Posts Tagged ‘redistribution of wealth’

Has the American Dream Turned Into a Tax Nightmare?

Saturday, July 17th, 2010

cat relax taxing Our country was founded on certain inalienable rights and millions of people flocked to the United States of America because we enabled opportunity. We were a land where, if you worked hard, you could prosper and avoid excessive taxation by the King. Our history books may not be as long as other, older countries, but our history books are filled with the names of people who have come to America with nothing and built personal fortunes from hard work, perseverance and ingenuity.

And let’s not forget the millions more, like my forebears, who never got rich, but have been able to provide a decent living for their families through honest work.

My hat goes off to those who have dreamed the American Dream and have achieved it. Unfortunately, for many of those who have worked hard to become financially successful or provide more for their families, the American Dream has turned into a tax nightmare: A bad dream where you work hard while others take your hard-earned money. We’ve turned into a nation that redistributes wealth, with the IRS taxing the higher income earners a disproportionately high amount while writing a check to those who have not worked and sacrificed for their income.

Now, let me say this: I believe America should be a land of equal opportunity, but not a land of equality. I believe people should be treated fairly regardless of their skin color, national origin, religion, etc. I think that’s something that makes America great. But we aren’t helping by heavily taxing what one person has honestly earned and giving to others. By this we are teaching them that wage theft, in the name of being “fair”, is permissable.

A society that offers its citizens an equal opportunity to work hard and advance themselves is all that can be expected of “fairness”. A society that forcibly takes earned income away from one person to give to another person is actually discouraging hard work. Entrepreneurs work unhuman hours to create the future, while undertaking significant risks. Entrepreneurs and successful businesspeople should not have to pay more to the Internal Revenue Service if their risks pay off, just as they would not receive an award if their startup venture failed.

We want to encourage every American to stand on their own two feet and to push forward, not enable them to continue lying down and not contribute to society.

We have become a nation of takers and givers, as Sherman Frederick points out in his article Tax Man Comes For Half of Us. We have become a nation of that says “wealthy” people (however the takers want to define it at any given moment) should be forced to give their income away to others.

Those receiving the handouts from massive taxes should rise up in revulsion and say they don’t want what they didn’t produce, and that they don’t want to treated like a charity case.

Have we reached the point where receiving free handouts is no longer shameful, and considered a “right”?

If we create a nation of people who expect a “hand out”, then we’ve fallen so far from our founding ideals that we may not recover.

Who’s to blame? Sherman Frederick points to Obama and Democrats in general (and a few Republicans). I think it’s easy to blame Obama, and he certainly deserves to shoulder a large share of the blame, but I believe it extends far beyond the current President. From eroding values to disengaged parenting, there are a lot of reasons that we’ve become a country of people seeking instant, selfish gratification without lifting a finger.

Let’s initiate change: Work harder. Seek the pride and satisfaction of a job well done. Sacrifice to get a better education. Save money and spend it less frivoulously.

Contact your government representatives at all levels and demand fairer taxation and aggressive government representation. Commit to working to change things in your own circumstances through hard work, a determined will, and guidance from your core beliefs.

And remember – pay your taxes, but take every legal tax-minimizing break you can to avoid redistributing more of your wealth than is necessary.

Through social change there may be a day when our tax debts decrease instead of the current increasing trend.

Adam Smith was right: We need “certain” tax

Thursday, July 15th, 2010

Adam Smith wrote the book “The Wealth of Nations”, a massive work that set the tone for employment, economics, and industrialization in the US. Published in 1776, much of Smith’s work is as relevant today as it was back then.

Among his many insightful economic positions, he believed that taxes were a good thing but they should be “certain, and not arbitrary”.

No one here disputes that we shouldn’t have taxes. Taxes are necessary to pay for roads and police and the many other services that come with living in the US. But what we do have a problem with is that the tax code has become a tool to redistribute wealth, taking it from some and giving it to others, ultimately redefining the American Dream into something that looks more like a socialist economy.

Adam Smith believed that taxes should be “certain, not arbitrary” but our taxes right now are anything but certain! Filling out tax forms – accomplished by wading through an overwhelming number of forms and documents – is akin to pulling the lever on a slot machine… but a slot machine that punishes you instead of rewards you!

Smith proposed a flat tax. While I realize that there are many challenges to implementing a flat tax, and there are reasons why a flat tax might not work, it is the most equitable form of taxation because it is certain and knowable. In fact, a flat tax might actually decrease the amount of bureaucracy and expense incurred by the IRS every single year in trying to understand their own tax code and then trying to enforce it.

The Washington Times has a fascinating article that starts by talking about the IRS and how IRS employees are receiving a growing number of threats for trying to enforce Congress’ tax laws but then, on page 2 of the article, it launches into a scathing examination of IRS employee culpability and ultimately concludes with other great thoughts by Adam Smith. Read the full article here.

It’s Time to Hand Out Pink Slips to Washington

Monday, May 10th, 2010

In a recent article by Robert Samuelson at RealClearPolitics.com called “How Big a Government Do We Want?“, Samuelson talks about a proposed Value-Added Tax (VAT) which its proponents suggest would relieve the US of its disproportionate tax burden and help to pay the deficit.

While a sales tax SEEMS like a good way to redistribute taxes to everyone who buys (instead of charging higher income taxes to people who earn more money), it is not a good solution. Implementing a VAT is complicated and, as Samuelson suggests, will only increase government.

And that is what concerns me more. Of course I don’t want higher taxes, but a bigger government is even more worrisome – because they create unnecessary spending (case in point: More of our income taxes go towards the federal pension than to education).

What’s the perfect size of government? I want it to be no larger than it was approximately 100 years ago. It want it small, the way it was before the big government era when we thought “the bigger, the better.”

Here’s why: The government is killing us while it benevolently attempts to provide us with a cradle-to-grave safety net:

  • It’s killing us with taxes
  • It’s killing our spirit of independence and non-government dependence
  • It’s killing our “can-do” spirit

The US was founded on liberty and opportunity and both of those things are quickly disappearing as we become overtaxed and then enslaved to debt.

Large groups of Americans now wait eagerly for their government check:

  • Farmers
  • Corporations
  • Earned Income Credit recipients
  • Seniors who obtain more in benefits/insurance value than their tax contributions would have ever bought on the open market

The government, through its hand-outs, is creating class warfare, age warfare, and warfare between small business and large business.

  • Those that earn more are encouraged to dislike those that earn less.
  • Those that earn less are encouraged to be suspicious of those that earn more.
  • Those that are older are encouraged to be hyper sensitive to younger folks who don’t want to pay for their benefits.
  • Those that are younger are beginning to begrudge the payments they must make to seniors who are better off than they are, or already have their homes paid off, while they also receive extra tax deductions, and in some instances may be excluded from paying property tax on the local level.
  • Small businesses looks askance at corporate welfare.
  • Large businesses seek to gain preferential tax treatment over smaller competitors.

Everyone SAYS they don’t like taxes and big government, but they’ve already been “bought”. They want everybody else’s government check be reduced or stopped – but they don’t want their government benefits or preferential treatment touched.

Do we have the guts to have a smaller government? Do we have the will to fight for reduced government that may actually cause our own governmental benefits to be cut? As I survey the present landscape, I don’t see much reason to be optimistic.

The True Cost of Tax Credits

Friday, April 16th, 2010

Everyone loves tax credits. There’s no better feeling than finishing your income tax return on (or preferably before) April 15 and seeing that you own nothing… or even that the IRS owes you. Long before the money arrives in your mailbox, you’ve probably spent it on something.

Tax credits seem great! But they come at a cost and it is threatening the fabric of our economic system.

As governments support specific groups or reward specific behaviors, they look to income tax credits as a way to manage that support and people make the mistake of thinking that their “great” income tax credits are a bonus.

But the real result is much more startling: A dwindling group of people are paying for a larger and larger group of people. Since the dawn of the new millennium, one in four taxpayers are considered “non-payers” because they owe no taxes (or receive money back). The number of non-payers grew by 36% while the number of tax filers grew by just 13%. So the gap is narrowing and the IRS is evolving into a turnstile of money, taking it in and then pumping it back out again.

This is increasing dramatically and it’s not just for impoverished families any longer! In fact, some families earning as much as $50,000 are able to combine deductions and credits to get out of paying taxes.

In this chart, notice how the percentage of returns with no liability is increasing!
no tax liability

Here’s the reason why this upsets me: tax credits mean the the government, instead of you and I, is deciding to give away our hard-earned money, and deciding whom to give it to.

Democracy being what it is, politicians will buy votes by giving away money that’s not their’s to give away. That will enevitable result, just as it already has, in more and more people getting “tax credits”. This means that a smaller group of high income earners are paying an increasingly disproportionate amount of taxes to support everyone.

If the IRS says you owe money, it’s not just because they want you to pay… it’s because they need to pay off others who are getting an increasing amount of tax credits.

The problem isn’t going away any time soon: Tax credits sound great and win elections. But politicians are just borrowing against the future.

Read more at the Tax Foundation about how Americans are getting out of paying taxes and avoiding societal obligations.

The Greediest States

Wednesday, March 17th, 2010

The Declaration of Independence asserts that all men (and women) are created equal. This document was written partly in response to the burdensome taxation that the colony felt from Great Britain. And, although we still believe today that all men are created equal, we are certainly not taxed that way. Your taxes can be dramatically higher, based solely on your geographic location. I looked at some basic data to discover which states are the greediest.

First, consider the states with the highest and lowest median household income.

The highest ten in 2008 (in order from highest to lowest) were:

  1. New Jersey
  2. Maryland
  3. Connecticut
  4. Alaska
  5. Hawaii
  6. Massachusetts
  7. New Hampshire
  8. Virginia
  9. California
  10. Washington

(Source: Wikpedia)

Now, check out this map of state and local tax burdens:
US states tax rates

The top ten highest tax burdens are:

  1. New Jersey
  2. New York
  3. Connecticut
  4. Maryland
  5. Hawaii
  6. California
  7. Ohio
  8. Vermont
  9. Wisconsin
  10. Rhode Island

So, what does that tell you? It tells me that the greediest states are New Jersey, Connecticut, California, Hawaii, and Maryland and they are getting a lot of money by burdening their higher-than-average income earning populace with a higher-than-average tax burden. We’re not just talking about tiered taxation but about geographic taxation!

It also tells me that the tax payers in Alaska and New Hampshire are very fortunate: They each are in the top ten average median income-earning states but they are also each in two of the bottom ten tax burden states – New Hampshire has the 46th lowest tax burden and Alaska has the 50th lowest tax burden.

What is the True Purpose of Taxation & the IRS?

Wednesday, November 12th, 2008

Equality of Opportunity, or Merely Equality?

An interesting article by Bill Frezza, dated Nov. 7, 2008, “Obama: Hope and Change or Duck and Cover?” appeared in RealClearMarkets.com. My comments on this article are not meant to be partisan, but it just so happens that these philosophical questions regarding the proper use of taxation, and of the IRS, are quite timely at this moment in history.

The truth is that in America every door is open to anyone who makes good choices in pursuit of a dream.

America is great, and it is a financial success. Some say that a large percentage of our fellow citizens living among us are poor and unable to help themselves without a handout, and we should use the power of the IRS to take money out of one person’s pocket to put it into another person’s pocket.

My own “poor” grandparents would be shocked to see how we are defining who is “poor” today. Almost all of what is called “the poor” in today’s America are much better off than my own grandparents who lived in rural Appalachia of the 20th century. It sounds hokey, but as recently as the mid-1970′s they had no indoor plumbing, and certainly no air conditioning, and they only had one automobile. When I lived with my grandmother for a time, my job each morning was to pour the chamber pots out into a special covered hole. I’ll never forget it. For those of you economically poor folks who don’t know what “chamber pots” are, they are the covered buckets you used the bathroom into if you had to use the bathroom during the night – either that or you walked down the trail to the outhouse in the dark. Their bed rooms, and mine, weren’t heated during the winter either. Such necessities are had by virtually all Americans now – as well as other necessities like cell phones and cable TV.

Being poor in America today is largely a state of mind – a state of mind constantly fostered by politicians who benefit from class warfare.

We owe the financial greatness of America to there being an atmosphere which helps fuel innovation, but I expect life on the front lines for small business persons and entrepreneurs may get much harder.

The entrepreneurs of American take outsized risks pursuing disproportionate rewards. How is this going to work in a culture that demonizes disproportionate rewards as the government shifts into overdrive to tax them away?

Entrepreneurs are every day folks who are dreamers. You cannot see the people they hope to employ nor hear their plans for change over the shouts of the entrenched entitled masses. If we make it a national goal to stamp out income inequality irrespective of its source, what happens when we succeed? No force of nature can make these rare and intrepid individuals quit their day jobs in hopes of striking it rich if you promise them that they can’t keep what they win. Just as they abandoned Europe to come here, where will they go next?

It is foolish to believe that if you tax businesses and entrepreneurs harder that they’ll just work harder. Socialism never works in the long run.

Pass all the laws you want to punish greedy entrepreneurs, small business persons, and corporations as you seek to squeeze the wicked “rich”, but don’t be surprised if the profits you hoped to tax and spread around evaporate or take flight. These people didn’t get “rich” by being stupid.

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