A week ago, I finished up my taxes, sealed the envelopes, and licked the stamps. Actually the stamps were already sticky, but doing my taxes did leave a bad taste in my mouth. The tax system needs to stop supporting the wealthy.
Starting locally, I pay a .5% earned income tax in my borough of Lansdale, Pennsylvania. It doesn’t sound like much, but it adds up to a significant amount. As a meager college student, I worked hard to make over $5000, so I ended up writing a check for $27.89 to my tax administrator. When I enter the real world I will owe close to $300 in local taxes.
It doesn’t bother me much that I have to help pay for police, roadways, and firemen. Once I start receiving bigger paycheck, I will welcome this responsibility. But there’s a problem with my local tax, that is emblematic of problems in the federal system. My local tax is an earned income tax, which means that money not received from a job isn’t taxed.
To illustrate this, compare me to a retired millionaire. I currently earn $5000 and pay $28. Now take the millionaire, he has $1 million in mutual funds, stocks, and bonds. These investments passively create an income of $50,000 a year, which is more than enough to pay bills. This millionaire though is retired and doesn’t have a job. Therefore with an income of $50,000, he pays $0 in local earned income taxes.
The problem is that investment income isn’t taxed, only wages, salaries, commissions, and net profits. So when you hear that poor people deserve to be poor because they’re lazy, remember the earned income tax, where the rich can pay no tax and the working classes foot 100% of the tax bill. To further my point the U.S. Census Bureau reports that in 2003, 9.8% of those earning over $84,000 did not work. Shouldn’t those people be paying local income taxes?
I propose the idea of having only an unearned income tax of about 2%. Then only passive income from rents, dividends, and stocks would be taxed. It seems fair to me.
Unfortunately, the federal government levies many of the same unfair taxes. For example, in my Fall 2003 Unbound article, I explain that ending the inheritance tax will only help the rich and place larger burden on the poor. President Bush’s other tax cuts are also only going to help the rich. Sales tax is another forgotten tax that places an unfair burden on the poor.
I don’t know where else to start, except with the idea to reduce the dividend tax. Simply put, this is just another way of enlarging the unearned income tax. This year, I owed just under $200 in federal taxes. The new dividend policy saved me only $3.
According to a U.S. House of Representatives, April 2003, Committee on Government Reform, tax savings for 21 corporate executives, such as Bill Gates would be over $615,000. And over ten years, the top three executives from the Fortune 100 companies will save $800 million (numbers reflect actual dividend tax reduction from 38.9% to 15% compared to published figures that represent complete dividend tax elimination).
Since the dividend tax was only reduced and not completely eliminated, the figures above are not exact, but do show the substantial difference in tax savings for the very wealthy.
I saved only three unimportant dollars. Sadly, my pocket-change savings raises me above (132 million taxpayers) 73.6% of Americans that receive absolutely no benefit from the dividend tax cut. And these tax cuts are supposed to be for the poor!
Yes, people argue that Gates’ money will trickle down through the economy, but I am much more inclined to buy things if I received an actual tax break. Unlike Gates, I do not already own everything in the world.
Since this is a democracy, voters can only blame themselves for electing an administration that so obviously favors the rich at the expense of the poor. There are many more issues, such as tax bracket cuts and payroll taxes, that tend to help the rich, but I don’t have enough space.
I recommend, Al Franken’s latest book, Lies and the Lying Liars Who Tell Them. It’s funny, but also a shocking look at the democracy that again resembles nothing more than a farce.
In the book, he notes that 19% of Americans consider themselves to be in the top 1% of earners. It is this ill-conceived perception that our administration preys upon. The American public must wake up and realize that taxing the very rich, will be good for everyone and the economy. Remember Bill Gates already owns everything. He doesn’t need tax savings quite like we do.
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Copyright 2004, Kevin Semanick