The "tax the rich" hysteria gripping this nation is absolute insanity. Cries to raise taxes on those with incomes over $250,000 or some other magical number are incredulous.
As a CPA, I find the "tax the rich" schemes to be pure junk science. The illogical precepts the arguments are based upon must be exposed before more disasters strike. Incidentally, by way of full disclosure, I would not be personally affected by these tax increases. I merely want to expose the scheme for the fraud that it is.
Many in Congress have attempted to make earning an income distasteful. Those citizens are subjected to public scorn. Politicians and many in the media are collectively pushing policies to "punish those people" by taxing them into economic slavery and involuntary servitude.
The scheme perpetuated by those demanding higher taxes goes something like this:
• Raise the taxes on the wealthiest in the nation
• The higher taxes will pay down the nation’s deficit
• Money can then be redistributed to those in need
• The wealth gap has widened since the "Bush" tax credits.
These reasons are pure fiction!
First, it is a inaccurate to equate wealth with income. The super rich (billionaires) contribute significantly to political candidates who then continue to perpetuate this myth. By deflect taxes from the super wealthy, are the super rich supporting candidates who favor taxing income and not assets.
Myth 1: Income is not wealth. Assets are wealth.
In the Berkshire Hathaway Annual report for 2010 the company posted results which indicated that it’s average returns from 1965 to 2010 were over 20%. In Buffett’s letter to the Bill and Melinda Gates Foundation he conditions his gift of stock of Berkshire Hathaway on "…BMG (or any intermediary) must continue satisfying legal requirements qualifying my gifts as charitable
and not subject to gift or other taxes". The tax deduction he receives against ordinary income on the contribution of stock which has appreciated and for which he has NOT paid capital gains taxes virtually translates to a tax subsidy of other taxpayers to Warren Buffett. He has, through wise tax counsel, been able to reduce his taxes while at the same time recommending that you
Second, the perception that higher taxes will pay down the deficit is sheer insanity. The "super rich" as the press likes to call those who work could pay their entire incomes to the federal government and barely make a dent in the deficit. The top 10% income earners already pay 90% of the tax liability. Involuntary servitude perhaps?
If we applied the same "hatred" of the "rich" to a protected class of citizen we would call it a hate crime.
Myth 2: Tax increases will not affect tax receipts. Taxes are a cost to a taxpayer. Increasing taxes reduces disposable income and consumer spending which results in fewer jobs and higher unemployment. If you do not believe me, ask the Treasurer of the State of Illinois which recently raised taxes 66% and is now feeling the reduced income for their misguided policies.
Third, the redistribution to those in need philosophy merely encourages those on the income earning side to migrate to stop working. Kill the incentive to work and you kill an economy.
In economic warfare, the objective is to debase the opponents ability to wage war. Today politicians favoring such tax tactics are committing economic suicide with their reckless spending programs. Al Qaida has a sleeper cell in the United States – the U. S. Congress.
Myth 3: Income redistribution works. See the history of the Soviet Union for more details.
Need I say more?
Fourth, the wealth gap has increased throughout the world but to blame it on the tax code is nothing short of intellectual bias. Congress has spent decades trying to make you dependent to help them get reelected. Wealth gaps are created for multitudes of reasons with creation of social programs to "protect the poor" as one of the main culprits.
Myth 4: The tax code is not progressive. This is pure fiction as well. The Brookings Institute analysis and the IRS both confirm that higher income people pay up to 30% of their incomes in taxes whereas lower income citizens pay significantly less and, in most cases, zero.
Until the American people demand accountability from our government and demand rational analysis of proposed laws, we will continue to suffer economically. We will fail to address the real issues of our day with real solutions. We will in effect reinstitute involuntary servitude on our children and grandchildren as they have to pay for our fiscal irresponsibility.
The solution is simple. Stop spending.
Frank Ryan, CPA specializes in corporate restructuring and lectures on ethics for the state CPA societies. He is on numerous boards of publicly traded and non-profit organizations. He can be reached at [email protected]