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Why our current tax system is so unfair

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Posted: Tuesday, April 2, 2013 12:00 am

We hear it all the time: "That's not fair!" It is the secular-progressive war cry. The president seems to use it in every speech. So is this just a clever, politically correct marketing slogan, or do they have a point?

For starters, what is the definition of the word "fair?" Dictionaries define "fair" as "equitable and just; free from favoritism or self-interest, bias or deception."

Lately, President Obama speaks exhaustively of "fairness," or lack thereof, in the tax rate paid by the rich. His argument is that the rich can "afford" to pay more, so they should. He even said that he, a multimillionaire, should pay more. In any case, does the president's argument hold-up against the definition of fairness and the facts?

According to the National Taxpayers Union, people earning $112,000 and up paid an accumulative total of 70 percent of all federal income taxes in 2009. Those making $32,000 to $66,000 paid 27 percent, and the bottom 50 percent paid 2.3 percent. Obviously, the "rich" (making $112,000/year or more) are paying the lion's share of the tax bill at 70 percent. But why is the bottom 50 percent, half the country, only paying 2.3 percent?

According to the Tax Policy Center, 46.4 percent paid no federal income tax at all in 2011. However, the Center on Budget and Policy Priorities believes that the number of non-taxpaying Americans is exaggerated because of the economic downturn, and that the 2007 number of 40 percent is more appropriate.

Vice President Biden defined taxation fairness, during a 2012 speech to the NAACP, as, "Where everyone, and I mean everyone, has skin in the game and no one gets played for a sucker." The data says that at least 40 percent of the population does not pay any taxes and the other 60 percent is being played as "suckers" per Mr. Biden's definition.

The president is partially correct; the system is not fair because a high percentage of folks have no "skin in the game" and the "rich" are paying 70 percent of the tax bill.

Moreover, we have a progressive tax system that burdens the most successful people with the highest tax rates. Currently, the 2013 marginal tax rate ranges from 10 percent to 39.6 percent. Is it "fair" to tax one group at 10 percent and another at 40?

When one factors in the loopholes written into 72,000 pages of tax code in 2010 (up from 17,000 in 2006), the idea of fairness becomes preposterous.

Apparently, the Obama administration must be referring to "political fairness" and the agenda of income redistribution instead of "everyday fairness."

So, is there an appropriate replacement tax system that would be "fair" and run without the political agenda element?

Two good replacement ideas are the "flat tax" and the "consumption tax." The flat tax charges everyone the same tax rate. If, for example, the tax rates were 10 percent, then someone making $100,000 would pay $10,000, $25,000 would pay $2,500, etc. If no exemptions are allowed for anyone (especially politicians), this is a very fair system.

At this point, secular-progressives are saying the rich are not paying enough. If so, the consumption tax would be more to their liking. This tax is only paid when an item or service is purchased. Therefore, logically, the rich can afford to buy more, so they would pay more. Again, without exemptions, this is a very fair system of taxation.

With either system, the federal government could reduce or virtually eliminate the IRS, reducing their overhead by at least $10 billion per year.

On the other hand, all of us would stop paying for tax accountants and attorneys and finally have a fair tax system.

Find out more by attending the Lodi Tea Party general meeting, the fourth Monday of each month at 6:30 p.m. in the United Congregational Christian Church, 701 S Hutchins St, Lodi.

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Welcome to the discussion.

24 comments:

  • Mike Adams posted at 8:32 am on Sun, Apr 7, 2013.

    Mike Adams Posts: 1314

    Eric: Really, what else have they got? America chose against conservatism in November. Their bad mouthing serves on purpose. It doesn't attract voters to their point of view (and that's what they really need, its just not going to happen). If you read their comments, they consist almost totally of a stream of names they think are offensive. Who cares? It just shows their true colors. The GOP is dying and everyone with any brains knows it. The members of the GOP who know it are trying, but the rank and file is so full of hate they don't listen.

    I think it's long over due for the GOP to fade into memory.

     
  • Jeff Tillett posted at 6:55 am on Sat, Apr 6, 2013.

    Jeff Tillett Posts: 539

    What divisive rhetoric do you see on this comment stream?

     
  • Brian Dockter posted at 7:56 pm on Fri, Apr 5, 2013.

    Brian Dockter Posts: 2813

    Really is hysterical that Joanne Bobin and her partners in crime, have been attempting to create the illusion that " LIberals/Progressives" are just "trying to get along" with their "Conservative" adversaries while they continue to plow the adversarial field with divisive rhetoric.

     
  • Brian Dockter posted at 7:52 pm on Fri, Apr 5, 2013.

    Brian Dockter Posts: 2813

    Hmm,

    Joanne Bobin is a Liberal who continually claims she is NON-partisan, but cannot for the life of her drop the derogatory descriptives.

     
  • Jeff Tillett posted at 9:03 am on Wed, Apr 3, 2013.

    Jeff Tillett Posts: 539

    [smile]

     
  • Eric Barrow posted at 8:46 am on Wed, Apr 3, 2013.

    Eric Barrow Posts: 1442

    Secular.. from Latin saecularis meaning "worldly" or "temporal" is the state of being separate from religion, or not being exclusively allied or against any particular religion.

    Progressive ..favoring or advocating progress, change, improvement, or reform, as opposed to wishing to maintain things as they are, especially in political matters

    Why is it that conservatives keep try to call me names and I don’t mind? They try to turn liberal into a dirty word and I wear it like a badge. They label healthcare reform Obamacare I love it being called Obamacare in the future they will never be any doubt who finally accomplished health care reform. Then calling me progressive (no problem there either) wasn’t enough so they try secular progressive, sounds pretty accurate to me I’ll take it thanks.

     
  • Kevin Paglia posted at 7:39 pm on Tue, Apr 2, 2013.

    Kevin Paglia Posts: 1904

    Actually, it was a 20 mile bike ride, 3 hours of running errands after that, a few minutes to have lunch and catch up with friends via FB ( Run a page so I have to keep tabs on it), Then getting the kids from school, and cooking for 15 people running into Stockton and back again, and just sat down from doing dishes of said meal.

    Translation, It's been a long day. Tomorrow is about the same only with baseball practice thrown in and running kids to music lessons.

     
  • Walter Chang posted at 6:30 pm on Tue, Apr 2, 2013.

    Walt Posts: 1066

    "Been a long day."

    Translation: You got me!


    [lol]

     
  • Kevin Paglia posted at 6:12 pm on Tue, Apr 2, 2013.

    Kevin Paglia Posts: 1904

    Thank you Mr. Tillett. I'll have to look over the report when I am less exhausted. Been a long day.

     
  • Joanne Bobin posted at 6:04 pm on Tue, Apr 2, 2013.

    Joanne Bobin Posts: 4485

    Thank you for your post, Mr. Chang. My thought exactly when I started reading this letter.

    This is the TEA Partier who continually claims that he/they are NON-partisan, but cannot for the life of them drop the derogatory descriptives.

    Thanks to Mr. Tillet for contributing factual information that does not obfuscate the tax issues.

    Really is hysterical that Mr. Miller's partner in crime, Ms. Parigoris, has been attempting to create the illusion that TEA Partier's are just "trying to get along" with their "liberal/progressive" adversaries while Mr. Miller continues to plow the adversarial field with his divisive "guest column."

     
  • Jeff Tillett posted at 4:45 pm on Tue, Apr 2, 2013.

    Jeff Tillett Posts: 539

    notice that food and housing are regressive in nature.

     
  • Jeff Tillett posted at 4:43 pm on Tue, Apr 2, 2013.

    Jeff Tillett Posts: 539

    http://www.bls.gov/news.release/cesmy.nr0.htm

    Table B. Shares of average expenditures on selected major components by income
    quintiles, July 2011 through June 2012
    ___________________________________________________________
    Lowest Second Third Fourth Highest
    Item 20 20 20 20 20
    percent percent percent percent percent
    -------------------------------------------------------------------------------
    Food 15.8 14.2 13.2 13.4 11.4
    Housing 40.0 38.0 35.5 32.4 30.2
    Transportation 14.6 16.3 17.9 18.1 16.2
    Health care 7.3 8.2 8.0 7.0 5.7
    Personal insurance 2.1 5.3 8.3 1 1.1 16.0
    & pensions
    ___________________________________________________________

     
  • Walter Chang posted at 4:37 pm on Tue, Apr 2, 2013.

    Walt Posts: 1066


    "Secular Progressive"

    "A term coined by FoxNews' Bill O'Reilly to describe liberals in a negative way as a means to perpetuate the conservative myth that all liberals are evil and want to destroy America as we know it."

     
  • Walter Chang posted at 4:37 pm on Tue, Apr 2, 2013.

    Walt Posts: 1066

    Ed's letter suggest that he wants to discuss tax laws.

    Wrong.

    He just wants to stir the pot and let everyone know that he's a Bill O'Reilly fan.

    Starting out with name calling...

    He then regurgitates the same old tax nonsense about the poor that was heard throughout the republican primaries.

    Shy on facts and references...

    But emotional soothing to frustrated Archconservative/Retrogressive crowd.

    An election winning strategy? No.

    Filling seats is the goal.

    So folks, go to Ed's meeting and have fun. Feel free to vent to the group, they'll understand!!


    [smile]

     
  • Kevin Paglia posted at 3:37 pm on Tue, Apr 2, 2013.

    Kevin Paglia Posts: 1904

    That was an interesting read. Thank you for sharing.

    I think a more helpful study, which will never be done without bias invalidating results, would be HOW do the different tax levels SPEND their money. From taxes to purchases and investments. One of the conclusions from this study would be how many JOBS each wealth bracket supports.

     
  • Eric Barrow posted at 1:55 pm on Tue, Apr 2, 2013.

    Eric Barrow Posts: 1442

    I'm not really "for" the consumption tax I understand the logic and have in the past supported such an idea but we would have to look closely to ensure necessities are not included otherwise it becomes a regressive tax. Really my point is that the households in this country paying tax rates you consider unfair are doing very well and continue to improve. when you complain that they are paying the majority of taxes you paint them as the victim and they are anything but that. You also imply that 40% or so are somehow suckering the 60% doing well enough to pay taxes. I guess if the top tax bracket earners are suckers they can live with that.

     
  • Jeff Tillett posted at 12:55 pm on Tue, Apr 2, 2013.

    Jeff Tillett Posts: 539

    Ask and ye shall receive. This study came out yesterday.
    http://ctj.org/ctjreports/2013/04/who_pays_taxes_in_america_in_2013.php

    "As the table to the right illustrates, America’s tax system is just barely progressive even after the fiscal cliff deal’s effects. Claims that the rich pay a disproportionate share of taxes often focus only on the federal personal income tax and ignore the other taxes that people pay, like federal payroll taxes, federal excise taxes, and state and local taxes. Many of these other taxes are regres­sive, meaning they take a larger share of income from poor and middle-income families than they take from the rich."

    Make sure you look at the average income of the lowest 20%. And you want them to pay more than their current 18.8% of that?

     
  • Jeff Tillett posted at 11:52 am on Tue, Apr 2, 2013.

    Jeff Tillett Posts: 539

    The problem is that you are looking at one tax: the federal income tax, and using that as a basis to claim, essentially, that not enough people pay enough in taxes. The problem is that that one tax only comprises 41% of all federal receipts. And so while it may be true that only 46.4% paid no federal income tax at all, the majority of those 46.4% paid the majority of the federal payroll taxes, that comprise 40% of federal receipts.
    http://en.wikipedia.org/wiki/File:Federal_Receipts_by_Source,_2010.jpg

    So if you are going to discuss how much is fair for one group or another to pay in taxes, you should probably talk about more than just that one tax. The remaining taxes burden the less affluent disproportionately more than the more affluent.

     
  • Jeff Tillett posted at 11:41 am on Tue, Apr 2, 2013.

    Jeff Tillett Posts: 539

    No, because for those that barely make enough to live, they consume their entire income. But for those on the other end, they don't consume... they invest. "I shouldn't have to pay taxes on my money, because I have so much I don't need to spend it."

    A progressive federal income tax, with a top marginal bracket of around 90% for an inflation adjusted income of over $2mil (nominally $200k) accompanied the greatest economic expansion and greatest growth of the middle class in the history of the US, if not the world.

    The real problem with the conservative orthodoxy that taxes are too high is based on the premise of the Laffer Curve. Laffer said that if you reduce taxes, you can increase revenue. And there was some truth to that. The problem is, we are on the left side of the Laffer curve now, not the right side of the inverted parabola. http://en.wikipedia.org/wiki/Laffer_curve#Reaganomics

     
  • Quan Pham posted at 11:41 am on Tue, Apr 2, 2013.

    qpham63 Posts: 31

    We should look at tax revenue that is needed for operating our government and the total income then calculate a percentate and everyone, no matter how much income you have pay that percentage.

    It is fair as the ones with more income automatically pays more.

    Our problem arise from voters without "skin in the game" vote on spending they don't have to pay for.

    It is much easier to be generous with other peoples money.

     
  • Ed Miller posted at 10:59 am on Tue, Apr 2, 2013.

    Ed946 Posts: 70

    Mr. Tillett,

    Not sure I understand your points. Yes, there are other taxes that make the situation even worse for all. Some of those taxes are the same for everyone and therefore "fair" by the word's definition. The State tax is as unfair as the Federal tax by the same reasoning I used in the column. But, the political rhetoric is about the Federal tax.

    Those who pay nothing are in the unfair group because of the definition of the word "fair" and Vice President Biden's definition of taxation fairness.

     
  • Jeff Tillett posted at 10:36 am on Tue, Apr 2, 2013.

    Jeff Tillett Posts: 539

    Not to mention that we are only talking about federal income tax. Ed doesn't include FICA, medicare, state, or especially sales tax. When the other taxes are factored in, the comprehensive tax structure is absolutely regressive, rather than progressive. That is that those earning the least pay a disproportionately larger portion of their income towards taxes than those that earn the most.

    It is funny to listen to conservatives complain that we pay too much in taxes, that we should pay less. But when that "less" becomes zero for those that earn nothing, or next to nothing, they complain as well.

     
  • Ed Miller posted at 10:22 am on Tue, Apr 2, 2013.

    Ed946 Posts: 70

    Mr. Barrow,
    So you would be for the "consumption tax" which is based on what you buy?

     
  • Eric Barrow posted at 8:51 am on Tue, Apr 2, 2013.

    Eric Barrow Posts: 1442

    The discussion on inequalities in the tax system is part of a larger discussion on wealth and income inequality. We cannot focus only on what is taken from people without considering what is left. The wealthiest 20% hold 90% of the wealth in this country and there income has increased much faster than the other 80% over the last 40 years. When we start discussing regressive tax policies this should be part of the conversation besides the wealth of the 46% Ed speaks of is practically immeasurable in comparison to the total wealth of this country. Why should people be taxed for nothing? They have zero wealth and they are taxed appropriately.

     

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