Sunday, February 12, 2012

Fairness by the Taxman or "Class Warfare"

Nowadays we have a constant debate about how fair tax rates are. Many say everyone should pay the same, but this is not realistic. Today someone making $9500.00 pays $1004 (11%), someone making $9,5000.00 pays $20,224.00 (21%), someone making $950,000.00 pays $332,500.00 (35%). The person at lower income will pay only 1K, the higher income 332K. Is this fair? Well some will say, higher income individuals pay more (obviously they would be correct), and lower income individuals pay less and therefore is unfair, and trying to make changes are "Class Warfare" Now then, the current tax scheme must have a justification. I think most agree you pay a share of your income and not the same amount to be fair and therefore the actual percent and progressive nature of our tax code. Most would understand that increasing the tax rate or amount of absolute money a lower income individual would pay could cause them to suffer and possibly to fall into poverty. But then why would we make the higher income earners pay more? Should they pay less and then make government to function with less? Why would they be willing to pay more? Would services provided to them be worthwhile paying more? What services are provided for them, that would be worthwhile. Well I think these are some of them:

6) Communications and transport. Well, this one is easy and likely won't cause much controversy. Highways, telecommunications, satellites, internet. This infrastructure regulated constructed and in many occasions subsidized or initially developed by the government, provide a great benefit for higher income earners that lower income earners do not get.

5) Safety and protection. What goes into this? well, Military, police, firefighters. The government develops, maintains and regulates these services. These services are of even more significance to high income earners as the security, stability, and safety in this country is key for conducting a business. No stability means no business, again look at other countries that lack any of these protections.

4) Legal and Judicial system. Although low and high income people would use the system, the burden and hours taken by high income earners is higher. How? well, cases involving complex financial instruments or contractual obligations require more time and resources and knowledge by the judicial system (judges, state attorneys). Also, the benefit of having a fair judicial system which provides stability to the country is very important. If you don't believe me, look at the amount of investment in countries with judicial instability and corruption, low or none. No corporation or individual would put money on an unstable country.

3) Education programs. Although this could be easily rebut with the argument that government provides schools to go, and although true, the benefit for high income earners is not a direct but an indirect one. Population being educated and trained to take jobs that will require significant education and training is a cost the government subsidize. These persons then would be available for companies who are obviously controlled by high income earners.

2)Welfare programs... Again I expect a gasp when I say this. How are high income individuals going to get welfare? No, that would be silly, the benefit to them comes when people who are poor and could pose a danger as desperation could cause them to cause crimes, but this is avoided by having welfare benefits. See other countries, the unrest caused by poverty would harm the country stability and therefore investment, companies ability to conduct business etc.

1) Financial regulation.... WHAT! are you insane? how is that a benefit? Well high income earners have complex financial instruments, for these to be profitable and have financial stability regulation and oversight needs to be created to which a low income earner have no use for and will never have access to this system. The instability that the lack or dysfunction of such a system would cause, was recently seen with the mortgage blunder, and losses by those with a lot of money were massive. Not only direct losses occurred, but due to losses to families living day to day that can't absorbed, caused such families to close their wallets and companies to saw their sales drop. So at the end protecting financial structure by regulation is essential for high income individuals. Despite many proposing capitalism equals no regulation, capitalism requires stability therefore regulation is needed to provide stability, actually very simple right?
Therefore if you take all these into account, the expenditures that are done towards higher income individuals is much higher. I do not have a number or source for this and getting all this information would require significant research. But I would point to some facts that would be much simpler: look at countries with weak or lacking of any of these infrastructures, and their ability to generate money and high income individuals is much less. I would argue that that is why companies want to do business in the USA.

Which brings me to companies... Why if according to the supreme court corporations are individuals, they do not pay taxes like other individuals? If they have free speech like Us, why they don't pay the same TAX RATE like Us. If you are an American and you earn income in another country you pay first the tax applied in that country and if it is lower rate than what you would pay in the USA, you pay the difference to the US government. No taxation without representation right? They get representation WITHOUT the same taxation! This therefore disenfranchises the low and middle income population, who would make the state of affairs unfair and expect instability which at the end will harm them. But for now they are getting away with it. As any of Us they conduct business here, they should pay taxes like Us. If they do not like it, go make business in other countries. Oh no..... they would leave the USA, Oh no we will suffer.... pious baloney, the income this companies get from the USA is most of their income and they would have major losses if they leave. To have the benefits they get in this country, that enable them to make large profits they should help cover the above expenses the government incurs for THEM, they should pay for them! What do you think?

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