Taxes irritate me. Not that I don't think they are important. In today's day and age we can't support our necessary infrastructure without them. There are a few things I take issue with though.
First, when I say “necessary infrastructure” I mean just that. There are myriad programs and costs we the taxpayers are supporting that are superfluous and wasteful. There are others that, while good intentioned, just are not Constitutional. They are a topic for another day, but it suffices to say that a tremendous portion of our taxes go toward unnecessary spending.
Next, is what gets taxed. It's ridiculous. If we earn money, it gets taxed. If we spend money, it gets taxed. If we save money, it can get taxed. Companies get taxed when they buy materials, manufacture products, pay their employees and sell their wares. Income, property, consumptive, corporate, payroll, capital gains and estate taxes. A tax for all occasions! A dollar circulating through the system is taxed into oblivion in no time at all.
But let me get to the crux of the issue. The audacity of politicians and people to state that the wealthy should be taxed more heavily than low-income workers. If you want to get technical, they do pay more than the rest of us simply because they make more. In fact, the top 5% of earners pay nearly 60% of federal individual income taxes while earning less than 35% gross income1. Part of me wants to laugh, while another wants to lash out, when I hear someone claim that the wealthy need to “do their part” or pay more simply because they are wealthy. The sense of entitlement (a recurring theme in my blogs) of a person who thinks they are owed something simply because the other person has more nauseates me. Personally, while I wouldn't mind being very wealthy, I don't think I would want the life those people have. Not the lifestyle... the life. Regardless, no one has the right to penalize another human for being successful. We can't treat people differently because or race, religion, or sex... so how is it right to treat them differently because of their income?
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How do we make it fair? How about this... a flat tax. It's not a new idea. We set a flat tax rate. Then everyone pays that rate. There would be no more deductions, no more shelters, and no more need for a tax code of over 9 million words2. That is called fair share. It would pretty much do away with the costly and time consuming audit process. I'm also sure we wouldn't need all 106,000 employees3 at the IRS any more... how much money would that save? It's time that everyone chips in to pay.
So there you have it; cut wasteful spending, begin to ween the country off of unconstitutional programs, stop taxing everything, and go to a flat tax.
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Also, trying a new color scheme, let me know what you think. Had some complaints about the old sepia color burning into people's retinas.
Also, trying a new color scheme, let me know what you think. Had some complaints about the old sepia color burning into people's retinas.
Jumbo, Your math is correct, but I believe your application of the tax rates is incorrect. The rates you provide above appear to be the "marginal" income tax rates. These rates are applied to that portion of the annual income that falls within that rate band. You are correct that the tax rate for most of the new $10,000 raise would be 33%. But that rate applies only to $9,750 of the new raise, or that part of your income over $209,250. It does not apply to your entire annual income.
ReplyDeleteThe computation of your "effective" tax rate, assuming your hypothetical income of $219,000 after the raise, would be:
.10 x $16,750 = $ 1,670
.15 x $51,250 = $ 7,688
.25 x $69,399 = $ 17,325
.28 x $71,950 = $ 20,146
.33 x $ 9,750 = $ 3,218
Total taxes = $ 50,046 or 22.8%
Before your raise, your taxes would have been $46,758 or 22.4% of your hypothetical $209,000 of joint income. (Congrats on the big raise, by the way.)
The effective tax rate has increased by 0.4%, but it is a common misconception that being in a higher "tax bracket" could effectively reduce your net income.
Other factors may be at work, however, that give that appearance. In 1990, for instance, while I was working for the State of Arizona, the legislature voted us a 0.5% pay increase (that is one-half of one percent -- Whoo-Hoo!). At the same time, they voted to increase our contribution to our retirement fund by 1.25%. Therefore, we effectively received a decrease in take-home pay of 0.75%. The same can sometimes happen when an employer increases an employee's contribution for, say, health insurance. The employee gets a raise, but sees a lower amount on his/her paycheck and assumes it's the increased tax rate.
The lower a person's income, the more of their income must be spent on the necessities of daily living: food, shelter, medical, etc. That's why flat rate taxes such as sales tax have a greater impact on lower income families, because they are forced to spend most (or all) of their money so they are forced to pay the sales tax on most (or all) of their money. The higher a person's income, the more disposable income they have for non-essentials and the more money they can put into savings. Therefore sales taxes make up a significantly lower percentage of the tax burden for the wealthy. They may buy higher ticket items, but they still spend, and therefore pay sales tax, on a significantly lower percentage of their annual income. Flat rate taxes are referred to as "regressive" taxes because they have a greater impact on the poor.
A graduated income tax is seen as providing some relief to lower income families while being less burdensome for higher income earners. Note, I say "less burdensome." It is still "irksome," and there is a school of thought that graduated income tax rates provide a disincentive to achieve higher income brackets. Personally, I don't see it. As my old Paw used to say, If someone offered you $100 if you would give your uncle $33, would you say "no"?
This, of course, opens a whole different discussion about how reckless that particular uncle is with his money!
I feel a little dumb, but I wasn't aware how the tax tiers are applied to earnings. Thank you for teaching me something new! I always like to get smarter :)
ReplyDeleteThe problem is that there a LOT of people out there that think the wealthy owe them something. I disagree.
It's reminiscent of the "every kid gets a trophy" mindset this country now employs. All you have to do is show up and you are entitled to the same thing as the kid that worked and tried the hardest.
"Spreading the wealth" is dumb. If you want it, work for it. A poor black kid grew up to be President, a Harvard drop-out owns the most successful software business on earth, a college failure is a self-made millionaire and host of the highest rated radio show in America (Rush Limbaugh). I even know a lady that put herself through college and law school while working and raising a son.
You can still go as far as you want in America... People who want the wealth "spread" need to get off their butts and EARN their share. That is what made this country great. We need to get back to it.
I agree that we all need to work for what we want -- it makes achieving the goal that much sweeter. There is a huge difference, though, between needing help and feeling entitled. I hate to see the two intertwined as though they are the same. Granted, there is the element out there who feel entitled -- and it includes senior citizens with wealth who believe they are entitled to virtually free health care at the taxpayers expense because they achieved the singular feat of living to be 65 years old. It includes Congressmen who vote themselves a raise, then freeze social security benefits because they claim there was no increase in the cost of living during the last year. Feelings of entitlement cover all classes.
ReplyDeleteI am not advocating a redistribution of wealth. I know people with a lot of money who worked very hard for everything they have, and I would not want it taken away from them. Likewise, however, I know many people who have lost everything they worked their entire lives to build through catastrophic events not of their own making. No matter how hard you work toward a goal, everyone needs a helping hand from time to time. If we are lucky, we can go to someone like a parent who has the resources to help and always has our back. But it's a rare human being who makes it through life totally on his own without any help from anyone. I know that single mom you mentioned who put herself through a couple of college degrees. And I know that she had a safety net of people who were there when she needed it: An ex-husband who never missed a child support payment for 12 years and who was always there to provide parental relief whenever she needed to work or study; a brother who paid for the new radiator her car needed when the old one burst her first week of law school; a friend who installed a new engine in her car when the regular repair shops wanted more than her semester's law school tuition -- and more than the car was worth; a sister who loaned her rent money one month and then wouldn't accept the repayment check for 15 years until all her college loans were paid off. For that matter, achieving her degrees would have been impossible without those federally (read "taxpayer") insured student loans.
Some of us are born with safety nets so strong and dependable that we often forget they're there. We who have that kind of support are blessed no matter what cards we are dealt in life. Some of us can't catch a break no matter what, and have no one to call when we can't carry the load alone. "But if anyone has the world's goods and sees his brother in need, yet closes his heart against him, how does God's love abide in him?" 1 John 3:17.
I can't see the humanity in turning one's back on everyone in need because a few of them don't appreciate it or might not make the most of it or just plain don't deserve it -- although how do we really make that judgment call? It's not so much a question of spreading the wealth as one of spreading the hope for the future.
I agree with everything you just wrote. You are absolutely correct in that there is a difference between entitlement and need. In fact, there are two huge differences in my mind. One on the side of the person in need, and one on the side of the person providing assistance.
ReplyDeleteFirst there are those in need. I've met more than my fair share, and I've been that person more than a couple times in my life. One thing I've noticed about those who are truly in need... they are slow to ask for help, ask only for what they truly need, and are quick to try to repay what they consider a debt... not a handout. I call it “pride.” If the government converted half of the IRS workers into personnel that audited benefits (in other words, making sure those who receive benefits NEED benefits) I think we'd find a frighteningly high percentage of beneficiaries who are taking advantage. Why are we “giving” people unemployment? Why don't we loan it to them? People truly in need would take it, and those who are scamming the system would not. Even a 25 cents on the dollar payback rate would greatly help the beneficiary, deter (not stop) fraud and be less burdensome on the system.
Then there are those in a position to help. Most of the highest level earners have “philanthropist” on their resume. Additionally, America on average donates twice as much money annually to charities as any other nation, and charity in America comes from ALL levels of earning. As you pointed out in your post, our politicians are in that “entitlement” class, so why would I trust them to fairly - or more importantly, wisely - distribute my money? The government could get their fingers out of a lot of the cookie jars they are in, and people would still be taken care of, or better yet would take care of themselves. Americans on the whole are a caring, generous people. We don't need Congress giving for us.
I'm not posting this to discount or argue anything you've said. I agree with all that you've posted, I just wanted to elaborate on why the government should not take on the role of moral compass.
And so we meet in the middle, the liberal and the conservative, whose views are really not so very different in the end. I enjoy the debate, especially when it is based on rationality and thought rather than emotion and "politics." I have to say that whoever raised you must be very, very proud.
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