The fairness of taxing the rich
Mike Hauser (31 January 2012 09:37:33)
Mike Hauser

President Obama and the Democrats, once again, are calling for raising taxes on the wealthy. Lots of people hear that and think, "Yeah, I'm not wealthy, so it won't affect me. Go ahead and tax those fat cats." But if you stepped back and looked at it dispassionately, you'd hopefully realize the folly in this.

For the record, I am far from wealthy. In fact, after the nightmare of an economy we've been dealing with for a couple of years now, I'm barely middle class. It's been all we can do to keep our business doors open. I've never been wealthy. I come from a middle class family where both parents had to work to make ends meet. All my married life, that's also been true for me. I live in an ordinary house and drive a vehicle that's over ten years old. I state all this so you'll know I don't have a vested interest in the tax rates for the wealthy.

So why on Earth aren't I in favor of raising taxes on the wealthy? Let's start with one of the Left's favorite words, fairness. I'm totally against the progressive tax structure; where the more you earn, the higher your tax rate. How can that be considered fair? Does a rich person actually use a higher percentage of government services? No, in fact the opposite is true. It's the poor who take more advantage of government services -- welfare, food stamps, subsidized housing, health care, etc. So why is it fair for the rich to pay a higher percentage?

The rich already do pay more in dollars, just due to the mere fact that they're taxed on a higher amount. For simplicity's sake, let's use a tax rate of 10% and a couple of imaginary people. Tom's taxable income is $20,000, so he'd pay $2,000. Danny, on the other hand, has a taxable income of $200,000, so he'd pay $20,000 at that tax rate. That means Danny's paying an amount equal to Tom's whole income for the year. How is that fair? Does Danny really use 1,000% more government than Tom? Not hardly. So much for the fairness argument.

Many argue for a flat tax. While I can see some appeal in that scenario -- it's certainly better than the progressive tax structure we're under now -- I think a national sales tax is a better way to go. One of the arguments the Left uses for raising taxes on the wealthy is that they're able to avoid income tax rates by deriving their income through capital gains. There are other ways the super-wealthy can shelter their money. But it's harder to hide purchases, and the wealthy certainly spend way more money than the rest of us. To avoid penalizing the poor, you'd need to exempt things like unprepared food and medical care. Or offer some type of 'rebate' to offset those things. Ultimately, I think a national sales tax is a much better replacement to all those taxes (income, payroll, capital gains, etc.) from the federal government.

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