The Demagoguery of Taxing the Rich
The national debt just exceeded $15.3 trillion and is currently projected to increase at approximately $1 trillion per year for at least the next several years. Currently, Americans are borrowing on average approximately $3.2 billion per day. Approximately 35 – 40 cents of every dollar of total government annual spending is borrowed. Earlier this year, the President and Congress approved an additional $1.2 trillion increase in the authorized level of national debt. The President’s just-released proposed budget projects a budget deficit for fiscal 2012 of $1.3 trillion, which deficit, if realized, exceeds the just authorized $1.2 trillion increase in the level of national debt.
Clearly, unless drastic deficit reduction is implemented in the near future, we will run the risk of suffering the recently well-publicized economic and social upheavals being experienced in Greece, Portugal, Italy and Spain.
Approximately half of our politicians want to reduce deficits/national debt by increasing federal income taxes on "millionaires and billionaires". The daily drumbeat for these increased taxes is phrased in talking points variously emphasizing that it’s only "FAIR" to ask those that are extremely well off to pay "JUST A LITTLE BIT MORE", or to pay their "FAIR SHARE", or to not force deficit reductions on the "backs of the middle class and the poorest among us". These repeated prejudicial references to FAIRNESS" and millionaires and billionaires as the class of taxpayers (the "M&B Class") expected to finance all spending requirements, are nothing more than rank demagoguery and class warfare.
These talking points are not only demagogic (def: "A leader who obtains power by means of impassioned appeals to the emotions and prejudices of the populace."), they are cheap shots intended to divide our country.
Who is to determine what "FAIRNESS" means and FAIRNESS in what respect…….economic, social, health, education, or all of the foregoing? Do Americans really want political parties arbitrarily determining what FAIRNESS is, who is entitled to FAIRNESS and how much FAIRNESS?
Liberal Democrats and social progressives do not want conservative Republicans and Libertarians arbitrarily determining who, how much and in what form FAIRNESS takes, anymore than conservative Republicans and Libertarians want liberal Democrats and social progressives making FAIRNESS determinations.
When evaluating the FAIRNESS issue, it is important to understand that most of the M & B Class are not "Wall Street Fat Cats". Most are professional athletes, movie, TV and other entertainment celebrities, media anchors, college professors and administrators at major universities, specialty doctors, many lawyers and certified public accountants, large farming and agricultural operations and thousands of small and medium-sized business owners. Even over 200 members of Congress are reported to be millionaires.
By and large the M & B Class of taxpayers has earned their incomes through any or all of talent, education, hard work and achievements.
Also, voters should appreciate that the numbers comprising the M & B Class are extremely small in relation to the total of individual federal income taxpayers. Based on the most recent data available, the number of taxpayers filing federal income tax returns with taxable income of $1 million or more is a very small percentage of the total of individuals filing federal income tax returns. And the number of taxpayers with federal taxable income of $1 billion or more is far, far fewer.
It is factually indisputable that these extremely small numbers of the total population of persons filing federal income tax returns pay a very substantial percentage of the total of all individual federal income taxes in any one year.
In the interests of "FAIRNESS", readers should compare the substantial amount of all individual income taxes paid by the M & B Class with the approximately 50% of all persons filing federal income tax returns who pay no federal income taxes. In fact, many of these non-federal income tax paying filers received distributions of monies from the federal government in the form of unearned income tax credits and other subsidy payments designed to socially redistribute income.
Fair-minded readers should ask themselves: is this FAIR?
Using a very over-simplified example to further illustrate the FAIRNESS demagoguery, consider that a taxpayer who earns $1 million of taxable ordinary income in a year, after all exclusions, deductions and credits, would pay approximately $350,000 of federal income tax using the current maximum rate on earned income of 35%.
Compare this result with a taxpayer earning $40,000 of taxable income, after all exclusions, deductions and credits, who would pay approximately $6,000 of federal income tax using the current 15% rate on earned income.
Given the results in these simplified examples, can any fair-minded person claim that the taxpayer paying $350,000, or approximately 58 times as much in federal income taxes as the taxpayer paying $6,000, is not paying his FAIR share? I believe that taxpayers paying the $350,000 and greater amounts of federal income taxes are already carrying their FAIR share of the load and should not be asked to pay "JUST A LITTLE BIT MORE" There is never any end to the demagogic demands for "JUST A LITTLE BIT MORE".
Another demagogic talking point is that the M & B Class has benefited disproportionately, while the middle class has suffered and not realized increases in income. The implication is that high income earners have realized their disproportionate increase in earnings at the expense of other taxpaying groups.
While I agree that compensation for "Wall Street Bankers" and CEO’s of larger corporations has increased dramatically over the past 30-or-so years and that these increases can justifiably be considered unfair and even outrageous, such increases have not come at the expense of salary and wage increases to average or lower income employees. In most cases, the outsized compensation of these executives comes at the expense of the shareholders or other owners.
It is an indisputable fact that the shrinkage of our middle class is due primarily to a combination of substantially increased foreign competition, increases in productivity and technology and an increasingly uncompetitive regulatory structure and cost of labor.
Moreover, it is factually indisputable that President Obama’s efforts to increase taxes on the M & B Class would impact far more than the M & B Class by reaching down to taxpayers having taxable incomes of at least $200,000 for single filers and $250,000 for taxpayers filing jointly. Lumping the over-$200,000 per year taxpayers with the M & B Class is the ultimate demagoguery of Obama’s class warfare. This is not the repeal of the "Bush Tax Cuts". Rather, it is a pure and simple proposed tax increase on a certain class of taxpayers, who collectively do not have enough votes to combat the Obama redistribution of income machine.
The Bush tax cuts, which were effected approximately 10 years ago after the adverse economic effects of the 9/11/01 tragedy, consisted of across-the-board tax reductions with those in the lower tax brackets receiving substantially larger percentage reductions in the tax rates they would pay. Now our FAIR-minded President wants to reverse what, in effect, are 10-year old rates embedded in economic decisions made and being made, for only those earning above $200,000.
I believe that fair-minded readers will agree that taking from only some and not asking all to sacrifice, is not FAIR. Also, in many high cost of living areas of the country (New York, San Francisco, etc.), $200,000 a year is not an exorbitant amount of money, nor is $250,000, especially if the taxpayer has a family of four or more.
Further, and of no small consequence, is another indisputable fact that many, if not most, small business owners file tax returns for their businesses in a manner that allows for the federal taxes on the business income to be reported and taxed on the business owners’ personal federal income tax returns. Thus, any increase in the personal income tax rates of these business owners reduces the amount of money potentially available to the business owner for re-investment in the business, including the hiring of employees.
This column discussed the staggering level and potential consequences of our escalating national debt and the administration’s demagogic proposal to nip at that national debt by increasing federal income taxes on only the M&B Class. It has been documented and widely publicized that the government could confiscate all of the taxable income of the M&B Class and not put a substantial dent in the national debt.
The solution to reducing our national debt is to substantially reduce federal spending, which will require substantial and painful curtailment of the welfare society which is being greatly expanded by the current administration. It is either this painful choice, or watch the welfare class riot in the streets along with the Greeks, the Italians, the Portuguese and the Spanish, when international investors will no longer finance the borrowing which has been necessary to finance the deficit spending.
But this is a topic for another column.
Ken Schaefer
Annville, PA
February 13, 2012
