Taxes and the such
The other day a co-worker of mine included me on and email foraward about one persons view of tax cuts. I view him as one of those selfish conservitive types who thinks community service is hiring an undocumented imigrant to do manual labor for $5 an hour. He sent me this email to piss me off and it worked. He thought it was quite funny to hear my "crazy liberal socialist" reaction.
Suppose that every day, ten men go out for dinner. The bill for all ten totals $100. If they paid their bill the way we pay our taxes, it would go something like this.
The first four men-the poorest-would pay nothing, the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man-the richest-would pay $59.
The story goes on to say the the resturant owner decides to give them $20 off their bill for being such good customers. The divide it up along the same portions as their payment structure.
But after paying the bill one of the ones paying the least for dinner realised the guy paying the most of the bill got the biggest discount ($7) and thus started to cry "The system exploits the poor!" The poor people beat up the rich guy for getting such a big discount and the next night he didn't come back for dinner. The story ends saying:
And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.
My response was that, wow, that story is truly ignorant and short sighted. By likening taxes to an extravagance such as going out for dinner fails to relay the point that taxes are used to pay for basic services that benefit our society. No one gets by for free as the story portrays, no matter how little your paycheck is. In reality the tax system is set up so that there are so many tax loop holes that only those who can afford to hire accountants can take full advantage of tax breaks.
Since Bush came to office taxes cuts for those in the top income brakets have dropped significantly while those in the middle have seen rates rise. Those at the bottom have seen miniscule declines. The statement that the system exploits the poor becasue it doesn't give out equal tax breaks to everyone is wrong and horribly simplistic. If the sytem burdened everyone the same that would be one thing. The truth is that the poor pay a much large percent of their incomes to taxes.
The basic thrust of U.S. tax policy since the early 1980s has been threefold. First, to increase massively the tax burden on wage and self-employed labor through FICA (Social Security and Medicare) tax increases while reducing the burden on corporations, whose share of total federal tax payments has plummeted. Second, to reduce to 20% the rate on capital gains, which make up roughly half the reportable income of most of the big moneymakers. Third, to make sure, through a series of phase-outs and self-employment levies, that the highest marginal rates concentrate on middle- and upper-middle-class Americans rather than the truly rich. What's extraordinary is that voters stand for it.
Consider: a two-worker professional couple with $160,000 a year could be in the 40%-42% marginal rate group when you allow for Social Security, Medicare and self-employment taxes, all income-based, on top of the 31% basic rate, together with such silent middle-class fiscal killers as the phasing out of exemptions and itemized deductions as certain income levels are reached. This is in marked contrast to the 20% marginal (capital gains) rate paid by the typical corporate CEO on his top dollars from stock options.
So, to address the final statement, what happens if the rich go away? Nothing except we need to make sure they can't keep making money off the poor in our country. If the rich and the corporations are alowed to move off shore and keep expoiting the American people we become a nation without control of our own ecoomic policy. We have a nation where, to make money, you need money. If we don't control our own money we will never be able to dig our selfs out.
