This may surprise some of you, but I do not believe in graduated taxes. In fact I don't believe the government should levy income tax at all (or estate- or death taxes). I don't think small businesses should carry the tax burden they do either(though they should pay a business tax). Have you ever tried working for yourself? The income taxes are twice as high. That is because, if you are employed, your employer matches most of the taxes you pay, so when you work for yourself, you pay your taxes and then you match them on behalf of your company. So, imagine the tax burden of having employees...now add to that paying health insurance for them which can be several hundred dollars per employee. Oi.
I do, however, believe that corporations and investments should be taxed. Why? For one, because corporations as an entity, and investment as an action, capitalize off of everyday Americans and the earnings are not a reflection of genuine labor. I may see this differently if labor and materials were paid a fair wage and products were sold with some cap on mark-ups to reflect a real cost and price.
...back to graduated taxes. Dems generally believe that rich people should be taxed more than poor people. Well, I already said I don't believe in income tax. Imagine that you are a businessman or women: you pay business taxes, you pay your employee's taxes, you pay your employees health insurance and then the government takes 35% more off the top. It is not equal, and it breeds animosity between classes.
I spoke to a rich, Democratic family, who asserted it their responsibility to pay more in taxes to help those less fortunate. That is nice, but it is not fair. Even if wealthy folks feel that way, or they do have some empathetic moral obligation to the less fortunate, the act of giving should not be forced upon them by the government. Might wealthy classes give more if they were not required to hand over 35% by force? In any case, wealthy Americans are often high profile in their communities, not giving would brand a person a Scrooge. On the other hand, giving would brand a wealthy person deserved of respect.
The way it is now, wealthy people give - and are called greedy anyway; and many Americans do not understand the values wealthy families bring to community.
I advocate a flat tax on consumption and minimal residential, state and federal taxes with local and state taxes being higher than Federal.. These for the purpose of providing 'public good'. Also: minimal taxes on non-corporate business, and relatively higher taxes for corporations, plus appropriate fees for extracting natural resources.
I should remark, that I in no way believe this to be a top priority for the nation any time soon, (especially in our current economic crisis) but ideals to be investigated and discussed.
What is public good? and The lost art of Community will be the subject of following blogs.
Ooooh, I had to think about this one for a while today! Thanks for the exercise, Kat!
ReplyDeleteI think individuals should pay at least some taxes:
- so they have "skin in the game". For democratic involvement, people need some investment in the system, financial, emotional, etc. Taxes create that.
- richer people have more property and more of the government's resources are devoted to protecting that property than what we get in roads, health care, and education. The defense budget is a good example of that.
- if corporations were the only taxpayers, they'd have a whole lot more say in what happens with that money. As it is, corporations manage to avoid a LOT of taxes thanks to various options in how they're formed and all the tax credits and tricks built into the corporate tax code. For example, in Pennsylvania, most of the oil & gas companies are formed as LLCs and LLPs because those corporate forms are taxed at the lower personal rate (the profits & losses flow thru to individual owners' tax returns) of 3.07% vs the regular "C" corporation rate of 9.9%.
Wealthy people are more likely to have investment income that exceeds earned income. Long term capital gains are currently taxed at only 15%, not at ordinary income rates.
Flat taxes on consumption are severely regressive instead of flat. Wealthy people consume less relative to their total income than middle class & poorer people, who basically spend it all on consumption. Wealthy people reinvest their money to make more money. Gotta tax it.
I find the idea of federal taxes being proportionately smaller than state/local taxes appealing, but it would end up with crazy inconsistencies between states like completely unfunded public education in some. Also, Social Security & Medicare are too big for states to handle alone - they need the equalizing powers of the feds to make sure the folks who lived in PA all their lives and paid into a system there aren't shafted when they retire to Florida.
"Fiscal year 2009 federal revenues will come from four major sources: individual income tax (44 percent), corporate income tax (7 percent), payroll taxes (42 percent), and excise taxes (3 percent). Estate and gift taxes, customs duties, Federal Reserve earnings/losses, and miscellaneous receipts will account for 4 percent."
http://www.taxpolicycenter.org/taxtopics/currentdistribution.cfm
On a technical note, the actual rate that someone pays is substantially lower than the "marginal rate" of 35% - that rate is only on the income above a certain threshold. The whole amount of tax ends up being lower: Your taxable income (that's after deductions like home mortgage interest) is $400,000 and you are single. You will pay $108,216 + 35% of the amount over $372,950 = $108,216 + 9467.5 = $117683.5 or 29.4% of total income. And if you're paying that much, you're probably doing a bad job of tax planning.
Also, the payroll taxes (Social Security, Medicare, Medicaid) are different than income taxes (federal withholding) - SS is flat up to $10x,000, then stops. These are entitlement programs that we can all access when we need them or retire. When you're self-employed and don't make much, that's pretty much all you're paying and it seems awfully painful to be paying both sides. But as your income increases, you start paying federal withholding also, which is graduated.
[didn't know there was a character limit to comments!! :-) Part 2:]
ReplyDeleteI read this fascinating book last year: http://www.amazon.com/New-Fiscal-Sociology-Comparative-Perspective/dp/0521738393 One of my favorite chapters was on the development of individual income taxes as a political issue. Before the mid-60s, the rich/elite just sucked it up and didn't fuss about taxes, even though their top marginal rate was 92% in 1953, and down to 77% in 1964, and steadily declined to its current 35%. And now they complain so bitterly about that!
Heidi <- tax nerd. You can depreciate a race horse over three years. Also, the 16th Amendment was necessary to get the 18th Amendment - Prohibition - passed because the federal government was completely dependent upon taxes on beer, wine & liquor. It had to have another source of revenue to replace alcohol taxes, which at that point was 31% of all federal income (most of the rest was tariffs and other external revenue, which are very small parts of today's revenue).
Is our tax system morally and ethically bankrupt? Yep.
Thanks for all the factual fodder, Heidi:) Could you imagine if the gov't took 70% of your income!!! I would buy the congressmen too...to see if I could get them to lower my taxes! You know, the most important part of a healthy democracy is citizen action. It is the people that need to hold our 'leaders' accountable..not just SAY we want them to be accountable. That means communicating messages to our leaders in an organized fashion, (not one email from dick and one from jane etc.) rewarding good leaders and punishing/publicly admonishing bad leaders. People do not take the time to be this involved in our democracy. If we were, we wouldn't FEAR rich people, presidents and congressmen, they would have a healthy fear of their brother and sister citizens. Also reference my 11/22 blog about citizens taking care of each other and our communities. We need to reinvigorate a sense of brotherhood to rebuild our country together, street by street, neighborhood by neighborhood etc.
ReplyDeletejust read over that again, heidi, though not sure if youll see this reply! I think we agree that 1. everyone should have skin in the game 2. investments, corps should b taxed more heavily. Even though a consumption tax would take more from poorer people... many poorer people dont pay taxes, or get MORE back than they pay in. At least having all ones dollars to pay bills FIRST would secure poorer families, and, if they budget, can then spend what disposable income is left (if any), and pay a bit of tax too.
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