President Obama tells us everyone must pay their fair share. I think he’s exactly right. But I don’t think he means what he is saying*. Everybody would include more than the roughly 53% of Americans who actually pay federal income taxes. The President wants to make federal taxes more fair by eliminating deductions utilized by “the rich.” He has never defined the term rich. Although he often refers to millionaires, proposed tax changes have applied to those earning at most 25% of what millionaires earn. To President Obama “fair share” means taxing a smaller group of tax payers from the shrinking pool of those who actually pay federal income taxes. Increasing demands on fewer and fewer people does not conjure the word “fair” immediately to the mind of most sane people.
What would be fair?
1) Take the entire Internal Revenue Code and burn it.
2) If you have income you pay income tax; unless you are not part of everyone. If you are not part of everyone you are no one.
3) There will be two tax brackets. 15% and 25%
4) Income brackets will be established by an “over/under” number and the number pegged to the rate of inflation.
5) There will be four deductions as follows:
- Mortgage Interest: federal income tax policy should encourage home ownership.
- Child Credit: federal income tax policy should encourage and support families.
- State Income Taxes (or high state sales taxes where no income tax): federal income tax policy should not take a second bite from the apple.
- Charitable Giving: federal income tax policy should encourage charitable giving. Not only is it right and proper but helps relieve the burden on tax payer funded programs.
The problem with a simplified tax structure like this is that it eliminates thousands of pages of code and the need for hundreds of thousands of experts to interpret it, it eliminates the opportunities for politicians of every political stripe to embed arcane deductions aimed at preferred constituencies and it would eliminate the need for probably 99% of the IRS. Sadly, while President Obama does not mean what he says, enough Congressmen agree with him to make it not matter. And so, we will continue to hear a lot about this issue that says nothing, at best, and misleads more commonly.
*Just for clarity, because Obama is President and not Governor, Mayor etc, I presume he is talking about taxes within the control of the federal government; that is to say federal income taxes and so my comments address federal income taxes. It is awful that I need to say that but with people like Warren Buffet intentionally confusing the issue it becomes necessary.
Warren Buffett recently wrote an article telling us to Stop Coddling the Super Rich during these difficult economic times. His article was strong on class baiting and weak on providing the reader with a well rounded picture on the issues. You can find the article here. I’ll respond to the article in a series of posts rather than one big article that no one will read. My purpose is not to suggest that billionaires can’t afford to pay more taxes; they can. My purpose is to illustrate that popular views about who pays federal income taxes and how much are skewed and that Mr. Buffett’s article played on those misconceptions.
To Buffet’s claims.
“While the poor and middle class fight for us in Afghanistan and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”
I really don’t know what relevance this could have in an article about taxes. Either Buffett included a non sequitur making his credibility suspect or he did it for a reason. I’m going with he did it for a reason. Mr. Buffett is setting up an us vs them dynamic, not hard when one group is the mega-rich. This is commonly known as demagoguery. Although Mr. Buffett waters his assertion down quite a bit to escape getting hammered on facts they way Charles Rangle did after writing in a NYT Op-Ed asserting that, “A disproportionate number of the poor and members of minority groups make up the enlisted ranks of the military, while the most privileged Americans are underrepresented or absent.” they both used the same rhetorical device.
Buffett and Rangle are not very strong on the facts when using this trope but it does allow allow the opportunity to correct the record about who actually serves. From an exhaustive study by Dr. Tim Kane at The Heritage Foundation regarding the demographics of the US Armed Services:
The household income of recruits generally matches the income distribution of the American population. There are slightly higher proportions of recruits from the middle class and slightly lower proportions from low-income brackets. However, the proportion of high-income recruits rose to a disproportionately high level after the war on terrorism began, as did the proportion of highly educated enlistees.
The facts are that Mr. Buffett makes an unsustainable claim of fact in his second paragraph in order to put the reader into the mind-set of a victim to encourage enmity for the subject of his attack; himself and others in the undefined class of mega-rich. This is not how an honest dealer should begin his efforts to clarify a complex issue.
Buffett’s “federal tax bill” next time