Like taxes? We all pay them. Come election time, every politician claims we pay too many. It’s just, the parties like to play with just who “we” is. To the right, “we” is everybody. To the left, “we” is comprised of the “middle class” and “the poor.” In the interest of truth, justice, and the American Way, I’d like to try and dispel some myths about taxes.
Let’s start with the biggest myth of all – that you can tax one group without affecting another. The guys on the Left would have you believe that the Bush tax cuts benefited only “the rich” or as they like to say “the top 2% of Americans.” Obama says he wants to lower the taxes on two-thirds of Americans – a “middle class” tax cut. He wants to raise taxes on the “richest Americans” to make them pay their “fair share,” and to raise corporate taxes, so that by sticking it to the corporations, he can fund his entitlement programs.
Here’s the facts: One-third of American families pay no income taxes at all. That leaves the rest of us to carry those that don’t pay taxes on our backs. Did you know that those earn over $250K per year pay a much higher percentage of their wages in taxes (over one-third of what they earn!), meaning that the richest Americans already bear a much higher burden than do the middle class or the poor?
Here’s the second-biggest myth: corporate taxes hurt only corporations. Let’s pretend that you are a corporation. You make some widget for $50 and sell it to your customers for $100. Before your bills are paid, you still have to pay taxes. That comes off the top. THEN you get to pay for your staff, expenses, raw materials, et cetera. What ever is left is your profit margin. If your expenses go up, your profit margin decreases. Taxes are just one more cost of doing business – an expense. If your taxes go up, in order to maintain your profit margin, you must raise your prices. Careful, though. You can only raise prices so far, before it will result in a reduced demand for your product. Oh, and by the way…who buys your products? You know…the ones that you had to raise prices on, to cover the higher taxes? People, of course. The simple fact of the matter is that the government may charge corporations taxes but they eventually get paid by you and me, in the form of higher prices. Higher corporate taxes = higher prices = less money in your wallet at the end of the month. Think raising corporate taxes is a free lunch? Think again.
In fact, every dollar you make gets taxed many times, before you get to take what’s left and put it in your wallet. You pay Federal income tax on every buck you earn. You also pay Medicare, Medicaid, and Social Security taxes. In many states (thankfully not Texas) you pay State income taxes. Now remember, every time you buy something – anything – you pay sales taxes – usually close to 10%. Corporations pass on their tax burden to you, in the form of higher prices, so that’s additional taxes right there. Then there are all sorts of special taxes – property taxes, road use taxes, utilities taxes, tobacco taxes, alcohol taxes, school taxes – you name it, and there’s likely a tax, either to regulate it’s use or to use it to pay for something else.
Here’s another fact – the tax code exists as it does to keep you from realizing just how much you pay in taxes. Does anybody even KNOW how much tax they pay? Of course not. And the government wants to keep it that way. Even if you were able to add up the taxes you pay (income, sales, tobacco, alcohol, et cetera), you’d still miss counting all the taxes corporations pay on their products, that then force them to run up the price for their goods so they can still make a profit.
On April 15th we all trudge to the mailbox to settle accounts with Uncle Sam. Some of us rejoice when we get a check from Uncle Sam, in the form of a refund. Why? It’s YOUR money – and you gave it to the one financial institution on the face of the Earth who doesn’t pay interest in order to get the use of your money.
Here’s a thought…why not pass a law whereby the government has to begin paying interest on any overpayment citizens make on their withholding? Think about that. It would be just like a savings plan, except that the U.S. Treasury would hold the note and pay the interest. The government would get the use of extra money (if the interest rates beat the prime, even by a point or so, it would be a good investment), and on April 15th, people would get their money back with interest. McCain could trumpet this idea as a sort of War Bonds program for Economic Recovery, and make it a nice counterpoint to Biden’s clarion call for us to all pay more taxes as our patriotic duty.
The best idea I’ve heard would be to scrap the entire system and start over, preferably with a consumption tax. No income taxes. No corporate taxes. Just a sales tax, that’s paid when something is bought or sold. THe more you spend, the more your pay in taxes. The less you buy, the less you pay. What could be more fair than that?
I think what keeps us in this perpetual state of confusion over taxes is that nobody in power really wants to change things. It keeps them in perks and pork. If the only kind of finagling you can do is to either cut spending to pay for some new program, or raise the sales tax rate, you’re going to have to operate in the open, sort of a “Sunshine Law” on steroids. Think about a political campaign, where the candidates could only argue to raise everybody’s taxes on everything they buy, or cut spending. You’d have a race to the bottom, where candidates would argue over how much fat they could cut from each department’s budget. Now there’s a plan I could get behind.
When a candidate – any candidate – starts talking tax cuts, and especially if they start playing the class envy card, look out. Just like with your own budget, when your income is exceeded by your outgo, the smart money is on cutting expenses. Not raising revenues. Because when it comes to raising taxes, the only thing left to tax is our intelligence.
[…] Taxing Our Intelligence. […]