Marines.Together We Served

Wednesday, November 24, 2010

Taxed to Death

I got to thinking about the tax system in our country. I have known for a long time that those who make the most money pay the most in Federal Income Tax.

Over the years I’ve heard how the “rich” don’t pay their fair share; that they have ways of hiding their money; that they get special tax breaks, while the rest of us poor slobs carry the tax burden! Is this true? Let me fill you in on my research.

In an article written for NPR (National Public Radio) in April of this year, a stunning bit of information is offered: “It turns out that nearly half of all Americans don't have to pay any federal income tax. In 2009, 47 percent of all filers paid nothing. It's a number that's gone up significantly in just a couple of years. Robert Siegel talks to Roberton Williams, who's been crunching the numbers at the Tax Policy Institute in Washington. According to Williams, millions escape filing because their incomes are too low or they're eligible for deductions, credits and exemptions.”

Did you catch that? “In 2009, 47 percent of all filers paid nothing.” Which 47 percent does not pay? “Millions escape filing because their incomes are too low.” Our U.S. population is right at 310 million (or 4.5% of the world’s population). About 200 million are adults eligible to be in the workforce. So roughly 100 million are paying income tax for a nation of 310 million.

So, do the “rich” really get a break? Not according to my research. They have opportunities of protecting their money through investments to a certain degree, but income is income and must be reported. Audits are conducted to make sure income is properly reported and taxes are paid on that income.

Are the “rich” paying their fair share? Yes and No. Yes, because they are paying a lot of taxes, and No, because they are paying way more in taxes than the rest of us. In 2008, the top 1% of filers paid 38% of all federal income taxes. To qualify for the top 1% of earners, you needed to have income of at least $380,354. The top 10% of filers with income of $113,799 or more paid 69.9% of the total federal tax burden. News Flash! The top 1% of filers are currently in the 35% tax bracket. For 2011, their tax bracket is scheduled to be increased to 40%.

This is why the “flat tax” is strongly supported by those who are wealthy.

They won’t have to pay as much income tax! How does this work, you say? Simple! Let’s say the government comes up with a flat tax rate of 20%. Everyone, the rich and the not so rich, would pay 20% of their income in taxes. So if Daddy Warbucks makes one hundred million this year – he would pay twenty million in taxes, while at the current rate of 35%, he would pay closer to thirty-five million. Still think the rich should pay more in taxes? Do you really want a flat tax?

Be careful of falling into the “Class Warfare” trap. Politicians are great at using this to their advantage. Those who are not wealthy and are not familiar with big money and how it works, often fall prey to the fires of resentment fostered against those who make a whole lot of money. One of the reasons the United States of America is the great country that it is has to do with the Free Enterprise system, which allows anyone the opportunity to not only earn a living, but to make as much money as they can, given time, talent, and opportunity. Those who make a lot of money are most likely to take that money, reinvest it, which in turn generates business growth, which then creates jobs for the rest of us. When Big Government gets in the way by demanding more taxes from the rich, the money used to reinvest is squirreled away which has the opposite effect: businesses suffer, and jobs are lost. Also, when business owners feel the pinch from the government, they tend to put their profits back into their businesses. Seems like an okay thing to do, except that it raises the cost of the item they are providing, which means you, the paying customer, are paying more for the item. We don’t call that a tax, but it might as well be!

One last thought! Many of our elected officials at the federal level are millionaires. Of the two major political parties, which one do you think has the most millionaires? If you said, “The Democrat Party,” you would be correct. If you said, “The Republican Party,” then you’ve been duped into believing the mantra that they are the party of the rich. Neither party is exactly standing in the bread lines, but just be careful of what you accept as fact.

‘Tis a true saying, “Death and taxes are unavoidable.” However, the answer to our tax problem is not to tax the rich to death, but to force Big Government to spend less.

And everybody said, “Amen!”

Happy Thanksgiving!

No comments:

Psalm for the Day