Interesting Libertarian Rant Of The Week
This is an interesting rant on the equality of paying taxes by newsletter editor Porter Stansberry:
According to the federales themselves, the top 1% of wage earners in the United States earned more than $388,806 in 2006.
There were 1.65 million citizens in this category. As a group, they paid $488 billion in income taxes. That was 40% of all income taxes. But they only earned 22% of all wages. In short, the marginal tax rates on America’s top earners were almost 100% more than average. OBAMA! will increase the top rate these people pay – because paying 100% more than average just isn’t quite “fair” enough.
We might argue about whether or not we ought to charge some citizens different rates of income tax. But if you’ll take the time to read the U.S. Constitution, it’s clear that progressive taxation is unconstitutional. Just read the 14th Amendment. It says the government “may not deny to any person within its jurisdiction the equal protection of the laws.” That means the law can’t treat one citizen differently from another – white or black, rich or poor.
If our Constitution weren’t merely a dead letter, the equal protection clause – which was designed to prevent black people from being discriminated against by southern states following the Civil War – would now effectively prevent a black president from “spreading the wealth around” as much as he sees fit. History is nothing if not ironic.
Even if you think progressive taxation is a good idea and redistributing income ought to be the government’s prerogative, I can tell you judging from history and the recent experiences of several different countries, when society expects 40% of the tax burden to be carried by only 1% of the population, bad things happen. The masses always demand too many services from the government – because they’re not paying for them. And, eventually, the 1% that’s paying leaves, quits working, or hides their income.
The result is always catastrophic, not only for the state but for the culture. Once people get used to living off the bounty of their neighbors, they’re reluctant to go back to work. And they’re angry about it. There’s not much more dangerous to society than lots of poor, angry, and desperate people who have become addicted to entitlements. Think unionized employees at Chrysler and GM. Welcome to Amerika.
At the present time, America’s income taxes are the most progressive of any major industrialized nation. That’s not a contest we should seek to win.
A lot of so called tax-reforms are anything but. Consider the introduction of the refundable tax credits, which looks like it will push America to follow Europe down the road of socialism!
The sad fact is that America is broke and the money required to pay interest on the money we’ve borrowed has to come from somewhere? Should we continue to “soak the rich”, or should everyone buckle-up and contribute their fair share? Or maybe we should just continue with business as usual and let our kids and grandkids deal with the consequences?
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June 29th, 2009 at 3:42 am
It wouldn’t matter how much we raise taxes until our government understands that it can’t spend more than it earns. It’s sort of like a credit-shopaholic getting a raise; it wouldn’t make a difference.
June 29th, 2009 at 4:10 am
Couple of points… firstly, America’s income taxes are by no stretch the most progressive in the world.
The US has a range of 35% whereas the Netherlands, UK and a few others have ranges exceeding 50%.
Also, if the highest rate of income tax is significantly lower than other nations then the range of progression isn’t all that relevant – if the highest payers in the US are paying only 35% then they’re still doing better than they would be in almost every other country in the world.
Finally, the whole idea that high tax rates slow economic growth is a myth for which there is no evidence. Even within the United States, the highest growth period in it’s history (1933-1973) also had the highest tax rates (70-91%).
Sources:
http://www.huppi.com/kangaroo/L-taxgrowth.htm
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
June 29th, 2009 at 5:44 am
It’s getting pretty scary. With so many people now not even paying federal taxes and getting a federal tax credit, let’s call it what it is – redistribution of wealth. I understand the rationale; people at the bottom end of the spectrum are hurting. But where does this end?
What’s next – eliminate mortgage interest deductions for those “rich people” with investment properties? Eliminate the child tax credit for those “rich people”? Raise the FICA paycheck limit well above the current rate so people continue to pay into it no matter what their salary – even though the net effect is that they’ll see a massive negative return on their Social Security investment over a lifetime (virtually assured already, but this would be further in the hole)?
Unfortunately, since the real ambition of a politician is the next election cycle and not what’s actually in the best long term interest of the country, there’s no doubt things will continue to move in this direction since the voting population on the “recieving end” is growing while those on the “paying end” are shrinking.
When America no longer holds the financial, military and political power to influence its own destiny in the future, I think historians will look back and cite this government tinkering as an example of the law of unintended consequences.
June 29th, 2009 at 7:26 am
Gareth, when you consider that UK and the Netherlands have paid health care and I believe college education as well, the 50% seems like a bargain.
June 29th, 2009 at 7:55 am
UK college is heavily and progressively subsidized, but not free. It’s comparable to the way community colleges are funded in the US.
My degree (from a well ranked University) left me with around $20k of debt, compared to the $100k+ for a comparable school in the US. If my parents had not been poor then I would have had to pay significantly more.
Having lived and worked in both countries, I’m still undecided which approach to taxation produces a “better” society.
Still, it doesn’t change the point that the last half of Mr Stansberry’s analysis, facts and conclusion are all completely wrong (don’t know about the first half as I’m not a Constitutional scholar, but it still sounds like quite a leap of logic).
June 29th, 2009 at 10:00 am
What exactly does the author mean by “wages”? It commonly means compensation for labor.
Capital gains is not the result of “labor” and it probabaly accounts for the bulk of the top 1% richest income. So the % of their tax burden as a ratio of their % of income (not wages) probably tells a much different and less misleading story.
So the article you quote is not an interesting libertarian rant, but likely just a sleazy misrepresentation.
June 29th, 2009 at 11:43 am
I can think of a lot of things more dangerous than GM or Chrysler employees.
“There’s not much more dangerous to society than lots of poor, angry, and desperate people who have become addicted to entitlements. Think unionized employees at Chrysler and GM.”
June 29th, 2009 at 1:29 pm
I don’t think anyone is complaining about the 15% capital gains tax on investments. Its the 35% federal, 10% state (in some states), city taxes in some places, social security taxes that slowly add up on your earned income that is annoying people.
the very wealthy have options to shelter their income like splitting it up amongst different entities, retirement vehicles and trusts. Its just the high paid wage earners that typically get screwed.
July 5th, 2009 at 2:34 am
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July 5th, 2009 at 1:13 pm
FAIR TAX.
Why should someone making a zillion dollars pay tax on that zillion dollars when they only spend $200,000?? There is no benefit to earning that money, only in spending it! If I am taxed on what I spend, there is a direct connection in the taxes. So everyone spending the same amount of money is taxed the same way. And for those of you who say this is regressive, the FAIR tax provides an automatic rebate TO EVERYONE, so more you spend, the more you are taxed. You are in complete control of your taxation. Want to enjoy your your money? Great spend it and pay the tax.
July 21st, 2009 at 9:38 am
ALL taxes are theft. The government will continue to take more money from the rich AND middle class as long as we are okay with the idea of services provided at the barrel of a gun. Propaganda is the only thing propping up the idea of government.