The President and his Administration talk a lot today about "economic
inequality." Hillary Clinton made a couple of gaffs last week when she
claimed she and Bill were "flat broke" when they left the White House after
eight years. The liberal discussion has made charges that those who are
wealthy are not paying their "fair share" in taxes. That has produced a lot
of conversation today on talk radio, network and cable news programs that
tout the President's premise that the "rich" are not paying their "fair
share" in taxes. Many in other spheres of political power are suggesting
that people who are the "richest among" us are getting a pass when it comes
to paying taxes. In the last national election cycle some who are in the
class of "Billionaires" reported they pay less tax than the secretaries who
work for them.
For that group of people whose "net" worth is counted in the millions and
billions it is likely true in most cases they pay less percentage in taxes.
Here is the reason why: When a person accumulates that much wealth s/he
generally has assets that are diversified over a wide range of investments
and ownerships that are capable of producing money. In such cases the
individual is able to declare no income at all and therefore not pay any
"income" tax. Since their wealth is so high, the accumulation of money comes
in the form of dividends or "gains" on their capital, or capital gains.
For example if a billionaire or millionaire had five million dollars setting
in an account that produced only 4% interest over the year, that money would
yield about $280,000.00 in a year. That $280,000.00 would be counted as
capital gains and the percentage of tax that would be owed would be around
15% to 17% of that gross gain. On the other hand, if a small business owner,
say a plumber or contractor was able to make that same amount of money
during the same year, and only $50,000.00 of it was counted as income for
the plumber or contractor, after payroll for the employees and all other
expenses of the business were paid, the "income" of $50,000.00 would require
a greater percentage in the tax bracket of income to be paid in the form of
income tax than the same $280,000.00 the millionaire made through capital
gains. This is a function of the tax code.
When we hear politicians telling us that the millionaire paid less in taxes
than the plumber or contractor, they are saying words that are inflaming to
a less rich person's ears, but the words are not entirely true. The
millionaire who accumulated $280,000.00 in capital gains would pay tax at
15%, or $57,000.00. The plumber who grossed $280,000.00 and claimed
$50,000.00 in personal income would only pay $16,800.00 in income tax, but
at an income tax bracket set at 24%.
For the capital gains revenue the taxes are at a steady, flat rate and not
progressive like the ordinary income taxes are. When we talk about "tax
brackets" we are talking about levels of adjusted gross income that is
represented in tax tables that start at the lowest levels and move to the
highest levels. Hence, for persons who are not rich and earn only a salary
of $40,000.00 would be in a tax bracket, or level that is lower than a
person who makes $95,000.00 per year. Therefore, even by taxing the richest
among us, those whose salaries are much lower will continue to pay more
taxes under our current system.
This type of rhetoric being spouted by the media and politicians is causing
a war against the socioeconomic classes. The lower socioeconomic classes are
being purposely pitted against the higher socioeconomic classes. What we are
missing in the argument is truthfulness in what will actually happen if the
so-called rich are taxed in such a way as to dismantle their structure of
capital assets. There is a lack of genuineness from the politicians
explaining who the rich really are.
The class warfare and arguments about economic inequality that currently
exists in our society is destined to squeeze out the so-called "middle
class" because in the final analysis they are the ones who will likely
suffer the most by placing pressure on the wealthy.
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We have been told that eighty (80) percent of our wealth in the
United States is generated by small businesses. Those people are the
ones who are the plumbers, contractors, dentists, doctors working in
clinics, consultants, truck owners driving their own rigs, barbers
and beauticians who own their own shop and employ others, restaurant
owners, dress shops, cleaners, trash haulers, and the list goes on
and on. These are the people who take risks to start their business,
pump their capital into the business, employ people and pay
salaries, keep investing in their business with any extra money that
is earned, and deliver the services and goods in an economy that
grows with the demands created by the needs of the people.
When a line is drawn at some ceiling level by any politician from
the government to take more money through taxes as the individual
crosses that line, the earning power is reduced, people lose jobs
and less, not more, taxes are collected. Let me give an example to
illustrate the point.
When I was in Jr. High and High School I worked in a Grocery store.
One of the things I learned from that experience was that in order
to have a job I needed to seek out those who had the jobs available.
The owner of the store was kind enough to give me a job and agreed
to pay me to sack groceries and stock shelves.
The owner of that store took all the risks of opening a store in my
home town. He invested his resources, time and energy in
establishing a service to the people in that town. He was never
given a promise from anyone that he would do well and make it in the
grocery business. He risked what he had to provide those services
and by doing so he hired many others in my town, including some of
my friends to work for him and help him grow his business.
Was he richer than me? Of course he was; did he risk much more than
me? Of course he did. But he shared his wealth by giving me and many
others a job to make a living, or in my case, have spending money
all through high school.
I don't know a thing about what he or any other owner of businesses
at that time paid in taxes. I do know that they spent a lot of money
on payroll. With the money I made working in my job, and the money
many others made working in their jobs that he provided, paid our
fair share of taxes that would not have been paid without his having
first given us the job with the ability to make our own salaries.
Through the years I have never worked for a "poor" person who did
not have the resources to pay my salary. But I have never thought
less of a person who has risked much in order to give me a job. When
the person who invests in their business, grows that business,
continues to hire more people to help with that business, but makes
money in the process, I believe it is that owner's right to not only
make as much as s/he can, but keep as much as possible too.
For some reason the liberal political focus concentrated in the
Democrat Party now days is to demonize the people who are "wealthy"
and demand they pay "their fair share" in more and more taxes. If
the government should finally take from them more than they can
possible afford, and it begins to reverse the growth of their
business, and people are laid off because of it, will those
increased amounts taken from the "rich" in taxes offset the loss of
taxes from the amount of money that would have been paid by their
laid-off employees if they were still working? Especially if those
employees join the welfare roles where 47 percent of the people
receive goods and services at the expense of the taxpayer?
[By JIM KILLEBREW]
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