Masters and Serfs

[NOTE - the numbers and amounts in this article are not official numbers and are used strictly for sake of argument.]

Okay ... an opinion piece in the local paper happened to catch my eye today and I just can't let slide. The letter was in responce to a writter who had asked (as a responce to another writer) that people take the time to learn about the facts of the Fair Tax bill before trying to write articles or letters against it. The writer of the letter in today's paper said:

"...its (the Fair Tax) core is a consummate cut of any obligatory federal taxes. That leaves the wealthiest in our country with no federal taxes to compensate the U.S. for the gifts showered upon them or to keep the wealth gap at a reasonable level." (bolding added for emphasis)

Excuse me? GIFTS? Most of the 'wealthiest' people in the U.S. have worked hard for their income ... it is not 'given' to them and thus it is not a 'gift' .... I suppose you might consider it a 'gift' if you believe that you are giving Walmart a 'gift' every time that you buy something there ....

The writter is technically correct in saying that it does remove 'obligatory' federal taxes .... the Fair Tax, however, does NOT leave anyone with "No federal taxes" it gives everyone the same tax ... the sales tax on the items that they buy.

Now ... lets look at something for a moment ... lets say I make 100,000 a year (Upper middle class by some definitions) ... and lets say that of that 100,000 after bills I have 50,000 (50%) that is disposable income ... and I save 20% of that ... leaving 40,000 that I spend on items ranging from food to TVs. Taxed at 23% (the estimated federal sales tax under the Fair Tax) I'll pay something like 9200 in taxes. (Less actually given the 'pre-bate' to compensate for the tax on normal living expenses ... but let's keep it simple here and ignore that for now.)

Let's take those percents and apply them to higher income levels ... 250,000 (the income level that the majority of american's consider 'wealty') .. that's 125,000 after bills ... 100,000 spent and 23,000 in taxes ... 2.5 times the income = 2.5 times the tax ... now ... lets consider the fact that the average 'wealthy' family generally has more disposable income (meaning a smaller % of their income is tied up in their monthly bills) meaning that the 250,000 household likely has more than 100,000 that is spent on items ... and more of it is likely to be on luxeries.

If we throw the 'pre-bate' into the equation ... lets say everyone gets 3000 a year (250/month) from the government to compensate for taxes on normal 'living expenses' (we're assuming here that both families have the same make up and thereby get the same amount as a pre-bate ... we'll say 2 adults no children. That brings the 100,000 a year family down to 6200 in taxes and the 250,000 family to 20,000 in tax paid ... and now the 250,000 family is making 2.5 times the income of the other family but paying just shy of 3.25 times the taxes....

[EDIT - I'm dropping a clarification here as upon re-reading this I wasn't quite clear on the assumption with the pre-bate. Under the Fair Tax each household is given a fixed amount monthly based on the number of people in the household. So in my above example where I said 'everyone gets 3000 a year' what I meant was that for the example lets say both households recieved 3000 a year. Since we're assuming that these are 2 adult no child households then that would be 1500 a year per adult ... and again, I do not know what the estimated pre-bate is actually going to be, this number is used solely as an example.]

Now let's take a 50,000 a year house (again 2 adults no children) ... thier disposable income is 25,000 (actually it's probably less) of which they save 5,000 leaving 20,000 spent ... so 4600 in tax ... BUT, when you account for the pre-bate they'll only pay 1600 in tax ... so they have half the income of the 100,000 house, but pay a quarter of the taxes ....

Oh, but rich people will just save more of their money and thus get even more money from the interest ... that's a guess and there is no research to back that up ... but lets play that game ... the rich save more (read 'invest') putting more money into the growth of business and the economy ... leading to more jobs, and better pay. But lets face it ... do you REALLY think that the 'rich' are just going to stop spending? That they'll stop buying their expensive sports or luxury cars (which will be taxed) or houses, or entertainment centers, movies, music, concerts, sporting events ... yeah ... they're just going to stop doing any of that so that they can pay less in taxes ... Riiiiiiight.

The fact of the matter is ... that the 'poor' and 'middle-class' WILL be more likely to save or invest more than they currently do because they will have more of the income that they earn to do so with.

Another writter did bring up the point that many retirees that have already paid a lot of tax on their IRAs and other after tax retirement money will then get taxed on that money when they spend it in their retirement (where they are not taxed on the 'income' of recieving it in retirement currently) ... however, it's no different than the fact that I'll get taxed on spending the money that I've already saved over the years and it's no different than the argument against private social security accounts ... I don't like it because it might hurt me a little bit ... never mind that it might greatly help my kids or grandkids ... who cares about them having it better it's all about ME ME ME MEMEMEMEMEME! Don't solve the problems that the country has, let my kids deal with it later!

Generally this kind of thinking is both shallow and selfish and it is this kind of short sighted foolishness that allows and even encourages politicians to continue to do nothing on major issues. If we can't get over such pettiness then this country is going straight to the toilet because as the tax code (along with governmental regulations) becomes more and more of a burden on the corporations in this country this economy is going to wither and die ......