The further to the left or the right you move, the more your lens on life distorts.

Tuesday, April 15, 2014

Tax Day

Today is Tax Day. The federal government will collect approximately $1.4 trillion from individual taxpayers who pay income tax. Who are these taxpayers? Only approximately 50 percent of all people who earn an income. The remaining 50 percent? They pay nothing or get tax credits. Of the $1.4 trillion collected, approximately $427 billion will be needed to pay the interest on our national debt.

No worries, say progressive economists, Barack Obama, and most democrats. Really? Thirty percent of all income tax dollars collected provide no benefit to the citizens and are used solely to service our debt. And it's getting worse year by year. And there's nothing to worry about?

In an effort to change the subject and move the media and low information voters away from this harsh reality, Democrats have adopted this year's favorite meme—"income inequality" and it's corollary, "the rich don't pay their fair share of taxes." This coupled with the demonization of the "1 percent" (a.k.a., financially successful Americans) provides a hat trick for Leftist class warfare.

Democrats actively encourage the widely held belief that 'the rich" avoid taxes to the extent that the burden is placed on the middle class and the poor. Problem is, like many other class warfare memes, this is pure fantasy.

Bob Adlemann reports the following statistics on this Tax Day, 2014:
Jane Wells, a business news reporter for CNBC, after reviewing the latest report from the Congressional Budget Office (CBO) on who pays income taxes in America, claimed that the rich pay them all. The CBO, wrote Wells, showed that the top 20 percent pay nearly 93 percent of all income taxes, [emphasis mine] while the top 40 percent pay 106 percent of them.

How is that possible? The bottom fifth of wage earners get more from the government than they pay in taxes. Hence, the anomaly of the so-called rich paying more than 100 percent of all income taxes received by the government.

The CBO’s math is straightforward: For the year 2010, the bottom fifth earned “market income” — wages, business income, capital gains, retirement income, and so on — of $8,100 per person. But they also received “government transfers” — cash payments and in-kind benefits such as SNAP — of $22,700, leaving them with a per-person after-tax income of $30,800. Each person’s income tax liability in that group? Exactly zero.
The Left responds that the 1 percent have an inordinate share of national income compared to the share of taxes they pay—the core "income inequality" argument. Again, a canard. Steven Moore reports that IRS data indicates that "the wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax." The key word in that sentence is "earn." To acquire their income, the one percent do actual work, build businesses that provide jobs for the rest of us, make investments in other businesses that provide jobs for the rest of us, buy government bonds that fund the debt for the rest of us, by state and municipal bonds that fund local government, and pay approximately $266 billion in income taxes. That sounds like a "fair share" to me.

Instead of focusing on the 1 percent or income inequality, it might make more sense to consider the taxation disparity between those who pay taxes and those who do not. That gap is growing rapidly. Maybe we should call it 'Taxation Inequality.'

If tax and spend big government policies continue (and there is every likelihood that they will) a smaller and smaller percentage of Americans will pay the cost of government for a growing majority. That majority will demand still more 'freebies' in the form of entitlements and government programs, will elect big government politicians who will keep the spigot wide open, and 'taxation inequality' will grow even more. After all, if you're not paying income taxes, why not vote for big government—it's free money, isn't it?

True believers think this can go on forever. But fantasy and reality will inevitably collide, and when they do, reality will prevail. Things that cannot go on forever, won't.