IGM THE TAX MYTH

INTERGALACTIC MEMO

The tax myth


I was up half the night writing and rewriting another Intergalactic Memo in my head. What set me off was some hack running for president talking about taking care of the American worker, cutting taxes for the middle and lower class worker, and raising taxes on the wealthy. All of them are spouting the same tired mantra—“protect the workers, relieve the burden on the productive members of society” etc., ad nauseam.
In the Review Journal this morning I noticed a quote in an article by John Edwards. I didn’t read the article, I just saw the quote in a bigger font and read it. Here’s what it says:

I will pay for it by repealing President Bush’s income tax cuts for Americans who make more than $2oo,ooo per year.

I don’t even care what he’s planning to pay for. This kind of wrong-headed thinking is ludicrous. Where do these ideas come from? The Communist Manifesto? Mein Kampf? A pamphlet from the Socialist Workers Party? I swear, this kind of muddle-headed, emotion-driven, irrational, ideological drivel grates on my nerves like sandpaper eyelids folding back and scraping on the brain! We have Bolsheviks trying to run the country!
It’s as if liberals (and far too many Republicans are closet liberals) believe that anyone who earns over some arbitrary amount of money—$200,000 will do nicely for the moment—doesn’t work. What? Only people earning a wage are “workers”? Wealthy people don’t earn their money? That’s right out of Karl Marx. What is anything he had to say doing in an American political debate? Are there really people out there who think the country is thick with trust fund babies, the idle rich, the indolent, self-absorbed social elite? Because it isn’t true. They exist, certainly, but our media seems to have given the false impression that they are legion. The truth is less than one half of one percent of our citizens are wealthy by inheritance. (People like Paris Hilton, who, based on what we know of her thus far, is a complete waste of protoplasm). It is also true that the wealthiest 5% of the country pays over 50% of all taxes. Do people just not believe that? Then read this:

The latest data show that a big portion of the federal income tax burden is shoul¬dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per¬cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare. (The American, Nov-Dec 2007, Stephen Moore, author)

Rich people pay taxes. It is a myth that they don’t. Corporations often get around paying, but that’s another issue altogether, which has to do with capital gains, writing off losses, and all kinds of other complicated stuff.
The idea that the rich don’t pay their fair share is just plain wrong. Like the rest of us, they take advantage of every deduction and exemption and exception they can legally find. A very few people—like George Soros—hire a phalanx of attorneys and accountants to keep from paying, but that is rare—and unethical. But for the most part they pay the lion’s share of taxes.
These politicians constantly pick on the working rich as if they are a separate class, which is tantamount to inciting class discrimination. It is the working rich who drive our economy, who pay the most in taxes and licensing fees and regulatory expenses, as well as mandated insurance, workers comp, social security and so on. They are not a separate class, they are not different from us—they just make more money—and pay lots more in taxes.
How many jobs has Steve Wynn created in Las Vegas? Tens of thousands at least—and all those employees pay taxes as well, but nowhere near as much as Mr. Wynn, who is the one who took the chances, had the dream (over and over again) found funding, created, and made his vision reality. I don’t know Steve. My guess is he and I wouldn’t get on very well. But I respect what he does. How about the Maloof brothers? I do not like their style at all. They were obnoxious rich boys in high school, spoiled and conceited. (I played ball with them on Wednesday nights back in the day). I think the Palms reperesents the worst of Las Vegas, the seedy, the crass and lascivious, but they too took their fathers seed money, started businesses, grew them, expanded, bought professional sports teams and came to Vegas and built a successful mega-resort. How many people do they employ? Thousands. And the Maloofs, like all the resort owners, pay local, state, and federal taxes. Regulatory fees, etc. We tax the snot out of them. And now we want to hit them again so they can pay for education. If we keep taxing the rich, keep picking on them and treating them like powerful chattel, they will eventually give up and go away. We’ll get just what we wanted and no one will have a job. Read Atlas Shrugged. It could happen.
And think about the sports franchises. Huge stadiums, even larger salaries for the players. But without A-Rod and his millions the peanut and beer guy would have no jobs. The grounds keepers would be doing something else, the security people and ushers and kiosk workers and memorabilia hawkers would be out of work and paying no taxes—and sucking up federal aid. Every stadium employs hundreds of people, every team hundreds more. Professional athletes may be idiots as a general rule, but they work hard. Their careers are short and often end in permanent, crippling injuries. Most of us have no idea what kind of commitment and determination it takes, starting as a kid, to make it to the pros. The sacrifice is tremendous. And because they are “wealthy”, hundreds of thousands of people have jobs. In what sense do pro athletes not work? And yeah, I think most of them are ignorant, spoiled brats too.
In what sense does my buddy Bryan not work? He owns a successful pool plastering business, employs 40 or 50 people and makes a good living. (I have no idea how much but it’s more than $200,000 a year). He works eighty, ninety hours a week—more than any of his employees. Explain to me why he should pay a higher percentage of taxes. I’ve talked to him; if he could get out from under the debilitating crush of taxation, he could expand, hire more people, purchase better equipment. He’d have more work, have to hire more people. And all those employees would pay more actual tax dollars to the government.
Let’s look at an unnamed hotelier. My cousin happens to be married to the guy. He’s worth billions, and he employs tens of thousands of people, pays all kinds of taxes, corporate and personal—millions and millions every year. He’s one of the majority of rich people who pay their fair share. They understand what taxes are for, why they are necessary. Most of us don’t. And most of the working rich spend even more on charities than they do on taxes. But when the politicians decide they have the right to spend other people’s money, and that some people should be forced to pay more by virtue of their success, all that philanthropy will dry up. It happens time and again, and still most people don’t get it. They don’t see the rich as being victims of unfair treatment, they just see the free money vanish and pronounce the rich selfish.
Now let’s talk about all those nice people who work at Wal-Mart (the ones who represent all those working in low-paying jobs.) We look at them and see their struggles, trying to make ends meet, and our knee-jerk reaction is to blame the rich and legislate another draconian tax to suck them dry. But there is no connection between Sam Walton’s billions and the fact that his cashiers make 12 dollars an hour—or 8, or whatever it is, other than the fact that Wal-Mart employs hundreds of thousands of people, all of whom pay taxes. But Walton personally kept less than one percent of his company’s earnings. He just knew how to make money. Most retail jobs don’t pay a lot because they don’t demand a lot of education or skill or experience. Those are low-skill jobs. Most of the people who have them don’t want to work full time. How many of them are retired and want extra income? How many are lacking in schooling and training? Those jobs are not meant to provide a living wage. And the argument that without those workers, the faithful employee, Wal-Mart wouldn’t exist, is fallacious. Because without Wal-Mart none of their jobs would exist either. Look at the minimum wage. It is meant for part-timers, the retired, teen-agers and those just entering the job market. The assumption has always been that employers who pay minimum wage are going to spend a lot of time training their people in entry-level skills. It’s not meant to be a living wage. The fact that so many people settle for those jobs and try to live on them, is not the employers problem and certainly not the governments problem!
This posturing about the evil rich is nothing more than a disingenuous ploy on the part of politicians to set one group of people against another for the sole purpose of collecting votes and re-election funds. And yet, every four years millions of people fall for it hook, line, and sinker.
And how can it not be obvious to everyone that the only two methods of taxation which even approach equity are a flat tax or a federal sales tax—without loopholes and exceptions. Our current income tax is illegal anyway. And don’t start yelling about the 16th amendment:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

(This is a direct contradiction to the original amendment, which required apportionment, and all those other things I mention in the next few sentences.) And there is credible evidence that the 16th amendment has never been properly ratified.
According to the constitution (remember that document?), and the Supreme court, an “income tax” can only be collected from corporations since income is defined as “corporate profit”. A tax on wages originally came with very specific and limiting parameters. The tax must be for a specific and publically stated purpose, the length of time it is to be collected must be set, the amount collected must be pre-determined, and the various states must be apportioned according to population with a set amount for each state based on the latest census. Does that sound like the IRS? And does the 16th amendment sound like something the Founding Fathers would approve of? Read it again. It is carte blanche; the congress wrote themselves a law that says they can take as much money from us as they want. No limits. Yep, that sounds like socialism all right.
To review: raising taxes on wage earners, regardless of their income, is never the right thing to do. (It is occasionally acceptable to exempt some people from paying taxes altogether). Lowering taxes, especially on the working rich, always increases overall tax revenues. Always. It stimulates the economy, increases employment, and rebuilds infrastructure. It is better for everyone. This is fact. It can be proven. It is historical. And yet, again and again, the liberals deny it, claim it isn’t true. One might ask oneself why they would do that. What is their motive for such duplicity? If any of them would just come out and publically announce they subscribed to a socialist agenda, that would be fine. I would have no problem accepting their position and would be content to let the voters decide. But they never make such an admission. Why not? The entire democratic platform these days is based on socialist ideology, global government, global economy and the surrender of National sovereignty to some nebulous, ill-defined, intrinsically ineffective and naturally corruptible form of bureaucratic nightmare. What are they afraid of? What is it they will not speak? How do they really see the world and humanity in general? Because what they are saying is not what they are thinking.
Other than that, I’m pretty happy with the way things are going. How about you?