by Frank Ryan –
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 unbelievable.
As a CPA, I find the “tax the rich” schemes to be pure junk science. To that end, the illogical precepts underpinning these arguments must be exposed. (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, so those pitiable enough to earn an income 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:
- The wealth gap has widened since the “Bush” tax credits.
- So 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.
These reasons are pure fiction!
To start, it is inaccurate to equate wealth with income. The super-rich (billionaires) contribute significantly to political candidates who then perpetuate this myth. By deflecting taxes from the super-wealthy, the super-rich are 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 indicated that its average returns from 1965 to 2010 were over 20%. In Buffett’s letter to the Bill and Melinda Gates Foundation, he qualifies his gift of stock of Berkshire Hathaway with the condition that “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 Buffett 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 by other taxpayers to Buffett himself. Buffett has, through wise tax counsel, been able to reduce his taxes while at the same time recommending that you pay more!
The perception that higher taxes will pay down the deficit is sheer madness. 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 its misguided policies.
The “redistribution to those in need” philosophy merely encourages those on the income-earning side to migrate to the unemployment line. Kill the incentive to work, and you kill an economy. In economic warfare, the objective is to debase the opponent’s ability to wage war. Today, politicians favoring such tax tactics are committing economic suicide with their reckless spending programs.
Myth 3: Income redistribution works. See the history of the Soviet Union for more details. Need I say more?
Granted, the wealth gap has increased throughout the world, but blaming this on the tax code can be attributed only to nothing short of intellectual bias. Congress has spent decades trying to make you dependent to help its members get reelected. Wealth gaps are created for a multitude of reasons, with creation of social programs to “protect the poor” being 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 earners 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 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.
HT: American Thinker (read full article)