Tuesday, January 8, 2013
Taxing the Wealthy
It brings tears to eyes watching all those in the middle class standing up for the rich and protecting them from an increase of 4% of their income earned that’s above the $400,000 threshold. They use the same vigor to protect the rich from regulations; health care for their employees, unions, and the Estate Tax. They use what’s left of their anger to rail on the unemployed. Those people should be happy that a low-wage job is available and if that means they will remain at the bottom for the rest of their lives; it's somehow their fault. When a student asked Mitt Romney a question of how to cope with the high cost of education, Mitt replied “borrow the money from your family.”
The question of fairness always comes up, but a poster said that the dictionary definition of fairness amounts to being equal. We don’t make laws using a dictionary definition; equal is defined by 535 elected representatives of Congress. It’s not that democrats want to necessarily tax the rich; they want to apply the tax rates proportionally with the ability to pay. The 4% increase will not balance the budget by itself; it won’t keep the wealthy from pursuing their profits either and besides 97% of small businesses got 18 tax breaks since 2009, and their taxes will not go up a single dime.
“Actually, as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way.”
One of the reasons' corporations pay so little is that they are not taxed on income of foreign subsidiaries; that’s a provision in our tax code that encourages the firms to invest abroad. The multinationals will bring those profits home but only if we give them a favorable lower corporate rate. Tax cuts for the rich not only increases our deficit and debt; it creates pressure on our government to reduce spending for education, innovation and infrastructure.
President Reagan was wrong when he said that making the tax system less progressive-lowering the top rate would raise more revenues because savings and work would increase. Studies show that tax revenues fell significantly as they did under President George W. Bush; they simply increased the deficit. I‘m not calling for the 70% top rate that we had in the seventies but at those rates ,the rich created more wealth by reinvesting their money on research and development, their employees and the community they reside in, rather than write a big check to Uncle Sam. In an utopian economy, corporate profits have to be low, ensuring that vendors get an equitable price, employees get a decent wage, and that they pay a fair amount for the resources they use and abuse. We don’t have an ideal economy, so we pay patronage to monopolies and a call for an unfettered free market. A monopoly discourages innovation and discourages competition.
It’s about this time the year when taxpayers start complaining about the tax refunds that people receive because they are eligible for the earned income credit. Taxpayers who get a small refund or no refund at all,will use all the anger from their resentfulness to call for an end to the credit or will use cherry-picked stories to try and convince others that it's creating a culture of dependency.
It’s also the time of the year when people start thinking that a flat tax is the way to go. Think about that; right now, we are in an era of a very high rate of income inequality. Income inequality means that the highest proportion of the wealth is concentrated at the top. The rich would love to pay a flat 20%, and that rate would assure us of forever having a greater disparity between the top and bottom. The right loves to demonize the word “distribution” and will say that’s socialism. Goldman Sachs will call themselves a bank so that they can get the below 1% loans, but they will not re-loan that money to small businesses; instead, they choose to participate in risky derivatives because they’re so much more profitable. They know that they can capitalize their profits and socialize their losses.
I think Kelli Gill did a great job explaining the need to tax the wealthy in her on-line VA post, and she didn’t exaggerate her points. She didn’t pick the 75% tax on the affluent out of the air to prove her point, as some posters did. One poster said that the less taxes the wealthy pay, the more they pay in charitable contributions. I think that logic could be used for everyone but is that the intent of charity? Do you have to get something back in return in order to contribute or does it come from the heart?
I saw where some posters used the 20% tax rate, but I wonder if they misunderstood that Romney said that he wanted a 20% tax cut across the board. He didn’t tell us that he was going to take away the deductions that the middle class uses.
It’s not that lefty democrats love tax increases; it’s more about them wanting a balanced approach in reducing our deficit and debt. We went for a decade thinking that revenues should never be part of our solution for reducing our debt; that’s over.