Death and Taxes

Tim Bean

11/26/2012

 

Who here likes to pay taxes?  I am going to guess that there are not too many hands raised in the air right now.  However, I think the vast majority of people will recognize the veracity of the old cliché, that death and taxes are the only certainty in our existence on this Earth.  Taxes are as old as civilization.  They are a necessary component of living in, and under a governed society, so I am not going to even come close to saying that there should be no taxes.

It would be nice to think of such a utopia, where no one pays any taxes.  The thing about utopia is that it has not, does not, and will not exist – it is a fanciful and fictional place.  There are some who will say that they are glad to pay taxes, because they feel it is their patriotic duty to the country.  I believe President Obama referred to this as “economic patriotism” during the election, and I can kind of sort of buy into this argument – to a point.  When I worked in the wonderful world of finance we used to say that if you have to pay taxes, and not get a refund or make a write-off, that you won; because that meant that you actually made money.  So, we can all agree that there is, should, and forever will be taxes of some nature or another, and that they (taxes) are needed to adequately fund the government.  All of that being said though, I think the bigger and better questions are how many taxes should there be, what all should be taxed, and how much of the money that you earn at your job should you have to give to the tax man?

Taxes are a penalty; if you wish to go by the White House’s explanation of the tax levied against those who fail to comply with the mandate part of Obamacare.  Again, this should not be taken as me calling for an abolition of taxes, but they (taxes) do serve as a financial penalty against who, what, where, how, and why they are being levied against.  Since their always has, and always will be taxes though, shouldn’t that penalty be administered in a fair fashion.  This is where it all gets tricky.  What exactly is the fair way to penalize/tax people, places, and things?

There is the whole “paying your fair share” line of thought, which again was bandied about throughout the election by President Obama, but what exactly is one’s “fair share?”  Is it 40%, 50%, 60%, or more?  What is the definition of being wealthy?  According to the President it is anyone who earns $250,000 or more.  I don’t believe that those who are earning (that’s the operative word there “EARNING”) $250,000 would call themselves wealthy – comfortable sure – but wealthy, no.  To me, this whole “fair share” line of thought reeks of wealth redistribution, which is just a nice way of saying socialism.  Before anyone wishes to go down the road that I am somehow wealthy, and thus selfish, I can assure you that I am nowhere close to even sniffing the top tax bracket, and given the status quo in this country the odds are increasingly unlikely that I will ever sniff that tax bracket.  So, why do I care if We the People soak the rich in taxes?  Because I do not believe it is fair to do so.  Their money is not mine, they do not owe any of it too me, even if I bought their products, or services; and to essentially punish them for being fortunate, and/or successful isn’t exactly what I would call an encouragement or endorsement for being fortunate/successful.

Other proponents of this “fair share” line of thought like to hoist up the Oracle of Omaha, Warren Buffet, as the shining proponent for higher taxes on the wealthy.  He does advocate higher taxes on the wealthy, though he says it should be for those earning (there’s that word again) over $500,000 per year.  He also dismisses the notion that if taxes were to go up on top earners, as well as raising the capital gains tax, that this would lead to a lack of investing by those people.  Okay, sure, there will always be those who will seek investment opportunities, but I do think there will be fewer of those people, and fewer opportunities; at least in this country.  Think back to those heady days of the 1970’s where we were all basking in the bright glow of a stagnant economy; in which high taxes (among other things) were a definite part of the problem.

Whenever you tax something you get less of that something; and people are no different.  If you tax the wealthy then you will have fewer wealthy people.  Some will simply move themselves and their money to a more tax friendly place, and those who do not leave will simply have less money.  To some, and it seems to be a growing number of people, this is perfectly fine – I can’t fully understand why, but they do.  The thing is with socialism, wealth redistribution, economic patriotism, or whatever other warm and fuzzy name you wish to give it, is as Margret Thatcher said, “… You eventually run out of other people’s money.”  The other thing is that redistributing other people’s money doesn’t make everyone richer, rather it makes everyone poorer.  The only people who do seem to achieve the so called “high life” under a wealth redistribution agenda are those who are in government, or who can curry government favors.  That doesn’t exactly sound like a land of opportunity to me, nor does it exactly match up with what I grew up believing the American Dream is all about, and I certainly wouldn’t call it fair.

This brings me to the notion of the Fair Tax.  What is the Fair Tax?  Well, quite simply it is removing the penalization of taxing what people earn, they are taxed on what they consume (purchase).

Opponents to this say that it unfairly burdens the poor, however if you go to www.fairtax.org, and read about this proposal, you will see that there is a monthly “prebate” built into it that would allow for tax free purchases for low income individuals and families.  What this proposal allows for is that you would actually get to take home more money that you earned, and then do with it as you so wish.  Given our predilection for spending money, then that is where the government’s revenue stream will be, at the point of sale – not the point of production (your job).  The more you earn, the better the chances that you will be spending more money, which means that if you just want the rich to pay their fair share, then you can rest easy knowing that since they tend to spend their money on more expensive goods and services, then they will really and truly will be paying their fair share.  All of that spending then has a stimulative effect on the economy, meaning that stores will hire more employees, and purchase more goods, which leads to the producers of those goods to increase production, and in turn hire more people, and all of those new employees will have more money to spend, which leads to more hirings, more spending, and since the taxes are levied at the point of sale, then Uncle Sam will still get plenty of our money that he so desires.

 

The income tax created more criminals than any other single act of government.  (Barry Goldwater)

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