susanne said...

I always like reading your POV.

Andy said...

Okay Roland...let's start with Exxon. "Exxon" is not just "some guy" that made billions and didn't pay taxes. Exxon is millions of shareholders, and tens of thousands of our fellow citizens that receive pay for their labor. (Some a lot of pay...some not so much). Each of those shareholders, and tens of thousands of employees pay taxes.

But wait...many do not, and actually receive earned income credits that refund MORE than they contributed each year.

Should Exxon have paid taxes while making billions? Quite simply, NO! If they had a tax liability then, YES! But obviously the corporation did not, or it would have been extracted from them by the Feds.

The problem is not filthy, greedy Exxon. The problem is the US Tax Code.

As you noted, the middle class is taking it on the chin. While I'll take some exception to your use of the term "working class" (even evil rich folks work...or most of them do), I know what you mean.

The problem is the US Tax Code, and the filthy morons in DC that have been bought. Democrats, and Republicans! I'm not going to point out the Dem. whores just to get in your face, nor defend the Republican whores, either. With a few exceptions (on both sides of the aisle), they are ALL WHORES, and have sold us down the river by allowing our current system to stay in place.

I will tell you this, and you can believe me. I would never bitch again about paying taxes if I knew that the burden was spread "equally" among our fellow citizens. And, I am all in when it comes to helping the helpless...the infirm, the mentally retarded, the elderly, etc. But, when I see big, fat, prisswillys buying name brand groceries, and using their food stamp debit cards to pay for it (while my cart is full of the cheap stuff that I will pay for with my own evil money), it makes me want to vomit...or ask Shaquanda if I can borrow her card to pay for a few of my items...just enough to pay for about half of it. WHICH IS WHAT I PAY IN TAXES!

You mention a "stealth tax." Damn straight! There are so many taxes in a loaf of bread that if they were removed, it would probably cost 40 cents.

We MUST scrap the tax system that we all live under. Personally, I am for a consumption tax. The poor folks get their basics paid for by you and me anyway in the form of Section 8 housing, food stamps, welfare, crazy checks, etc.

I believe that a "flat tax" would be a disaster. A consumption tax would have many benefits...encourage savings, allow citizens to decide just how much of their gross income they want to contribute. Could you imagine getting a paycheck for your entire gross wages?

I would bet that many folks would likely spend more. At least they would have the option.

There are many problems with "The Fair Tax" that is so popular with many on the right, and I've run on too long already. So, to wrap this up...We can get this right. But, until we quit electing whores, and start electing serious humans that understand how grave our situation is financially, we're screwed. You moved here because you and your wife could live a decent life on two incomes. 40 years ago, a "decent life" for a family was possible on one income. We have got to throw the whores out...on the left, and on the right.