Posts from — October 2007

Apparently, if you make $200,000 or $250,000 a year you are. Congratulations!

To Hillary Clinton, it’s $200,000(1), same thing for John Edwards (2) . Charlie Rangel thinks $200,000 – $250,000 is the right ballpark (3). While they may disagree on who the next President should be, they all agree that some of you make too much money or at least are not forking over what they consider your fair share.

Ignoring the fact that the top 5% of taxpayers supply 57% of the revenue; Charlie, Hillary and John would like to reach ever deeper into your pockets and “redistribute” some of your income.

So when did $250,000 a year make you rich? Where did the idea that folks who work hard all their lives are responsible for underwriting the Utopian dreams of the next crop of socialists wishing to occupy higher office?

John Edwards would raise the capital gains rate to 28 percent for those “fortunate taxpayers – taxing the investment income of the wealthiest Americans similarly to the wages of the middle class. ” (4)

Editor’s Comment:I guess justice is achieved by screwing-over both groups; the investors and the wage earners. What makes 28% a “good” tax-rate? Why not lower the rates on middle class taxpayers to the capital gains rate of 15%?

(Rhetorical Questions: The answer is obvious, cutting tax revenues forces government to shrink.)

A Bold, Unpopular but Possibly FAIR Proposal

Let’s do away with income taxes entirely. Repeal the 16th Amendment to keep our “leaders” in Washington for sticking it to us twice; a sales tax today and a revival of the income tax later.

Charge a national sales tax of 20-25% (or whatever revenue neutral figure is needed to support the truly necessary functions of a central government).

Tax every purchase: apples and airplanes, beer and balloons, candy and cars; in short, you buy it, it’s taxed.

Maybe create some sort of rebate, a one size fits all solution based on household size, to offset taxes on necessities.

Since approximately 45 states already have tax collection mechanisms in-place, implementation would involve a minimal increase in bureaucracy; not to mention an opportunity to skim a few bucks off the top for “shipping and handling”.

Just imagine.

• The hidden costs of taxation would be removed from all products sold in the US. Hidden taxes? Yes, Virginia, the cost of Federal, State and Local taxes is built into everything you buy. The State and local taxes are paid at the register; the federal income taxes on Corporations are included in the wholesale price. Corporations don’t pay sales taxes; their customers do!

(Note to Legislative Leaders: Even Charlie Rangel’s 30.5% rate on corporate income is still an obstacle to global competitiveness with foreign manufacturers.)

• Zero cost of compliance to the 137,000,000 individuals who filed a tax return in 2006.
• Reduced cost of compliance and enforcement; checking the few thousand merchants which account for the majority of the economic activity in the country has got to be cheaper than checking individual tax returns.
• Removal of the temptation to “socially engineer” (translation: manipulate) behaviour through tax code treatment.
• Recapture of the underground economy. Like the folks working “off-the-books”, drug dealers, hookers and all manner of “self-employed, independent contractors”. As most of these folks probably don’t file a 1040 or 1040EZ, they currently get a free ride. But they all buy stuff and when they do, they will pay taxes, possibly for the first time in years!
• Elimination of tax evasion as this is a self policing system. Merchants desire to maximize sales and therefore have no incentive to under-report. In the case of publicly held companies or privately held firms requiring financing to expand, under reporting can actually be detrimental to their continued economic health. Since tax liability is based on gross sales, the merchant either collects the tax or eats it.

And the number one benefit, control of your economic destiny. Don’t want to pay taxes? Don’t buy anything (or more realistically, buy what you need). Just image, you would take home your entire paycheck and should you decide to put some money away for your retirement, the interest would be tax free as well. What a concept; a governmental program that actually rewarded self-reliance and personal responsibility.

Not THE Answer but at least as start

This is not the answer to all that ails America. It is not the solution to the growing divide between the economically successful and the section of American society that is struggling to make ends meet.

It will not magically restore a sense of equality and fair play in the US economy.

But the system we have now is broken and no amount of tinkering about the edges; usually with a watchful eye to the polls, is going to fix it. The current tax code is divisive; fostering class war. When 5% of the folks pickup the tab for 57% of the country something has got to change.

Hillary, John, Charlie?

You can continue the “patch it until I’m out of office” charade or you can do what is right.

A no brain-er from where I sit.

1. http://www.hillaryclinton.com/news/speech/view/?id=3329
2. http://www.youtube.com/watch?v=x8ncguHrpAE (Face the Nation Feb 25,2007)
3. http://www.washingtonpost.com/wp-dyn/content/article/2007/09/16/AR2007091600908.html
4. http://johnedwards.com/issues/tax-reform/

Some food for thought.

For the 2004 Tax Year

Conclusions:

If tax liability were proportional to income then:

• the top 1% of all taxpayers pay almost twice as much in taxes

• the top 5% are overcharged by 70%

• 50% of all taxpayers do not pay a proportionate rate; under paying by 75%

Whether the rich are getting richer or not may be debated but the above table shows they are carrying the freight for more that half the population.

This progressive system of taxation has reached the point where it is confiscatory. “Voluntary” taxpayer compliance may be a thing of the past.