Tax Fallacy
With the tax cuts in the Bush proposal, a lot of talk is going on about the state of taxes. The left is spewing class warfare rhetoric and the right is saying that the tax cuts should benefit the rich since they pay more than their fair share. Both sides are right and both sides are wrong.
What the Left gets right:
There is a huge disparity in the effective tax rates between the rich and the poor. The primary reasons are due to sales taxes, employment taxes and other flat percentage taxes. If you make $10K per year, 6.5% in payroll taxes is significant. It’s less significant to someone who makes $1M. Of course, the federal government can’t control sales taxes, which are a function of the state. Also, assigning sales tax rates to individuals based on income is damn near impossible.
What the Left gets wrong:
They think we should be happy to pay taxes. They even suggest that the government allows us to invest, which they don’t as that is a function of the free market and capitalism. The left also thinks that tax avoidance is wrong. Tax avoidance is legal and tax evasion is illegal. Participating in certain activities to reduce tax liability is what everyone should do. They also fail to get that tax breaks from the federal government to the poor are irrelevant because the poor pay no federal income taxes. Maybe they should propose giving the poor tax credits based on the aforementioned flat percentage taxes. Also, the left fails to realize that tax cuts are good for everyone. Sure, I may only get a $1,083 benefit under the new Bush plan, but it’s $1,083 more than I had access to before. It also is coincidentally pretty close to the purchase price of this item I mentioned here.
What the Right gets right:
That Americans pay too much in taxes. That, as a dollar value, the rich get shafted. The top 1% pays a ridiculous dollar amount compare to the rest of us. I did enjoy Locke admitting that the top 1% included those making over $300K. If you make $300K per year, you are not filthy rich. You’re pretty well-off but you’re not retiring right off the bat.
What the Right gets wrong:
They see the disparity only in terms of dollar amounts. The percentage points seem irrelevant to them. The also seem to discuss taxes only in terms of federal income taxes and discount that the poor tend to get shafted by local sales taxes and employment taxes.
What everybody gets wrong:
The argument is always over Who Pays. The rich pay too much(little) and the poor pay too little(much). The argument needs to shift from Who Pays to What the Hell are we paying for? Congressmen try to get as much pork funneled to their districts as possible. Like these gems:
$40,000,000 for the National Animal Disease Center in Ames; $632,000 for Midwest agricultural products; $400,000 for manure management research at the National Swine Research Center; $280,000 for the Iowa Vitality Center; $200,000 for hoop barns; and $100,000 for the Trees Forever Program
Go to CAGW and click on the Pig Book to find out some of the crap that you’re paying for! Get ready to be amazed and disappointed.
But when congressmen funnel this pork to their districts, it gets them elected. Because the people in Ames now have an extra $40M brought to them courtesy of their representatives and it’s free. I’ll spell it out for those who are just now joining us: Pork is vote-buying paid for by taxpayers! Holy shades of campaign finance reform Batman!
What we should do:
If the people of this country would rally and tell the government to cut out the pork, the impact on the budget would be significant. As long as the government has to pay for pork, there will be no equity in taxation. The government has to fund these things and it costs you and me significantly. Also, some efficiency audits (as I mentioned here) would help get spending under control.
So, before we continue with the class warfare of Who Pays let’s try to figure out what we’re paying for and what we really need to be paying for. Equitable taxation will follow once we regain control of the government’s pocketbook.
