Saturday, September 24, 2011

On taxing the "rich"

When I've posted links on Facebook, at least in the last several months, several of them have been about President Obama's plan to tax the "wealthiest" among us. Repeatedly in speeches, the president has made references to making sure that "millionaires and billionaires pay their fair share". Several of the links I've referenced to in my Facebook postings have been about how the wealthiest Americans are already paying the lion's share of taxes in America. Here's an example of one of those links:
The answer is simple: those whom Obama considers rich, already pay more than the rest of us, both in total dollars, and in tax rates. But why should that matter? In this time of economic disaster, shouldn't they be asked to pay even more? The answer, again quite simply, is no. Here's why.

Those who earn over $200,000 per year, which seems to be the income level that Obama begins thinking of them as "millionaires", include the vast majority of employers. Entrepreneurs, most of whom are taxed at an individual rate, do most of the hiring in America. The question then becomes, will they still hire as many people if their bills (including taxes) are higher? It's a question that must be asked because it's highly relevant to the discussion. Let's take the average citizen as an example. Let's say Joe Johnson is humming along, happily earning $50,000 per year, buying things as needed, and sometimes as wanted. He's really got his eye on a nice fishing boat, selling for about $5000. Now Joe's a good saver, and has saved most of the money to purchase the boat, but then the unthinkable happens---he loses his job. Try as he might, he can't find a job that pays as well as the job he had before and he winds up at a job paying $42,000 per year. Suddenly the extra he had for paying off the rest of the boat is needed for basic necessities: food, house payment, gas for his car. He decides to put off buying the boat, although he really still wants it.

In the same way Joe has decided not to purchase the boat, employers must make decisions on whether or not to hire future employees. If their bills increase, they have less money with which to do this. At a time in which our unemployment rate is very high, to decide to increase taxes on those who do the hiring is foolish at best. Even President Obama has said this in the past. Obama says you don't raise taxes in a recession

Another reason for not raising taxes, on the rich or anyone else, is that it reduces the incentive to stop the outrageous spending. If I'm getting $1000 more per month, as an individual, am I going to be more likely to spend, or less? I think the answer is clear.  And that's even more problematic when the money you're receiving is a gift from someone else. Someone once said that it's always easy to spend someone else's money, and it is. Frankly, as a citizen, I don't trust my government to spend my money wisely. Remember, these are the same people who spent $400 for a hammer and something like $1000 for a toilet seat. Do we really want them collecting and spending more of our money for wasteful things like this? I'd rather stop the inflow and make them reduce the outflow.

All that being said, there's nothing wrong with asking those who have the means to contribute more. Warren Buffet and some others who have a lot of means have said that they don't pay enough in taxes. Fine. They can cut checks and send them in to pay more. It's easy to do. They should put their money where their collective mouths are. Frankly, I'd rather see them contributing to the Food Bank, or the homeless shelters, or any number of privately owned charities that actually do more with less money than our federal government. I'd rather see them going around helping individuals and families, than sending in more money to be squandered by government agencies.

The bottom line is, heaping more taxes on job providers doesn't help in an ailing economy. Cutting spending does. Asking people who have the means  to voluntarily help their neighbors goes much further than any increase in taxes ever could. Remember what Ronald Reagan once said: "The problem with socialism is that you eventually run out of other people's money". Think about it.

No comments: