NEWS FLASH: The Associated Press has apparently just discovered that nearly half of all Americans will pay no federal income tax this year! And that almost 40% will actually get money from the government! And that 73% of all federal income tax collected comes from only 10% of the population! Wow! Who knew?
Well, you did, if you've been following this blog, because we've written about this before. But, now that it's actually being reported by the national press, I'd like to point out a few things that should be intuitively obvious:
- First of all, it's obviously unfair (and if you've been listening to Obama and the rest of the Democrat leadership, you know they care deeply about fairness) that 73% of the tax burden should be paid by only 10% of the people, and that nearly half of the population should pay nothing toward services that benefit everyone.
- Second, this should, once and for all, settle the issue of whether or not the government is advocating the redistribution of income. If a small portion of the population is shouldering a disproportionate share of the tax burden, and a large portion of the population is being given (not refunded) money that they didn't pay into the system, that is redistribution of income. End of story.
- Third, we are getting uncomfortably close to the point where a majority of the electorate has nothing to lose by voting for higher taxes and spending, because (they will think) the tax burden is going to be paid by somebody else (the "rich").
But here's where it all falls down. The federal budget deficit is now so unimaginably huge that you could tax "the rich" at a rate of 100% and still not cover it. Even liberal Democrats are now saying that it is unsustainable and must be brought under control. This, of course, would be laughable if it wasn't so tragic for the nation, since they are largely the ones who created it. And, of course, their solution isn't to bring it under control by reducing federal spending...they want to raise your taxes - hence the recent trial balloon regarding a "value-added tax."
So, just for a moment, let me talk directly to the 47% of my fellow Americans who aren't paying any federal income tax. You should know that federal income taxes account for only about half of the government's revenue. You're paying a big chunk of that other half in ways you never see - like Social Security taxes that are not going into some kind of "trust fund," but in fact are being used to run one of the biggest Ponzi schemes ever perpetrated. Oh, I know you see the portion of Social Security taxes that are taken out of your paycheck, but you never see the matching amount that your employer pays (unless you're self-employed, in which case you get to pay both halves). That's money your employer doesn't have available to give you a raise, or some other kind of benefit, because it's going to the government. You're also impacted by other kinds of taxes levied on businesses, who ultimately pass the costs along to you when you buy their products.
Here's an example everyone should be able to understand: Let's say that a loaf of bread costs $2.00, and you've got $4.00 in your pocket. You can buy two loaves of bread. If the federal government directly levies a $2.00 tax on you, you can now buy only one loaf of bread. That's easy to understand - everybody gets that. But if the federal government, through some other policy decision, causes the price of bread to rise to $4.00 per loaf, that also results in your being able to buy only one loaf of bread. So there is no difference in terms of the effect it has on your life.
There are many ways for this to happen. One is to simply keep up that deficit spending until inflation kicks back in. And, if we stay on the path we're on, it will - with a vengeance. Another is to pass laws that cause the cost of energy to go up - thereby increasing the cost of plowing, planting, and harvesting the wheat, transporting it to market, milling it into flour, baking it into bread, and delivering the bread to your local grocer. In fact anything the government does that increases the cost of doing business is ultimately going to get passed along to you, the consumer, in the form of higher prices. What's the difference between seeing your purchasing power erode because of higher prices, and seeing your purchasing power erode because you're paying more taxes? None. Either way, your standard of living goes down.
It has been said that, while capitalism may be the unequal distribution of wealth, socialism is the equal distribution of misery. We are already on that slope, and it's slippery as hell. We have to elect leaders who will reverse course, before it's too late, or our grandchildren and great-grandchildren will look back and curse us for being so selfish and short-sighted.
Thanks for listening.
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