Skip to comments.America’s Great Divide: Tax Payers vs. Non-Payers
Posted on 04/23/2010 6:26:48 AM PDT by K-oneTexas
Americas Great Divide: Tax Payers vs. Non-Payers
"So I've been a little amused over the last couple of days where people have been having these rallies about taxes. You would think they would be saying thank you."President Barack Obama, April 15, 2010
Mr. President, with all due respect, you dont get it. The Tax Day Tea Parties werent about taxes alone, they were also about spending.
And the tax cuts the President often talks about are, by and large, one-time checks that will do nothing to protect the taxpayer from future tax hikes. And he is concealing many tax increases in his budget right now.
One of the cornerstones of the Tea Party movement is that our tax system is broken and patently unfair. About as many people are exempted from paying federal income taxes as pay them. Weve created a system where the Americans cant sit across the kitchen table and talk about the problems with their tax burden because no ones taxes are figured the same way. I believe that is by design. Our lawmakers like the chaos it creates.
I support the Fair Tax, but one thing is sure, our system is so 20th Century by taxing production and not consumption. In 2001, President Bush told us to live our lives after 9/11. He wanted Americans to get back into the economy and spend. We are an economy based on consumption and we ought to have a tax code reflecting that.
Ironically, the Bush tax cuts made the divide between the income-tax payers and the non payers wider by exempting from federal income taxes a large number of low-income earners. What happens to a society where as many people pay into the system as take out of it? It becomes divided, permanently.
We have a system where 50% of the people pay payroll taxes and very little income tax and the other 50% pay payroll taxes and most of the income tax. Its insidious because lower-income people think they are paying their payroll taxes to fund Medicare and Social Security. In theory thats correct, but we havent used Medicare and Social Security taxes solely for that purpose since LBJ was President. How bad it the divide? Cluster Stocks Chart of the Day from Tax Day shows this divide in bold colors.
Another Tax Day is another reminder for millions of working Americans how much of their hard-earned money flows to Washington each year. Whats more is the Democrats in charge are only getting started, Rep. Lynn Westmoreland (R-Ga.) said. In just over one year, President Barack Obama and the Democratic majority in Congress have enacted 14 tax hikes, amounting to more than $670 billion in gross tax increases. Simply put, thats more than $2,100 for every man, woman and child living in the United States.
Westmoreland knows we cant afford it. You know we cant afford it. If we continue down this road, we cant come back from it. If you have a large number of people thinking they dont pay taxes, they are going to vote to keep these policies in place. The truth is that the folks who think they dont pay (federal income) taxes are really carrying the heaviest burden in relation to their income. They pay most of their tax burden in less progressive payroll taxes.
Rep. Paul Broun (R.-Ga.) takes it further, As Americans file their income taxes; many are forced to face a painful reality. The average income has decreased 3.2% and business owners continue to reduce their payroll because they cant afford to pay their employees and the federal government. There is no doubt that our tax code is unfair, inefficient, and lacks provisions to promote real, economic growth.
Congress continues to abuse their power and continues to seize any new opportunity to tax and spend. Take a look at the states who are weathering this recession the best. States like Texas enjoy lower taxes and that creates more incentives and opportunities for economic growth. States like California, Michigan, and New York, which have large state governments and high taxes, are currently facing big unemployment numbers and even bigger debts.
Weve got to have a flatter, fairer tax code that is based on consumption. Repeal the 16th and 17th Amendment to the Constitution which would abolish the income tax and return the selection of senators to the states. Sunset the current code and pass the Fair Tax.
While that seems impossible now, did anyone think 16 months into an Obama presidency that Rep. Ron Paul (R.-Tex.) would be polling dead even with President Obama in a 2012 match up? Anything can happen in this environment.
This is a time of great change. Change on the level we saw in the early 1900s and the 1960s. What kind of change will it be? We cannot sustain a system where the people cannot discuss and debate their tax burden with their government. November will be the watershed for this movement. If we shake things up enough in November, we can right the Titanic of tax policy and spending and get Americans back at the kitchen table debating tax policy.
Let me end where I started with the President and his musings about the Tea Party movement. Its not just about taxes, its the whole package. Spending needs to be cut by one third and the tax code needs to be replaced. If we dont balance this burden, the country will remain divided and well have turmoil for generations to come. Stop being amused Mr. President and listen to your constituents, you might learn something.
Oh, we’re going to get taxes based on consumption. No doubt about it.
-Barack Hussein Obama on his "economic stimulus" plan.
“What happens to a society where as many people pay into the system as take out of it?”
Look out your window. It’s happening right this minute!
A more appropriate dichotomy would be "Tax Payers vs. Government Enabled Thieves"
Group 1 and 2 have a symbiotic relationship and cannot co-exist with group 3.
The are really no peaceful political solutions to this, sorry. You are either free or not free. That includes economic freedom.
Guess the ‘reconciliation process’ is going to get a serious workout from here to November, then. :(
Seems like the only doubt is them repealing the other taxes.
A great article, but the O won't listen.
Changing our country to a Communist nation depends on turmoil, whether it be about taxes, financial regulations, legalized racism, or any other public policy bestowed upon us by our 'betters'.
Seems like this would be illustrated well with a flow chart.
Oh, no doubt at that either. They’ll stay.
As for people not paying taxes, does that go for GE and EXXON too?
It’s taxpayers vs tax consumers, and it always has been.
Picture this scenario. You are shovelling snow so that you can get to work. Your neighbor is not shovelling snow. He is the same age as you, but he was a government employee, and is now retired. You cannot afford to retire. You are in the private sector, and it’s your taxes that are funding your neighbor’s retirement. You’re shovelling snow before going to work. He’s in Florida for the winter.
Later, you slip and slide home from work on poorly cleared, or uncleared roads. Remember, your tax money is funding your neighbor’s retirement, not road maintenance, like it is supposed to.
You open your mail box, and there is a post card from your neighbor in sunny Florida. If you do not throw an ice ball through your neighhbor’s window, your restraint is admirable, probably because you are a conservative and you believe in property rights.
Here is a big faultline in the next American civil war.
Maybe a VENN diagram
We need to stop being so sentimental and look reality in the face or have another Civil War....
How will that happen? Why would the ‘Republican’ proposal result in higher taxes on the middle class? Which ‘Republican’ proposal?
Please explain your thoughts, possibly examples.
I tried but the premise of a VENN diagram is that you all have something in common... and I just can't find any common ground with Marxists.
Political separation is the only way this divide will end without bloodshed.
The division will get more strident and hateful, no matter which group has the power in the federal government,
because each group will be attempting to force their ideology on the other.
Make no mistake, “the other side” views being “forced to be responsible” with the same hatred as we view being forced into their collective.
-- Jefferson Davis Pres. CSA
We can seperate peacefully or in a desperate struggle to the death, I'm good either way...
A lot of folks on both sides would like to see the other side “punished” in some way.
The left would love to see the power of the state brought to bear to punish, incarcerate, and kill their ideological opponents.
On the right, we’re a bit more independent and individualistic, and some would like to inflict the punishment themselves.
A flat tax would make all the goldbrickers and scofflaws pay up. A flat tax or a fair tax.
-- Jefferson Davis Pres. CSA
Abusing the language
to promote their own power
for the past 6000 years.
So everyone pays but you still believe YOU pay more than anyone else. How exactly when everyone pays the same and everyone get the same prebate?
Under the FairTax no one is EXEMPTED. Everyone pays the tax. No one pays income tax, social security or medicare tax (payroll tax). The middle class pays no more than anyone else. Unless they purchase more than anyone else.
All classes (low, middle, high and all in between) pay an proportional percentage of their money based on their purchases. Now, you may go out and buy yachts and high priced items everyday and as such you will pay more than many others. You consume more than others, you will pay more.
You chose when you pay the tax because you chose when you buy the goods or services. Sales tax (a consumption tax) is in all but 5 states now and they all tax a combination of goods and services (a few tax intangibles). You pay that now.
You seem to think that the middle calls bears the burden because they buy more than anyone else or that there will always be loopholes for special interest to relieve their burden.
That not how it works. No loopholes. No exemptions. Purchase a new item or a service and you are taxed, regardless of who you are. The poor are not exempted in anyway way, shape or form. Nor are the rich exempted in any way, shape or form.
As I explained, and evidently you missed, everyone gets the prebate ... not just the poor. Everyone receives a check for the tax based on the governments computed poverty level for various sized households. And there is NO withholding from anyone’s pay check.
I think you may already know that the rich do not pay income tax because they do not have income, in the form of a paycheck, like the middle class. They live off their investments and therefore pay capital gains tax. Capital gains are taxed at a lower rate than income.
People don’t pay their ‘fair share’ now because the tax code allows them to pay nothing and get money from the government, the EITC, called a refund by our tax code.
Personally, I believe you are way off base in your understanding of the FairTax and should get it explained to you by someone you are willing to listen to.
I’m not saying that the middle class as a whole will be paying more than any other group. I am saying that under a consumption tax there will be households that currently pay no income tax that will be paying a consumption tax. Thus, for those households, tax reform will represent a tax increase. I think that is a a tough sell for Republicans who have traditionally been the party of lower taxes.
For years the District of Columbia has used a license plate bearing the motto “Taxation Without Representation”.
I now believe it should say “Representation Without Taxation”.
The problem is they pay no income tax now. As such, the middle class must make up for that. The burden is redistributed to someone to pay for another.
Under the FairTax everyone will pay their portion, period. Will it be an increase, yes. One they should have been helping with all along paying for the running of their government, rather than being an expenditure of theirgovernment. Now, yes government spends to much but that is another subject all together.
Tax reform has nothing to do with and does not impact spending reform. The FairTax is revenue neutral, so it collects the dame as being collected under the income tax now.
It is just that 100% of the country, consumers all, will be paying it.
Now the poor will also get a tax break with the FairTax, just like everyone else in that payroll taxes will not be taken out of their paychecks any longer. An increase in their available funds to spend.
The prebate reimburses them for the taxes they would pay up to the (their) poverty level. They are not out any money. How is that an increase in what they are paying. Thus they pay no tax, in net terms. Only on what they would purchase above that level with their new increase in spendable funds.
Republicans have always tried to hard to appease everyone to get their vote. when they do they miss the long term implications of most every subject they discuss with their blinders on. The Dems are the same but their blinders are to the facts.
It’s not a tough sell, it short-sightedness.
To further clarify my point, let me propose an example. Let’s take a household at the about 40th percentile in income earning $40,000/year. Let’s assume that this is on of the households currently payin no income taxes. No, we replace the income tax with a 15% consumption tax. Let’s say the save 10% of their income, so they would pay consumption taxes of $4,700 on purchases $31,300. Unless the prebate/credit is greater than $4,700, then this household’ taxes have gone up. If the prebate/credit is larger than $4,700, then there has been no progress towards having everyone pay their fair share.
It will raise on those not paying income tax before. If they worked they got the tax taken out of their paycheck and then they got it back.
The same happens with the prebate. What is the difference. Net sum equals zero.
How does it raise taxes on the middle class when they will no longer have payroll taxes taken out of their paycheck AND they too get the prebate.
Your arguing a non-happening.
It is not a hard sell if it was explained to the people. It’s a hard sell for those uninterested in learning. It’s a hard sell because it can be demigoged so easily by those who think they have a bargain in the current tax code.
You make it sound as though there is an increase in taxes being paid. There is not.
An example for us to look at (assume single no state withholding):
You earn $2,000.00 per week ...
Federal Withholding - $ 408.33
Social Security - $ 124.00
Medicare - $ 29.00
Net Pay - $1,438.67
1st - you keep the $553.33 in payroll taxes per week. ($28,877.16 annual savings of payroll taxes - $553.33 times 52 weeks)
2nd - Prebate of (2009) $208/mo or $2,491/yr. (see http://www.fairtax.org/site/PageServer?pagename=about_faq_answers)
The prebate covers your first $208 per moth in taxes paid out. Buy more it is not covered for anyone.
You have over $31,000 per year which is spendable that you do not have under the current income tax code.
It lowers taxes (payroll) and reimburses the tax (to the poverty level) ... no real increase possibly a wash.
I think you are afraid that any change will raise taxes. As I pointed out it is revenue neutral. It would even out across the household levels, however based upon what/how much they are buying their tax payments might go up.
>>>An example for us to look at (assume single no state withholding): You earn $2,000.00 per week ...You earn $2,000.00 per week ...
I think this is an example of a person that is already paying taxes and in the top 15% of earners, not exactly middle class household that I was referring to. What about the family of four that earns $800 per week. How does that scenario work out?
So would the "right", no doubt about it. Just read the FR abortion threads.
America is a bit short on liberty-minded citizens these days. Everybody is obsessed with security.
Your example for us to look at ((assume family of 4 - husband/wife/2 children - no state withholding, earning $800.00 per week:
Weekly Gross Pay - $800.00
Federal Withholding - $ 27.88
Social Security - $ 49.60
Medicare - $ 11.60
Net Pay - $710.92
1st - you keep the $89.08 in payroll taxes per week. ($4,632.16 annual savings of payroll taxes - $89.08 times 52 weeks)
2nd - Prebate of (2009) $559/mo or $6,702/yr. (see http://www.fairtax.org/site/PageServer?pagename=about_faq_answers)
The prebate covers your first $559 per moth in taxes paid out. Buy more it is not covered for anyone.
So this family gets the prebate annually of $6,702 plus the payroll tax savings of $4,623.16 total annual $11,325.16 to spend or save as they see fit.
This is good. Every thing is proportional to the funds that individual/family have available. It will not bring the poor up to the middle class or the middle class to wealthy ... no tax reform will ever do that. That will take the individual getting raises at work ... I know for some work is a dirty word.
What this shows me is that you do not want to be burdened with researching this matter yourself. Therefore, I don’t believe you will ever understand what the FairTax is all about. You will always have a uneducated point to bring forth. People learn by doing ... not having others do for them. I really wonder about folks who choose to question and not research the facts for themselves.
Your logic eludes me. You seem to be all over the map with your questions and comments.
Everyone now pays and is reimbursed to a certain level. It even brings the wealthy into paying, since they didn’t pay income tax under the current system (capital gains remember and at a lower rate that the workers).
Additionally the wealthy don not pay payroll taxes since they do not have a ‘wage’ subject to these taxes (living off their investments).
Definitely. Since some (wealthy) do not pay tax, in the same way the rest of the country does, they will now be on the same level. Big plus is that social security and medicare can now be funded.
I guess I proved your point but I wonder why I needed to prove it for you. Why couldn’t you have done the same as I did.
Remember the FairTax is 23%. Current the the Income Tax varies (on a graduated stair stepping scale with the various brackets - http://www.moneychimp.com/features/tax_brackets.htm). Then add the Social Security Tax of 12.4% (6.2% paid by employee and 6.2% matching by employer). On top of that add 2.9% (1.45% paid by employee and 1.45% matching by employer). That is a grand total of 15.3% in payroll tax.
23% minus 15.3% is 7.7% left for the general fund. Using today’s method as Social Security and Medicare are expenditures of the General Fund. Something called the unified budget which has been used since Johnson’s time. No Social Security Trust fund, but now there could be.