Populists, plutocrats and the GOP sales tax

By Charles Postel
February 14, 2013

February 1913 marked a turning point in U.S. history. One hundred years ago this month, the states ratified the 16th Amendment, clearing the way for adoption of a federal income tax. Two decades before, in 1892, the Populist Party had first put a progressive income tax on the national agenda.

The income tax faced steep conservative opposition. Since it was enacted, in fact, the political wars over income tax have never stopped. Conservatives battled against it when it was first proposed and have continued the struggle ever since. Now, Tea Party conservativism has given that fight new force.

The economist Joseph Schumpeter called tax systems the “thunder of world history.” Because if you dig beneath the rhetoric, tax systems reveal the underlying direction in which societies move. The saga of the income tax says a great deal about changes in America.

In the decades before the income tax, the rich grew extremely rich while most Americans struggled on the edge of poverty. Mark Twain dubbed it the Gilded Age: Plutocrats built ever-bigger mansions; hard times pressed on everyone else. Yet by the 1950s, the income tax had played a crucial role in the mix of policies that narrowed the income gap and built a broad middle class.

Over the past 35 years, however, those policies have been under siege.

Corporations have bent the regulatory regime to their will. Legal barriers have helped efforts to dismantle the trade unions. And conservative assaults have pounded the progressive structure of the income tax. As a result, the United States is experiencing a crisis of inequality not seen since the last Gilded Age.

Today’s Republicans want to take this a step further. They are doubling down on the century-old conservative goal of doing away with the income tax. They see it as discriminating against the richest Americans. And they want to replace it with sales and excise taxes ‑ levies that place the heaviest burden on working and poor Americans.

Abolishing the income tax enjoys strong support in the Republican House of Representatives. But in Washington, Republicans need to negotiate with a White House that is holding out for some measure of tax equity.

This is why the real tax action is at the state level. Governor Bobby Jindal of Louisiana, with GOP governors in Kansas, Nebraska and other states, is pushing to end state income taxes and replace them with sales taxes. The common denominator of all these GOP schemes is that they will punish working and poor people – and make the rich richer.

Over the past three years, states with GOP governors and legislatures have become the testing grounds for the conservative vision of government. They have moved aggressively to break what is left of the trade union movement, to restrict women’s reproductive rights and to limit the voting rights of minorities, the young and the poor. The latest moves are state experiments in conservative tax policy. Jindal and the GOP have now turned their guns on state income taxes.

This puts into context Jindal’s recent speech before the Republican National Committee in Charlotte, North Carolina. There, he warned his fellow Republicans that the GOP needed to convince voters it is not just the party of the wealthy. “We must not be the party that simply protects the well off,” Jindal said, “so they can keep their toys.” He asserted, “We are a populist party and need to make that clear.”

Conservative pundits welcomed Jindal’s speech as a hopeful sign of the GOP’s future. But the thunder of Jindal’s tax plan speaks louder than his rhetoric. His conservative vision is firmly stuck in the past. To be precise, it is stuck in the America before the income tax – when the tax system plundered the poor and funneled wealth to the rich.

Jindal’s talk about the GOP as “a populist party” is clearly misleading. In the 1890s, the original farmer-labor Populists stood for economic justice.

That is why the Populist Party (also known as the People’s Party) fought hard against the consumption taxes that benefited plutocrats at the expense of the rest. That is why they fought for the progressive income tax to address a growing crisis of inequality. And that is why any Populist worthy of the name would recognize that the Jindal-GOP tax schemes are all about making sure today’s plutocrats “can keep their toys.”

Before 1913, a slanted taxing system deepened the economic divide. Most federal revenue came from consumption taxes. People paid import taxes (the tariff) on everything from coffee to cook pans, and excise taxes on alcoholic beverages and other products.

To use the language of today’s conservatives, taxes were “flat and fair” – everyone paid the same amount. A poor cotton farmer paid the same tax on a pound of coffee that Jay Gould and other Wall Street tycoons paid for their pound of coffee. The tax was small. So it meant nothing to Gould. But even small taxes burdened the poor’s meager incomes.

Worse, when it came to the division of government outlays there was nothing “flat and fair” about it. The super-rich gobbled the lion’s share. Gould reaped millions in federal subsidies for his railway schemes, and millions more when the schemes went bust and the government bailed him out.

In short, the tax system redistributed wealth upward – to Wall Street financiers and the super-rich. To remedy this injustice, the Populists proposed a progressive tax on incomes. It would accomplish three Populist goals:

First, it would mean that the wealthy, who could most afford to pay taxes and benefited most from government subsidies, would pay their share of the tax burden.

Second, it would provide funding for infrastructure projects, the postal service, education and scientific research, and other needs of the people not met by the private sector.

Third, it would help close the income gap. As the Populists put it, the country was turning into “a land of tramps and millionaires.” Instead of redistributing wealth upward, the income tax would support a broad-based prosperity.

Under Populist pressure, Congress passed an income tax in 1894, only to have a conservative Supreme Court decide that the tax posed a “communist threat” and rule it unconstitutional. The Populist Party was mortally wounded by the 1896 elections. But in that election, William Jennings Bryan, the Democratic candidate, stumped for the income tax.

By the 1912 presidential race, the income tax had wide public support. All four presidential candidates endorsed it: William Howard Taft (Republican), Woodrow Wilson (Democrat), Theodore Roosevelt (Progressive) and Eugene Debs (Socialist). On Feb. 3, 1913, Delaware, the last of the required three-quarters of the states, ratified the 16th Amendment and opened the door for the federal income tax

The original tax applied only to upper incomes, and rates ranged from 1 percent on the merely well-to-do to 7 percent on the richest Americans. But the principle was in place.

In the years after World War II, the income tax had a broader base and top rates ranged from more than 90 percent in the 1940s and ’50s to 70 percent in the 1970s.

The effects were just as the Populists had hoped. The income tax funded infrastructure (interstate highways), education and research. It also helped narrow the gap between the super-rich and everyone else. It was part of the mix of policies that lifted millions of poor Americans into the middle class and sustained a widely shared prosperity.

But conservatives never reconciled to the income tax. In the 1920s and ’30s, a conservative bloc in Congress pushed to replace income taxes with a national sales tax. In the early 1960s the John Birch Society, the Young Republicans and other right-wing groups demanded repeal of the 16th Amendment. So did “Mr. Conservative,” Senator Barry M. Goldwater, the 1964 GOP presidential candidate.

At the same time, conservatives fought to make income taxes “flatter” – or less progressive. The breakthrough came in the Reagan years. But even before President Ronald Reagan, both Democrats and Republicans supported flattening rates. By the end of Reagan’s presidency, top rates had tumbled to as low as 28 percent.

Twenty-five years later, the erosion of progressive taxes means that a billionaire like Warren Buffet pays a lower tax rate than his secretary. Yet Republicans in Congress still demand more cuts to taxes on capital gains, estates and other gifts to the super-rich.

In addition, Tea Party conservatives repeat the old right-wing demand for repeal of the 16th Amendment. Conservative Websites spin conspiracy theories about the amendment being unlawfully ratified. Tea Party hero and former Representative Ron Paul attacks income taxes as “totalitarian” and “Marxist.” His idea of “tax reform” is restoration of 19th century tariffs and excise taxes.

Meanwhile, the Cato Institute and other well-funded conservative think tanks push for replacing income taxes with consumption taxes and other means to plunder the poor and enrich the wealthy.

Taking their cues from the Tea Party and the corporate think tanks, Jindal and the other GOP governors seem to be searching for ways to make state taxes even more inequitable. Most states already have a regressive tax system. The rich pay lower tax rates than everyone else because states rely more heavily on sales taxes than income taxes. Yet unlike most people who spend what they earn, the rich spend less of their money on taxable purchases. This makes a sales tax, by its very nature, a class tax in favor of the wealthy.

Some sales taxes are even worse. Alabama, for example, taxes groceries – which punishes the poorest people in one of the poorest states. Or what about excise taxes on beer? They are based on the given quantity of the beverage taxed. In other words, a retiree living on Social Security pays the same tax on a 75-cent can of Pabst as a hedge fund executive pays on his $3 bottle of exotic ale.

It may be only a small tax. The retiree living on a budget, however, might feel it; an executive charging it to an expense account would not. And dollar for dollar, the retiree will pay four times the tax that the executive pays.

As for Louisiana, it already has a light income tax but the third-heaviest sales tax in the country. Jindal’s plan to abolish the income tax will mean higher taxes for 80 percent of Louisianans. It will hit the poorest 20 percent the hardest. And the big winners will be those with annual earnings of $1 million or more, who would receive tax cuts averaging more than $25,000.

Jindal wants to change the public perception of the GOP as the party of the rich and the super-rich. He wants to provide his conservative party with a glossy coat of “populist” paint. But tax systems are the best measures of such claims. They reveal the underlying essentials of how societies work. The original Populists of the 1890s fully understood that consumption taxes fueled inequality by allowing the super-rich to amass fortunes at everyone else’s expense.

The sales tax schemes of the modern GOP move in the same direction.

 

ILLUSTRATION (Top): MATT MAHURIN

PHOTO (Insert A): Louisiana Governor Bobby Jindal speaking at the Republican Leadership Conference in New Orleans, Louisiana, June 17, 2011. REUTERS/Sean Gardner

PHOTO (Insert B): Robber Baron Jay Gould, between 1865 and 1892. LIBRARY OF CONGRESS

PHOTO (Insert C): William Jennings Bryan @1907. LIBRARY OF CONGRESS

PHOTO (Insert D): Senator Jack Kemp (R) was a leading advocate of the flat tax when he was chosen by Senator Bob Dole to be his running mate on the Republican presidential ticket in 1996. REUTERS

42 comments

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An excellent, interesting article. Many thanks to Reuters and the author.

Another place the wealthy have corrupted congress is in watering down the ESTATE tax to make it almost meaningless.

Why does America need an estate tax? Consider Einstein’s words.

Albert Einstein said that it’s impossible for any human to contribute more to society than he gains from society.

He said the great libraries that scientists like him utilize are filled with knowledge written by people long dead.

He said the streets we travel on, and the greatest buildings of our cities were all built by the sweat and labor of men now long dead. All these things every human benefits by today; and yet others performed the labor, the work and the sacrifice.

Now, TAKE Einstein’s words, and look at financial wealth.

The vast majority of the wealthy people in the US did not earn their wealth. The wealth was passed to them by parents doling it out to them, or by inheritance. That is a fact of life that is easy to verify. How?

If one examines the property tax map and tax roll in any county in any state in America, the data clearly tells the same story: 95% of the wealthy people in America today obtained their wealth from parents or by inheritance. They did NOT earn it themselves.

The sad part is, it is that same 95% of the wealthy, who are NOT self made, that despise the poor and are often heard accusing the poor as being lazy, and chanting that the poor are poor because they have a bad attitude.

The rich brat in his 60′s, a true, wasteful parasite on society who travels to Aspen, spending money by the bucketful, diverts our attention by pointing his finger at a poor man who spends nothing. He accuses the poor man, who spends nothing, of being a parasite on society! What will heaven say about that? Can a camel fit through the eye of a needle?

In this online forum, I can only guess that it is that 95% of the wealthy – the spoiled kids who inherited money from parents, those 95% of the wealthy who are NOT self made men – who probably complain most loudly about taxes.

And they hire lobbyists and tax attorneys to minimize the estate tax.

What does America need to re-build itself?

America needs to re-instate its former estate tax, and make it a SIMPLE, powerful estate tax, of 100% of anything over $500,000. Period. Yes, a 100% estate tax.

That way, the spoiled inheritance-money wealthy, living their ritzy glitzy lives, can finally see what it feels like to be a SELF-MADE man, instead of a spoiled rich, wasteful leech, parasite on society.

A competitive society thrives the best.

Posted by AdamSmith | Report as abusive

Awesome article! We should reform our tax structure immediately, but keeping in mind what this article explains about it.

Posted by tmc | Report as abusive

The article unmasks the real motive behind the Republican tax efforts. Further insulate the wealthy from any responsibility to contribute to government.

Posted by pavoter1946 | Report as abusive

Wow, what an objective opinion. What do you have to say about those that file no income tax returns, deal in cash, or simply cheat? You should try preparing tax returns for those that claim the EIC and drive up in a BMW.

Let’s face it, there are many gaming the current system on both sides. The income tax system is still a system based on the honest reporting of income. Instead of deriding the people at the top, propose a hybrid system of consumption and income taxes. Now wouldn’t that be a little more fair for everyone?

Also, do a little research. Our accrual based debt is over $70 trillion, some $5 trillion more than all the assets of the US combined, rich and poor. So go ahead and confiscate 100% of everyone’s wealth at death, and you would still not solve the country’s problems.

Nice job Reuters!

Posted by EdNewMexico | Report as abusive

The problem with the present so-called “progressive tax” is that, over the years, lobbyists have succeeded in providing so many exceptions for the wealthy that the term “progressive” is almost meaningless. Oh yes, and a few crumbs have been thrown to the peasantry, such as mortgage interest deductions. So the result has been tax laws that are full of duck and weave exceptions that leaves the average person stuck, and I’m including that 47 percent the GOP loser referred to. Makes me wonder if a flat sales tax might be better. If a millionaire buys a 3 million dollar yacht and I buy a rowboat and we pay the same percentage tax, I don’t feel put out. Food, however, would be the exception. If we can throw out all the exceptions for the wealthy in the progressive tax then we should keep it, otherwise we will need a constructive change, whether a flat tax or something else.

Posted by act1 | Report as abusive

@ AdamSmith. If one works and saves their entire life, foregoing consumption and reinvesting their earnings (while others elect to consume)–why do you believe their efforts should go to benefit government? What entitles anyone to the results of their efforts (while they also continued to pay income and other local taxes)?

A 1% national sales tax should be assessed on everyone, as everyone “benefits” from government–that same government you espouse. With a national sales tax, everyone will then have skin-in-the-game when Congress proposes taking more from the citizens–versus the President’s agenda of taxing only a select few. Additionally, since a sales tax is a “consumption tax” then those who elect to consume will pay more in real dollar terms.

The idea that you support taxing “the other guy” is disingenuous; much like Congress passes laws and then exempts themselves. Everyone should contribute something–regardless of their means. Much the same as everyone pays fuel taxes based on their consumption of gasoline. The more you consume the more you pay. If you do not want to consume, then you don’t have to pay.

You have had the same opportunity as everyone else to achieve success–your parents went to the same public schools, and you sat next to my children in those same schools. If your parents, or you, chose not to take advantage of the opportunity, that is a choice only you are responsible for. But you espouse that others should be responsible for the choices you made by confiscating the wealth they created?

Your choices have consequences. Self-victimization is not a positive attribute.

That being said, why do you demonize the guy living in Aspen, but not the Harry Reid’s, Henry Rangel’s, or the Obama’s. They, and their children are the same people of privilege you despise–notwithstanding the fact that each of them generated their wealth via political favors versus creating a business.

Posted by COindependent | Report as abusive

@COindependent
Well said. Except that you didn’t here what Einstein said.

You said, “the wealth they created”. That’s what I take exception to.

The great buildings of city you live in, who created them? Pick the largest.

Was it the rich guy’s son who formed the development corporation with some rich friends, hired some attorneys, outbid several other development groups, and watched the buildings go up, between his trips to Europe, Aspen and golfing in California?

Or was it the 500 men and women who sweated, and broke their backs, to carve every intricate square inch of that great building, usually living from hand to mouth, paying exorbitant rents, heavily in debt, and substantial numbers of them severly injured during the construction? Their children are sick? If they missed a day, they might lose their job. Then when the building was finished, they were out of a job, falling even further into destitution.

Now, COindependent, who created the wealth? The rich man’s son whose name ended up on the deed, along with his ever-vacationing rich pals as a Limited Liability Company? Or the 500 workers who truly sacrificed their time on earth for it?

Or even, as Einstein might say, was it also the workers who came generations before that, whose physical labor built the streets and sewers and electrical infrastructure that set the environment for the building to be located? And that’s why so many developers were bidding for the land?

Yet, the rich man’s son, like the rooster claiming credit for the sunrise, tells us, in your words, COindependent, that it was he that created it.

That is the mantra of the rich man’s son: I created this wealth myself!

Posted by AdamSmith | Report as abusive

Add a sales tax to stocks, bonds, and real estate. In order to prevent regressive tax issues, just create exemptions for the less well-off. The issue that is frequently ignored by the media is that income tax can be delayed and manipulated by our current laws and legal system.

Posted by M.C.McBride | Report as abusive

@Adam. It doesn’t make any difference who “created the wealth.” There is not one person in history of power and wealth that created anything of value solely on their own. They may be the idea guy, but they still have to have people to execute the agenda. (Read Napoleon Hill’s treatise on the “collective mind”.)

The “wealth” created trickles down to others based on the value of their contribution. That being said, it is critical to acknowledge that without the “idea guy”, no wealth would have ever been available to trickle down. The premise that wealth is created at the expense of someone else (a “zero sum game”) is refuted by history. If that was the case, then the Google’s, Facebook’s and 1000′s of other companies would have consumed the limited capital available at the expense of other opportunities–thus the wealth they truly created, and transferred to others via stock options etal, would not be available. Fortunately, it just doesn’t work that way in our system.

Every “worker” or employee truly benefits from the capital and business acumen provided by the developer–regardless of where the funding comes from. The “developer” benefits from the skills of the worker–it’s a symbiotic relationship. It’s the aggregation of the capital, and deployment of that initial capital that matters most–without it nothing else happens. The demand for the skills of the worker (be it a blue collar worker, or a knowledge worker) is translated to wages, which then the individual worker allocates according to his needs. Thus, the creation, and ultimate distribution, of wealth benefits all.

Posted by COindependent | Report as abusive

@COindependent
Your protestations faithful to the doctrine remind me of the men of 70 AD, described by Titus Flavius Josephus. But first I must say that I believe all persons are part wicked, myself included. All humans, indeed every living creature, even a sprig of grass, seeks to expand its powers, i.e., its freedom to act. But, getting back to Josephus:

From Josephus, Book VII, Chapter I:

“By these examples any one may learn how many and how great instances of wickedness will venture upon for the sake of getting money and authority, and that they may not fail of either of them ; for as when they are desirous of obtaining the same, they acquire them by ten thousand evil practices ; so when they are afraid of losing them, they get them confirmed to them by practices much worse than the former, as if (no) other calamity so terrible could befall them as the failure of acquiring so exalted an authority ; and when they have acquired it, and by long custom found the sweetness of it, the losing it again ; and since this last would be the heaviest of all afflictions, they all of them contrive and venture upon the difficult actions, out of the fear of losing the same.”

Posted by AdamSmith | Report as abusive

@COindependent

I completely agree with your assesment of compensation being that of your merit and contribution. We all have the same opportunity via education to distinguish ourselves and increase our earning power. Regardless of where you come from, a good work ethic and a direct goal is all one needs.

@AdamSmith

You make a compeling argument, have you read any of the documents and ideas presented by fairtax.org? Although I don’t completely agree with all of their ideas, I do agree that we as a nation need to position ourselves as the business capital of the world, doing so by greatly reducing the corporate tax rate. With that being said, I do believe that there must be heavy regulation in the distribution of the funds saved by these lower rates (limiting executive compensation and bonuses) and rewarding above average mean employee salary levels.

I enjoy the idea of a consumption tax, but I also believe it should be a tiered system. High dollar and premium items should have a higher percentage than the basic items. Expensive tastes should be more expensive, and essentials should have next to no tax passed on to the consumer.

@AdamSmith & @COindependent

I’d enjoy hear your thoughts on our infrastructure, the benefits of modernizing vs. the pitfalls and how we might go about it.

Posted by NadrojCO | Report as abusive

@ COindependent –

You state “If one works and saves their entire life, foregoing consumption and reinvesting their earnings (while others elect to consume)–why do you believe their efforts should go to benefit government? What entitles anyone to the results of their efforts (while they also continued to pay income and other local taxes)?”

The answer is actually quite simple.

The lifestyle one chooses, whether frugality or epicurean, it is entirely their own decision — all things being equal, which they are not since most never have the choices presented by being of the manor born — and must take responsibility for those choices, whether they lead to riches or poverty.

What you and others like you tend to forget, conveniently no doubt, is the trite but true statement that “no man is an island”.

While your intrepid hero is scrimping and saving, his wealth is being protected by the state, which consists mostly of those less well off than he is being forced to bear a greater burden in proportion to what they receive back from the state.

The so-called “Greatest Generation” fought to protect the wealthy class, not for freedom and democracy, but they sacrified mainly because they still believed this country had those principles.

Thus, he is using the state to protect his life, health and wealth, as well as his legacy to his family from harm.

Assuming life, health and wealth, as well as that of his childrens’ lives, health and wealth are “free market commodities”, what price should we put on this protection?

Nothing in this life is free. Everything has a price, whether it is hidden or visible, nothing is free.

The wealthy need to understand that they do not live outside of society, and must “pay their dues” or their “membership” in society may be cancelled.

This logic leads inevitiably to the question of taxation and how it should be applied.

Since the wealthy have profited the most and stand to lose the most, they should bear the higher burden.

Thus, while they are alive, progressive income taxes are necessary to keep the state stable. A stable society is absolutely necessary so they can have some assurance that when investment decisions are made, there is some reasonable assurance of being able to reap their “just” reward.

Problems arise — as they are doing now — when the wealthy class see themselves as somehow better and above the rest of society, when they forget they CANNOT live outside the state’s protection, which is mainly bought dearly by the efforts of others.

Quite simply, literally EVERYTHING comes from the state; therefore, when a person dies ALL of it must go back to the state to be “recycled” by others that follow.

A wealthy person’s heirs already have the advantages associated with being manor born, and thus have a built-in head start over others who are not.

I would argue “enlightened self-interest” should be the guiding principle for ALL of our laws.

THAT is “what entitles (the state) to the results of their efforts”. It is as pure and simple as that.

The type and degree of taxation needed to provide a stable economic environment is what the state decides is proper, whether you personally agree with it or not.

The problem we have now in the US is that the state has been unduly influenced by the wealthy class who are doing their level best to destabilize the government.

THAT represents a “clear and present danger” to ALL Americans. IF the wealthy are allowed to go back to their “Golden Age”, the wealthy WILL destroy this nation.

They have done it many times before in the history of this country, mainly because they have had little or no controls placed on their activities. Thus, rampant speculation has become the norm, which creates bubbles and destabilizes this nation.

It should be noted that this period since WWII has been one of the most stable in this country’s history, but that is about to end with the rise of the wealthy class to power once again.

“Proper taxation” — a system that does not needlessly burden those least able to bear the burden, which means progressive taxation on those who can most easily pay for the protection of the state (i.e. those who benefit most should pay the most as a matter of equity) — is NECESSARY for the stability and growth of this nation.

Anyone who denies that is either a fool or a liar.

Posted by PseudoTurtle | Report as abusive

Somewhere hidden is the truth: But by some accounts it looks as though there are two tax systems and that one of them favors the wealthy. In 2012 Frobes claimed that the top 1% pays 10% of the taxes and that the top 10% pays 70% of the taxes. This kind of agreed with figures from the CBO. If even close: It means that the rest of us pay 30% of the taxes with 1% of the wealth and that means, that only 3% of the wealth is needed to pay all of the taxes, which by default that means that the rich are shielding 97% of all wealth from taxes….. They seem to push the agenda that “big government and over-spending” are the culprits vs. revenue, but likely revenue is really the top issue…..

Posted by DannyL | Report as abusive

@PseudoTurtle – I am struck. To say “Well said” would be an understatement. Please keep a copy of your post. It is a special one.

Posted by AdamSmith | Report as abusive

For those of you, like COindependent above, believe that a return to the years prior to the Great Depression — when, for the very first time the American people were able to wrest some tiny measure of financial security from the wealthy class (poor as that has been), mainly because they had lost their power due to the Crash of 1929, and the subsequent implementation of trade and banking regulations which stopped their greed for the moment — here is a link to what this country has been like, financially and economically, with the Masters of the Universe in charge. And what to expect if you allow them to take charge again.

A List of recessions in the US since it was founded in 1776, along with an explanation of the causes of each:

http://en.wikipedia.org/wiki/List_of_rec essions_in_the_United_States

The lesson to be drawn from our own nation’s history is that Capitalism, as an economic system, is HIGHLY UNSTABLE, a fact which the wealthy class prefer you not know.

Capitalism ONLY functions to “serve the common good” when it is HIGHLY REGULATED in terms of taxation, trade and banking.

We’ve been here before — many more times than most of you realize — and it MUST STOP NOW, if we are to survive.

Posted by PseudoTurtle | Report as abusive

Wow, I’m sad for the philosophy espoused by PseudoTurtle. “Everything comes from the state”? Only in a Communist society. The US was founded on the freedom of a person to rise to the level of his/her competence. The “state” gets in the way, and the power of a Federal government was of prime concern to the founders of the Constitution.

As for taxes? Well, there should be a progressive system with lower rates. Everyone pays something, perhaps 1%. At around 40K or so, the rate rises .5% for each 10K of income, topping out at around 10%. No exemptions or deductions.

Posted by stevedebi | Report as abusive

The debate between @Adam Smith, @COindependent, and @Pseudo Turtle is both welcomed and enlightenting. I must admit that I tend to favor @Adam Smith’s point of view when it comes to the wealthiest among us especially those that inherit their wealth. Still it was a pleasure to read intelligent well thought out arguments for each person’s point of view. Thank you.

Posted by MJMann | Report as abusive

Read the article above “List of Recessions in the US” that I mentioned above (repeated here because it is extremely important you understand who and what these people are).

http://en.wikipedia.org/wiki/List_of_rec essions_in_the_United_States

In the 236 years from 1776-2012 there have been at least 47 recessions/depressions.

Do the math. That means the US has had a major recession/depression EVERY FIVE YEARS on average, of varying length and severity.

ALL caused by the wealthy class, and ALL at the expense of the American people.

It is the true horror story of what the wealthy class has done to this nation. But the resulting toll in human misery and suffering cannot possibly be calculated.

And they are about to increase that total to 48 with the present and largest speculative bubble in history.

Posted by PseudoTurtle | Report as abusive

People who feel they don’t need the state probably won’t want to call the fire department (pure communism) when their mansion is being burned down.

Nor will they want to call the police department (more pure communism) to arrest the people watching the mansion burn.

And of course they won’t want to drive on any paved streets anymore (communism), and certainly not on interstate highways (pure communism).

Posted by AdamSmith | Report as abusive

AdamSmith
Did anyone put a gun to the heads of the workers or did they choose to work of their own free will?

Posted by Crash866 | Report as abusive

@PseudoTurtle – Thanks for the link List of Recessions. I’ve printed PDF and will read it tonight.

Posted by AdamSmith | Report as abusive

@Psuedo

God help us if you truly believe that “everything comes from the state”. Many, many times over history that same mentality has led to totalitarianism which ultimately did great harm to the masses. It would first begin with the government restricting your right to make such a statement.

I acknowledge your position, with one caveat. The tax laws in this country are corrupted due to Congress (the political aristocracy) trading political favors for power, money and influence. There is not any reason for our tax laws to involve 55,000 pages–except for the fact that both Republican and Democrats develop the legislation to benefit their supporters (K Street) and secure benefits in return. If the tax laws were simple, consistent, and evenly applied, the majority of the issues relative to our “collective responsibilities” would be resolved.

However, that also begs a discussion of how those who currently pay (including the middle class)
are repeatedly legislated into paying even more, while a larger portion of the population continues to receive many of the same benefits without any tax liability. Thus, you have 40%+ of the population who receive the benefits of education, health care, and other federal programs with no (zero) contribution. Those who demand “fairness” are most often demanding that the rules be rewritten to benefit a selected group.

You cannot criticize someone who hires a lawyer or accountant to minimize their tax liability, when those politicians who wrote the rules do the same. The President can preach about the wealthy paying more, but one can be sure that he, Warren Buffet and others that embrace this idea are not sending one extra dollar to the IRS–and I am sure they each exhort their lawyers and accountants to ensure they do not pay one dollar more than required. And, it’s documented that Warren Buffet has walked away from deals because the tax issues compromised the returns he and his investors expect.

A movement to a flat tax, where you file your return on a postcard, is the most equitable way to ensure that everyone pays “their fair share”. Exempt those with the least; but overtly penalizing success by taking upwards of 60% of one’s earning is putative, with significant long term ramifications on future economic growth.

Your comments regarding the wealthy promoting the destabilization of government is more opinion than fact–which you are entitled to under the First amendment. However, it should be noted the wealthy secure no benefit of a nation dominated by anarchy–as the laws that protect you also protect them when EQUALLY applied. (The bigger issue is that the government has selectively applied the laws–see John Corzine as a recent example where those with political influence and connections are not prosecuted.)

Your issue would be better directed to the political elite inside the Beltway whose only objective is to ensure they consolidate their influence and power–translating that into personal wealth.

I would also question your generalizations as to the wealthy–as their is new wealth and old wealth–e.g. the Kennedy’s versus the Zuckerberg’s. That being said, the old wealth via their investments most likely provided the funding for folks like Zuckerberg.

@Adam. I will take exception to the cause/effect that you align with wealth/evil. At best, that’s both dangerous and unwarranted.

Posted by COindependent | Report as abusive

@ stevedebi –

You state “The US was founded on the freedom of a person to rise to the level of his/her competence. The “state” gets in the way, and the power of a Federal government was of prime concern to the founders of the Constitution.”

Actually, you are totally and completely wrong on both counts:

(1) The US was founded as a Plutocracy, and it remains so today. The constitution was based roughly on the English parliament system, with two houses representing different factions of the wealthy class.

The “extra insurance” included in the US constitution to make sure the non-wealthy classes never got a chance to vote was a stroke of genius called the “electoral college”, which guarantees the “popular vote” is NEVER used to elect public officials.

Thus, a built-in guarantee the US would NEVER become a democracy.

http://en.wikipedia.org/wiki/Electoral_C ollege_%28United_States%29

————————————–

plutocracy

1. the rule or control of society by the wealthy
2. a state or government characterized by the rule of the wealthy
3. a class that exercises power by virtue of its wealth

————————————–

(2) The prime concern of the founders was that the US would be taken over by popular rule (i.e. democracy), a new political movement which was sweeping Europe at the time. That was a prime motivating factor in how the US constitution was constructed.

The secondary concern was that the federal government would gain more power as time passed, thus challenging the “States’ Rights” powers in the constitution.

This concern was quite legitimate, as history has proven.

The federal government DID continue to increase in power until it split the Union — that difference of opinion is now called the US Civil War (1861-65).

With the result that now we are dominated by a federal government that illegally seized power by forcing the southern states to remain in the union through force of arms.

Power corrupts, absolute power corrupts absolutely.

Posted by PseudoTurtle | Report as abusive

@Crash866
When a drug dealer grows wealthy, very wealthy, by selling his customers heroin, did anyone put a gun to their heads?

Did he “create wealth”?

Posted by AdamSmith | Report as abusive

@ COindependent –

What am I to do with you?

I simply cannot make up for your lack of knowledge of history and economics. You NEED to check your facts BEFORE advancing an opinion that is based on nothing other than what you personally believe.

It is beyond my ability, especially in this venue, to attempt to answer and refute your comments, ALL OF WHICH ARE WRONG.

Whether you realize it or not, we live in a totalitarian state now (read my comment to stevedebi above). My comments apply to ALL forms of government.

The whole point of my argument for a stable society above is to force the wealthy to give up their dynasties, which are the main reason this country is failing.

Put simply, these people and the families were able to amass tremendous fortunes at the expense of everyone else — the reason why doesn’t matter, only that they have — which means EVERY SINGLE DOLLAR THEY TIE UP IN THEIR FAMILY FORTUNES IS A DOLLAR THAT IS NOT BEING USED FOR INVESTMENT FOR THE BETTERMENT OF EVERYONE ELSE.

THAT MEANS EVERYONE ELSE MUST PAY MUCH HIGHER TAXES TO COMPENSATE FOR THE LACK OF MONEY IN THE ECONOMY.

Fiat money (i.e. electronic money) simply exacerbates the problem by coving up the issue of limited resources.

In every single society at every single point in history, there exists only a FINITE amount of wealth to go around.

Why?

Because we live in a physical world of finite resources.

If a significant portion of those resources are not available to society, then commodities become scarcer and prices rise as a result.

The wealthy class ALWAYS exists in opposition to real growth and stability because of what they do with their wealth, which is to hoard it.

Thus, great disparity in wealthy ALWAYS presages a destabilization and collapse of a society.

History is my proof!

Posted by PseudoTurtle | Report as abusive

Instead of a sales tax, create a revenue tax and offer deductions for jobs created in the USA, not in China or India. This tax would apply at every step in the food chain and every business would pay some tax, regardless of profit or loss. Those who create value, that is, jobs would pay lower taxes; those who do not, will pay higher. Even individuals would be allowed to benefit from this tax if they spend money to create US jobs (hire a gardener). This tax could be introduced gradually and will eventually replace income tax. This will also end all the shenanigans associated with off-.shoring, tax-heavens abroad and profit manipulation. Foreign companies that sell in the USA but pay no taxes here, will be forced to pay US taxes. This tax will also survive WTO rules. Although it looks similar TO VAT in Europe, it is different and distributes the burden more fairly among business and individuals. Even more important, it will spur job creation in the USA.

Posted by RajKanodia | Report as abusive

@Pseudo

First, wealth is relative, as opposed to being finite. It can be both created and destroyed. Fortunately, in these United States we have done an exceptional job of creating increasing wealth over time–to the benefit of everyone.

Relative to the personal “stuff”:

My “belief” is based on the personal experience of an immigrant family (my own). Came from literally nothing in the “old country”, didn’t even speak English, and in two generations living the American dream–own home, kids through university, secure financial foundation (but not surely “wealthy”–perhaps to some I am).

Additionally, I have a collection of acquaintances who are products of this same experience.

Your statement regarding that those of wealth do not invest is unsubstantiated; in fact, nothing can be further from the truth. Where do you think the venture capital that funds start-up companies comes from? It’s irrational to believe that wealth is finite–that it cannot be created or expanded upon (or destroyed). Sure it consumes resources–most of which were idle or inefficiently used–the market determines that–and put to a better use. And, I have continued confidence that we will continue to make better and higher use of the resources available. The pie from which everyone shares can truly be expanded.

As long as you embrace the idea that everything is finite, there is little grounds for an informed and rational discussion. We should just acknowledge we have a different view of the world and move on–but, again, I am glad you live in a place where you can promote your perspective without repercussions.

I will however agree with you that fiat money is a significant issue that can be (easily, not sure) resolved by going back to some fixed standard (gold?) The details would have to be worked out by folks more talented in these affairs than I; but it does need to be fixed.

__

Posted by COindependent | Report as abusive

@ COindependent –

You state “Fortunately, in these United States we have done an exceptional job of creating increasing wealth over time–to the benefit of everyone.”

That is a totally incorrect statement, which is easily verified if you care to face reality.

As I said above, simply read and understand the “handwriting on the wall” of the financial and economic performance of this country ALL for the benefit of the wealthy class and to the detriment of everyone else.

I suggest you begin by reading the “resume” of the US wealthy class in terms of their economic performance.

http://en.wikipedia.org/wiki/List_of_rec essions_in_the_United_States

—————————————

You state “As long as you embrace the idea that everything is finite, there is little grounds for an informed and rational discussion. We should just acknowledge we have a different view of the world and move on–but, again, I am glad you live in a place where you can promote your perspective without repercussions.”

Your are correct, as long as our belief structures are totally at odds and yours is based solely on your personal experiences — including your “up by your own bootstraps” with no help from society belief structure — we have an unbridgeable gap with no grounds for an informed and ratonal discussion.

We are essentially where the Congress is right now — we “agree to disagree” — a catchy little phrase that really means “my way or the highway” when personal beliefs begin to conflict with reality.

And, once again, just like the other 47 times the wealthy class destroyed this economy, they will do it again quite soon.

I can’t think of a single thing in the universe that is infinite, especially not the total amount of wealth possessed on this earth.

We shall soon see (in real time, not as historical fact) whether or not the US has infinite wealth — or even the global economy for that matter.

As to my being able to promote my perspective without repercussions — supposedly, the much-touted “free speech” afforded by this government — there have been many overt attempts to suppress my opinion. I choose this particular forum because it does not need to pass muster of an unseen censor as other articles of Reuters must.

As for those opinions, they are well watered-down by the time they reach this forum, or they wouldn’t be permitted even here, and I am very conscious of that fact when I write my comments.

Posted by PseudoTurtle | Report as abusive

@ COindependent –

Here’s a classic example of your wealthy “trickle down theory” in action.

From the UK Guardian:

“Denying minimum-wage workers a raise is craven and grotesque”

Corporate CEOs make 231 times more than the average worker, but balk at the idea of raising minimum wage by $1.75

http://www.guardian.co.uk/commentisfree/ 2013/feb/14/minimum-wage-raise-obama-sot u

Posted by PseudoTurtle | Report as abusive

@ COindependent –

And here, again from the UK Guardian, an example of the wealthy class acting to benefit the US economy.

“US and EU governments aiming to agree transatlantic free trade pact”

Moves within US Congress and 27 member governments to eliminate or minimise barriers to unfettered imports and exports

The US and the European Union on Wednesday launched their most ambitious attempt to liberalise transatlantic trade following Barack Obama’s commitment to a new pact outlined in his state of the union address.

A joint statement from Obama and the presidents of the European council and commission, Herman Van Rompuy and José Manuel Barroso, said they would kickstart moves in the US Congress and among the 27 EU governments to open negotiations on a new free trade pact seeking to eliminate or minimise barriers everywhere from the car to the pharmaceuticals industries, to services, agriculture and investment.

http://www.guardian.co.uk/business/2013/ feb/13/us-and-eu-transatlantic-trade-lib eralisation

Obama’s “solution” to US economics problems — AMNESTY FOR ILLEGAL ALIENS, PLUS OPENING OUR BORDERS WIDE OPEN TO ANYONE WHO WANTS TO ENTER FOR ANY REASON.

PLUS, SINCE LIMITED FREE MARKETS HAVE WORKED SO WELL IN THE PAST TO HELP THIS ECONOMY GROW, HOW ABOUT 100% FREE MARKETS AS A SOLUTION?

Posted by PseudoTurtle | Report as abusive

Pseudo.

Your rants and citations are at the point of being irrational.

Fini

Posted by COindependent | Report as abusive

@PseudoTurtle,

“I would argue “enlightened self-interest” should be the guiding principle for ALL of our laws.” We agree on this.

“THAT is “what entitles (the state) to the results of their efforts”.” A dazzling leap of philosophy and faith, but from where to where?

“The type and degree of taxation needed to provide a stable economic environment is what the state decides is proper, whether you personally agree with it or not.” This is NOT a statement appropriate to one of and in the “land of the free”. Yes, a stable, sustainable economy requires SOME “type and degree” of taxation.

But it is our founding fathers, through our Declaration of Independence and our Constitution that give “we, the people” final say OVER those in government who would take our freedom too limit what is federal, state and local “business” and what tax is acceptable for each to do their job.

Posted by OneOfTheSheep | Report as abusive

@PseudoTurtle,

The above was unexpectedly posted when this window unexpectedly refreshed, thus some incoherence. I continue:

You seem to believe that the cost of the “protection of the state” to assets of citizens should be bourne in proportion to the assets of each and not the number of citizens. I see absolutely no logic to support this belief.

I believe more along the line of “splitting this baby” as the Social Security tax does. Social Security was not set up to offer everyone an equal “level of dignity” in retirement because it was recognized that consensus on ANY “level” would be impossible. So the wage deduction only applied to a “basic range” of income within which different benefits would accrue, but within this range those paining in less would receive “more” and those paying “more” would receive proportionally less on their contributions.

Our highway system has traditionally been built and maintained by fuel taxation, thus those using these roads and bridges pay more when they drive more. Those who do not drive do not pay such taxes.

Our school taxes are not set up to make parents of those students who score best pay more. They are not collected only from families with children. They are collected, by and large, by a tax appraisal and collection system that can literally force people from PAID FOR homes in their old age by over-taxation. Let’s call this “equal-opportunity” oppression. Our fire and police protection are similarly funded. Everyone, rich and poor, has equal right to demand the protection they have BOUGHT AND PAID FOR!

My “point” here is that ALL citizens of these United States have “common cause” to pay on a single-family unit basis for good schools and such military capability as is necessary to assure the survival of our country AS WE KNOW IT indefinitely into the future.

“EVERYTHING comes from the state…”. I have no doubt this has been the belief of each and every tyrant and would-be tyrant since time immemorial, but the state has nothing it did not take it’s citizens or as plunder of war, and most wars in recent years have been financial “tar-babies” utterly devoid of plunder. On the other hand, I agree that “Power corrupts, absolute power corrupts absolutely”, and that “…’enlightened self-interest’ should be the guiding principle for ALL of our laws”. But when you say “…we live in a totalitarian state now…” you leave all reality and credibility far, far behind. If your “opinions” expressed here are really “watered down”, you may well constitute a real and present danger to one and all outside of a mental institution.

You see “equity” as an absolute mandate of government, and yet were this implemented in the manner you suggest and to the extent that would require the “goose that lays the golden egg” would be killed. Americans tolerate our “well off” better than other countries because deep down every one of us hopes to someday join them, just as kids play baseball or football or basketball in hopes “lightning might strike” and they might become a sports legend. All golfers want to become Tiger Woods, and every garage band hopes to become the Stones. Any society that tears down those who achieve success does not achieve equity, but mediocrity.

So yes, America needs a tax “system” that subsidizes “basic” owner-occupied housing, like the two-bedroom house our “greatest generation” bought and raised families in, or decent “parks” for manufactured housing with nominal lots for sale or rent. It shouldn’t subsidize the construction or purchase of 4,000 – 5,000 sq. ft. McMansions the average citizen can’t afford to furnish, heat, cool, clean or maintain, or second “vacation homes” or Estates. We need common sense and balance instead if our current “if some is good, more is better” mind set.

I agree with COindependent that wealth is NOT “finite”! Wealth is created by many forces both long and short in duration all the time, and is destroyed similarly and not always in equal measure. Capitalism is the “magic” by which self-interest is harnessed to create a bigger pie when the rrest of creation os squabbling over how to divide one of fixed size or how to take something from someone else. Of all who criticize it, NONE can point to any alternate economic system that has achieved better results over a reasonable period of time.

COindependent is absolutely correct in observing that “…tax laws in this country are corrupted due to Congress (the political aristocracy) trading political favors for power, money and influence.” and that “If the tax laws were simple, consistent, and evenly applied, the majority of the issues relative to our “collective responsibilities” would be resolved.”

Posted by OneOfTheSheep | Report as abusive

@OneOfTheSheep – Well Said!

I wish the majority thought as yourself and COindependent.

We live in a world with Finite resourses, this is true… But steps are being taken to change that. —www.planetaryresources.com — There are multiple corporations like this one gearing up to mine the solar system for natural resources.

This further supports the fact that wealth is not Finite and can continue to grow. As humans we have always expanded to increase our resources, this trend will never cease no matter the distance. Maybe I’m an optomist, but I envision the upcoming future much like Roddenberry. We may be going through a turbulent period with economic and political corruption, but the American people will only take so much. Eventually the change we need will be demanded, and thankfully we are fortunate enough to reside in a nation founded on democracy and the needs and desires of the people. All that’s left is getting the right ideas into the right hands and forum.

Posted by NadrojCO | Report as abusive

The problem with letting great wealth go untaxed is that it leads to the idea in the minds of the wealthy that they are somehow ‘better’ and more ‘deserving’ of privileged treatment. This undermines the basic concept of a democracy, which is that all men are created equal. Of course this has never been the case, but the principle that we are supposed to be striving for, that everyone does their fair share for the good of society. What is so astonishing is to hear wealthy individuals proclaim that they should not be held to the same standards, they are somehow exempt, straight out of George Orwell, ‘some are more equal than others’.
On the other hand there should be a limit to how much someone can be taxed and simplification of the tax code and elimination of deductions is long overdue. Bowles Simpson would be a step in the right direction.The sooner we get to an equitable tax structure, the less likely the poor will resort to taking out their revenge on the wealthy in the form of exorbitant taxes.

Posted by thinkb4its2late | Report as abusive

An excellent article in general. However one specific I always have a problem is why states should even be able to tax, and why some states tax too much and others tax not at all (at the income level) and yet both provide service. What I would suggest is that all income taxation be at the federal level and then monies be doled out at a constant ‘per capita’ level to each state. This would force states to stick to a common average level of spending per line item in the budget. I believe that much of the excessive spending in spendthrift states is because they are not being held to limits, and probably have no knowledge thereof, because , unlike in business where there are income statements and balance sheets, etc which are uniform, there are no uniform accounting standards for states. One wonders what they do at National Governors Conferences, or National State Comptrollers Conferences, besides ‘eat drink and be merry’ and sit on their thumbs at the taxpayers expense. And what about those in our Universities who are in so-called Municipal and Government Studies departments? Are they too sitting on their thumbs? If we want to get taxation under control then we need to get spending under control. And in a ‘united’ way, ie where these two ‘phenomena’ are known and understood across the country. If we don’t have uniform budgets, with uniform line items, then our so-called academics won’t be able to ‘compare and contrast’ the budgets of two states and see why one is run efficiently and another is not.

Posted by Eric93 | Report as abusive

@ OneOfTheSheep –

(1) You state “You seem to believe that the cost of the “protection of the state” to assets of citizens should be bourne in proportion to the assets of each and not the number of citizens. I see absolutely no logic to support this belief.”

The logic, as I explained above, is that, if you put an assumed market value on the services a state provides — because nothing is free, and there are costs associated with running a state — then those who use and receive the most benefits should pay the most of the cost. That is the most equitable distribution possible.

Thus, ANY kind of flat tax, whether applied at state or federal level on either sales or income is WRONG, because a flat tax unfairly burdens a poor person who must support not only his/her meager existence, but also that of the wealthy individual who is getting a free ride on society. That is wrong no matter how you look at it.

For example, a wealthy individual actually uses the benefits of the state more than a poor person. Their personal protection is provided by the state (in terms of both police and military), they use more medical care, housing, education, food, clothing and retirement benefits (ignoring Social Security for the moment).

Thus, each should pay an amount of taxes according to the amount of services provided by the state.

That principle is in fact what this article is all about. Did you actually read it? Do you understand what it means? Apparently, not.

For example, from above “Before 1913, a slanted taxing system deepened the economic divide. Most federal revenue came from consumption taxes. People paid import taxes (the tariff) on everything from coffee to cook pans, and excise taxes on alcoholic beverages and other products.

To use the language of today’s conservatives, taxes were “flat and fair” – everyone paid the same amount. A poor cotton farmer paid the same tax on a pound of coffee that Jay Gould and other Wall Street tycoons paid for their pound of coffee. The tax was small. So it meant nothing to Gould. But even small taxes burdened the poor’s meager incomes.

Worse, when it came to the division of government outlays there was nothing “flat and fair” about it. The super-rich gobbled the lion’s share. Gould reaped millions in federal subsidies for his railway schemes, and millions more when the schemes went bust and the government bailed him out.

In short, the tax system redistributed wealth upward – to Wall Street financiers and the super-rich.”

THAT is where this country is heading, back to the “Golden Age” of the wealthy class, which WILL destroy this nation.

I also said that capitalism is inherently unstable — mainly because the wealthy class will inevitably destabilize this economy because of their proclivity to use the markets to speculate — which is proven by the history of this nation in terms of economic performance.

http://en.wikipedia.org/wiki/List_of_rec essions_in_the_United_States

What is ABSOLUTELY NECESSARY to constrain capitalism in terms of taxation, trade and banking regulations.

OOTS, if you were in charge of this country and you had to select a management team (i.e. the wealthy controled government) to run it economically and efficiently so that you would obtain the maxiumum sustainable growth to benefit the most people, would you hire these people, given their track record?

I know what they are presenting as their “resume”, but if you run a “background check” on these people you will find they are totally incapable of running this country without repeatedly crashing it into bankruptcy.

WHY would you hire a management team like this?

This isn’t rocket science, nor do you need an advanced degree, or even a college degree to figure out what is happening. Simply the ability to read and understand what has happened in the past is all that is necessary.

That and an open mind.

Stop drinking their “kool aid”.

(2) What you are apparently confused about is what the state chooses to spend the taxes on, not the method of taxation, which are two different things entirely.

FIRST, a reasonable budget for the state must be created each year, not the “ad hoc” politically-driven legislative process that we have now, which is really the underlying problem that is generating government waste.

SECOND, the amount of taxes to be collected can then be calculated to support that budget. This should be a variable tax amount each year to adjust in real time for changes that occur. If this tax was based soley on income (i.e. those who benefit the most, should bear the most burden) with NO exemptions at all, the actual percentage of income tax would probably be very low, certainly much lower than it is now.

THIRD, as I said above, it is the state that is in the best position to decide how the tax dollars should be spent — which you may or may not agree with, but neither you nor I am in any position to run the government, which is why we have elected officials to do this for us — IN ORDER TO PROVIDE STABILITY FOR THE STATE.

That is the key to what I am saying.

Why does the state exist?

The answer should be to provide stability that benefits the majority of the population in terms of reasonable needs and requirements.

ANYTHING that destabilizes the state MUST be immediately suppressed. For example, like this so-called Tea Party tax revolt, which threatens to destabilize this country simply because a few greedy wealthy don’t want to pay their fair share of taxes.

(3) Your ideas about Social Security are wrong.

You state “I believe more along the line of “splitting this baby” as the Social Security tax does. Social Security was not set up to offer everyone an equal “level of dignity” in retirement because it was recognized that consensus on ANY “level” would be impossible. So the wage deduction only applied to a “basic range” of income within which different benefits would accrue, but within this range those paining in less would receive “more” and those paying “more” would receive proportionally less on their contributions.”

Social Security is NOT a tax. Social Security is a form of “social insurance” which has absolutely nothing to do with what we are talking about here. It was set to be a self-funded, stand alone insurance fund.

The problem is the government has commingled the trust fund with the General Fund (during the Johnson era) to make it appear the US economy was doing better than it was in actuality.

Johnson created a number of other programs as part of his is “Great Society” — Medicare, Medicaid and others — which he sold to Congress BUT THE FUNDING TO SUPPORT THESE ADDITIONAL PROGRAMS WAS NEVER APPROVED BY CONGRESS.

THAT is the problem with Medicare and Medicaid and others. The funding depends upon Social Security taxes, because they have no independent source of funding for themselves.

Social Security was NEVER designed to be anything more than an insurance policy for old age.

Social Security has been misued since it was created back in the 1930s, but the problem with it stems from the fact that the government has never been able to keep its hands off of it. Which is why it is insolvent right now, and the ONLY reason why it is broke — government malffreasance that would normally put commercial managers of the fund in jail.

WHY do I have to keep repeating these FACTS?

(4) You state “Our highway system has traditionally been built and maintained by fuel taxation, thus those using these roads and bridges pay more when they drive more. Those who do not drive do not pay such taxes.”

To which I reply that ANY consumption tax is counterproductive, because it increases the costs of products sold in the marketplace. You are wrong that “those who do not drive do not pay such taxes”, since they are passed on to the consumer, thus driving up prices and forcing down consumer demand — which means less profitability for businesses.

(5) You state “Our school taxes are not set up to make parents of those students who score best pay more. They are not collected only from families with children. They are collected, by and large, by a tax appraisal and collection system that can literally force people from PAID FOR homes in their old age by over-taxation. Let’s call this “equal-opportunity” oppression.”

Education should be run from the federal level — clearly attempting to run it from a state and local level has not worked since the US educational system is abysmal compared to any other OECD nation.

THIS is one of the items the wealthy should be paying for through income taxes, since a well-educated nation is in their best interest.

Right now, the wealthy would rather import educated people than accept the burden of paying for our own childen’s education. This is wrong! It undermines the stability of this country, and is creating a two-tier society of wealthy and poor.

Besides, why should ANY homeowner who does not have children be forced to pay for the education of others? That is nothing less than confiscation of personal property by the government without “due process” since the local school boards are always demanding more money for less performance.

(6) You state, “Our fire and police protection are similarly funded. Everyone, rich and poor, has equal right to demand the protection they have BOUGHT AND PAID FOR!”.

In principle you are correct, but as the poor well know they do not have equal right to demand and receive protection they have bought and paid for. The wealthy class receives much more police and fire protection than the poor, most of it paid for by the poor. This is wrong.

(7) You state, “My “point” here is that ALL citizens of these United States have “common cause” to pay on a single-family unit basis for good schools and such military capability as is necessary to assure the survival of our country AS WE KNOW IT indefinitely into the future.”

YOU ARE TOTALLY WRONG!

AS I STATED ABOVE, PAYMENT OF TAXES ON A PER CAPITA BASIS PLACES AN ENORMOUS BURDEN ON THOSE WHO CAN LEAST AFFORD IT, THUS IT TENDS TO DESTABILIZE THIS NATION.

THE ONLY RATIONAL METHOD OF TAXATION IS BY PROGRESSIVE METHODS APPLIED SOLELY TO INCOME.

How much money are we wasting as a nation by allowing the wealthy class to shift their tax burden onto everyone else. I doubt it can even be estimated.

(8) Unfortunately, you descend once again into your tradition rant, in which you babble incoherently which I will not even attempt to dignify with an answer.

=====================

“EVERYTHING comes from the state…”. I have no doubt this has been the belief of each and every tyrant and would-be tyrant since time immemorial, but the state has nothing it did not take it’s citizens or as plunder of war, and most wars in recent years have been financial “tar-babies” utterly devoid of plunder. On the other hand, I agree that “Power corrupts, absolute power corrupts absolutely”, and that “…’enlightened self-interest’ should be the guiding principle for ALL of our laws”. But when you say “…we live in a totalitarian state now…” you leave all reality and credibility far, far behind. If your “opinions” expressed here are really “watered down”, you may well constitute a real and present danger to one and all outside of a mental institution.

You see “equity” as an absolute mandate of government, and yet were this implemented in the manner you suggest and to the extent that would require the “goose that lays the golden egg” would be killed. Americans tolerate our “well off” better than other countries because deep down every one of us hopes to someday join them, just as kids play baseball or football or basketball in hopes “lightning might strike” and they might become a sports legend. All golfers want to become Tiger Woods, and every garage band hopes to become the Stones. Any society that tears down those who achieve success does not achieve equity, but mediocrity.

So yes, America needs a tax “system” that subsidizes “basic” owner-occupied housing, like the two-bedroom house our “greatest generation” bought and raised families in, or decent “parks” for manufactured housing with nominal lots for sale or rent. It shouldn’t subsidize the construction or purchase of 4,000 – 5,000 sq. ft. McMansions the average citizen can’t afford to furnish, heat, cool, clean or maintain, or second “vacation homes” or Estates. We need common sense and balance instead if our current “if some is good, more is better” mind set.

I agree with COindependent that wealth is NOT “finite”! Wealth is created by many forces both long and short in duration all the time, and is destroyed similarly and not always in equal measure. Capitalism is the “magic” by which self-interest is harnessed to create a bigger pie when the rrest of creation os squabbling over how to divide one of fixed size or how to take something from someone else. Of all who criticize it, NONE can point to any alternate economic system that has achieved better results over a reasonable period of time.

COindependent is absolutely correct in observing that “…tax laws in this country are corrupted due to Congress (the political aristocracy) trading political favors for power, money and influence.” and that “If the tax laws were simple, consistent, and evenly applied, the majority of the issues relative to our “collective responsibilities” would be resolved.”

=========================

As I said above to COindependent, and I have said to you previously, I cannot be held responsible for your abject lack of knowledge and education.

That goes for most of the rest of the contributors, as well.

Clearly, when reality conflicts with persal beliefs, reality must be rejected or your ego-centric world will collapse.

There is nothing I can do to open your minds to the truth.

That is why we will continue with this insane political and economic system until it destroys all of us.

I would say that it is you, and others like you, who present a clear and present danger to this country.

Posted by PseudoTurtle | Report as abusive

@Eric93,

The reason state and local taxation is as it is preserves the illusion of “local control” over education, etc. While, in the end, all the differences as result merely preserve “local inequities”, this reality is not widely perceived.

You are absolutely right that “If we want to get taxation under control then we need to get spending under control. ”

“If we don’t have uniform budgets, with uniform line items, then…” NO ONE IS… able to ‘compare and contrast’ the budgets of two states and see why one is run efficiently and another is not.” You got it! That’s why politicians will do anything and everything in perpetuity to see that such “apples and apples” comparisons are not possible!

Hope to hear more from you.

Posted by OneOfTheSheep | Report as abusive

The fact is that this country is founded on self-rule more than on any other principle.

Individuals are either treated as free and thus free to determine their own allegiances and action, or they are the chattel property of another, whether an individual, corporation or the State. Individuals who are free are not entitled to be protected and served by the group but are also free to keep what they produce.

Taxes are dues free people pay to be members of a collective group. If you don’t like your group, emigrate to a place you prefer. But do not claim group privilege and then not pay taxes. Wealthy people do not own anyone, in spite of their use of the pronouns “our” and “we”. They are not “entitled” to rule like medieval lords. “We” do not exist to provide services, protection and land to the privileged. That is very much the kind of system the American Revolution fought against. It was most certainly not a fight to replace one set of masters with another.

Posted by usagadfly | Report as abusive

@PseudoTurtle,

“…if you put an assumed market value on the services a state provides…then those who use and receive the most benefits should pay the most of the cost. That is the most equitable distribution possible.” Not so. You are ASSUMING that the word “those” means ASSETS and not CITIZENS. “Services” are provided to CITIZENS, and not ASSETS. It is absolutely vital to Americans that the “poor person” not get a “free ride on society”, a situation unfortunately more and more common and the result of the combined effect of well-intentioned but poorly defined and implemented government programs at ALL levels.

Any economic system distributes “wealth” towards those who have or accumulate the resources that fund the provision of goods or services in demand because “wealth” is, in the end, some form of acceptable “exchange” for the risk associated with participating in the “marketplace” that is a majority of human “life”. This is the “game” we must all play from birth.

If the present “monetary wealth of the world” were suddenly confiscated and redistributed to each existing human being, embryos and fetuses excluded, the immediate result would be universal poverty and starvation for a relatively short period but within a short time the “other assets” of America, our houses, cars, intellect and experience and that other major economies would soon see the lion’s share of such “wealth” right back whence it came. As in any game, there are winners and losers; yet some simply excell at just about everything they turn their attnetion to. Accept that.

There is instability in capitalism, just as there is instability when one operates a car or aircraft beyond it’s “design operating envelope”. Drivers or pilots who do this suddenly and invisibly transform themselves into “test drivers” and “test pilots” utterly without necessary experience, training, or roll cages and/or parachutes.

If “speculation” today causes “instability, look at ways to regulate the excesses rather than an absolutely necessary component of capitalism. Speculation” in commodities provides the liquidity and certainty necessary for businesses to make “routine” decisions that otherwise could be “life or death” rolls of the dice. An example would be Southwest Airlines, who has rather consistently made profits by locking in their future fuel prices when all their competitors were sitting on their hands.

On the other hand, is it possible to “constrain” what become essentially “windfall profits” in commodities such as oil price fluctuations from refinery fires, regional conflict, regime change, and the like? To such extent as these are (or can be) manipulated for profit, that incentive can and should be removed and even effectively penalized. Will it be? Unfortunately this would require coordinated and reciprocal global effort in the common good, something economically or politically impossible. “All politics is local.”

The hope, which springs eternal, is that somehow such power could be placed in the hands of competent people that will wield it with appropriate restraint. Trust, but verify, said Reagan. If humanity as a whole can’t do that, we are all, not just “the rich”, to blame equally.

You speak of “constraint” and regulation as one and the same. Your considerable education has not lifted the blindfold of ignorance from your eyes. American government today exemplifies levels of ineptitude, foresight and inefficiency almost incomprehensible.

So, NO, I would NOT hire the present government “management team”. And the “invisible hand” of capitalism and it’s APPROPRIATE “constraint of excesses” must be a marriage of competent partners and not convenience if it is to improve the quality of life in America in the overall.

As I have often said, you can create any kind of society you wish simply by how you tax it; i.e. adopted incentives and disincentives. By that measure, what we are currently doing is not only ineffective and inefficient, it is so contrary to what is appropriate as to be insane.

And I agree with you when you say that “This isn’t rocket science, nor do you need an advanced degree, or even a college degree to figure out what is happening. Simply the ability to read and understand what has happened in the past is all that is necessary. That and an open mind.”

I am not “confused”, you are. It is not for OUR “state” to “choose to spend taxes”. It is for “we, the people” to decide how much of OUR income to give the state to do what WE would have done. This tail has wagged the dog for too long (since WW II).

Yes, a “reasonable” budget is essential. Unfortunately we, as a people united, have yet to reach consensus as to what should be in it. And I agree with you that education should be defined and funded on the federal level.

But you have priorities of budget and taxation backward. Our present problems result from people coming up with an endless and ever-expanding list of expenditures whose appetite currently exceeds the economic value of American economic productivity leaving “we, the people” with a negative amount to live on!
When we again turn this around, and prioritize budgeted expenditures so that they do NOT exceed the amount of OUR income we will permit the state, this nation will again be on a path to past greatness and future potential. Not before.

Posted by OneOfTheSheep | Report as abusive

Pathetic.

First of all, stop worrying about what rich people spend their money on or how much they are allowed to keep. As my mom always said, “mind your own business”.

Second, Warren Buffet pays a lower tax rate because he pays CAPITAL GAINS TAX, not INCOME TAX. It’s apples and oranges.

Third, to say that the rich would be at advantage or buy less than poor people under a consumption tax is just ridiculous. I don’t see many poor people buying Ferraris or Yachts or building and filling those mansions that you mentioned with expensive items.

Finally, you need to actually READ the Fair Tax consumption tax and NOT alter it or make false assumptions when discussing. Prices would rise slightly ( they would remain low due to compeitive pressure) but you would keep your ENTIRE paycheck, NO federal taxes of any kind would be deducted ( state/local would, if applicable). The poor would actually benefit as a thriving resale economy would develop (the tax is only applied once upon the purchase of a new item). It is a “green” tax proposal that would encourage recycling/reselling usable items and save millions of tons of paper each year. It would bring back the $3 trillion in tax shelters overseas. It would attract foreign investment. It would be a boom for our economy.

Our current tax system is corrupt and hurts the people, like me, who grew up lower middle class and have become successful through hard work, risk taking, and making more good decisions then bad ones. By exchanging my time, which is literally huge chunks of my life, for this thing called money, I can voluntarily purchase items that make me happy. If that makes somebody rich, but I am satisfied with my purchase, where is the evil that you imply? Why should they be punished? If I spend my time, my life, to earn money, and the government takes it involuntarily, they are confiscating my life… And that is slavery at worst and serfdom at best.

Posted by urukhai2 | Report as abusive

Jindal acts like a brahmin elitist,

wanting to have his nirvana today,

built on the back of a new caste of untouchables –

the american taxpayers and its honest workers,

it’s time to throw a shoe at Jindal

Posted by scythe | Report as abusive