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By Jim Killebrew

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[October 06, 2014]  The pivotal strategy of the President is trying to ramp up the talking points about the economy to deflect the discussion from world events and all the scandals. He is saying the economy has recovered to levels experienced in the 1990s. It is interesting that people around the country seemingly are not experiencing that same economic upturn the President is talking about. They seem to be experiencing the same hard times they have experienced during the past six years of his administration. They see it when they buy groceries, buy gasoline, pay taxes, make any purchase at all, receive services, or simply try to travel on a vacation. With his propensity to blame anyone but himself and his policies, his Administration has talked a lot today about "economic inequality."

Hillary Clinton made a couple of gaffs a few months ago 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.

The truth is, 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% gains 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. While the President thinks he is staking a claim to an improved economy, he needs to reconsider his boasting since the middle class citizen is being squeezed from existence in America as a direct result of his polities on higher taxes, lack of tax reform, extreme debt and stifling regulations on business.

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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. But those are the very people the plethora of this Administration's regulations target the most.

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. This creates a need for the politician to borrow more money that results in a strangling-hold debt at both the state and national level. Let me give an example to illustrate the point.

A person gets a job at a local business, like a grocery store. The owner of that store took all the risks of opening a store. 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 so he could provide those services and by doing so he hired many others to help keep his store stocked, and complete the other jobs to help him grow his business.

Was he richer than any of the workers he hired? Of course he was; did he risk much more than any of them did? Of course he did. But he shared his wealth by giving them and many others a job to make a living for their families. With the money each of those employees were paid, each one paid their fair share of taxes that would not have been paid without his having first given them the job with the ability to make their own salaries. 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 rolls where 47 percent of the people receive goods and services at the expense of the taxpayer?

Perhaps the President should reconsider his pivoting toward the economy as a method to win the mid-term elections. Perhaps it would be better if he went back to Obamacare as the premier accomplishment of his Presidency; oh, wait a minute....


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