Wednesday, November 12, 2008
How progressive taxes work...
Came across a paraphrase of the following on another networking site I regularly visit. Snope's can't verify attribution so I'll leave that part off.
Still, the analogy is sound and clearly explains the fallacy of a progressive tax system and especially one geared towards wealth envy, such as ours.
How Taxes Work . . .
This is a VERY simple way to understand the tax laws. Read on — it does make you think!!
Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men — the poorest — would pay nothing; the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man — the richest — would pay $59.
That's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement — until one day, the owner threw them a curve (in tax language a tax cut).
"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80.00.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six — the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?"
The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59. Each of the six was better off than before. And the first four continued to eat for free.
But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man who pointed to the tenth. "But he got $7!"
"Yeah, that's right," exclaimed the fifth man, "I only saved a dollar, too . . . It's unfair that he got seven times more than me!".
"That's true!" shouted the seventh man, "why should he get $7 back when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!
And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.
Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!
Sadly, in America today, according to a recent Gallup poll 46% of those polled would prefer to be the first 4 or 5 guys. They approve taking from the others, only they don't want it done voluntarily, they want it under the threat of government coercion.
That says much about the state of their self motivation and one might even say moral depravity. What happens when government gets into the business of wealth redistribution? Well, I'm talking more than we currently have and more like has been proposed by the incoming powers of our government, both legislative and executive branches.
In the mid '90's I was in Hungary, a nation that lived under Communism. In 1989 she came out from under that heavy handed rule and while the Budapest was thriving, outside the city the people still labored in a state of despair.
Old world horse carts still traveled the roads as people moved themselves and the fruits of their backbreaking labor in their gardens and fields. Once the socialist economic principles of Communism took hold, breaking their grasp on those weaker, poorer victims of it's failed policies was near impossible.
This is what some in power want for our nation. I have no doubt they don't wish the wearying daily struggle, but we have already seen the results of unintended consequences of well intended government intervention gone wrong.
The Community Reinvestment Act of 1977, at the heart of our current financial crisis. I've written much about that. The 2005 Energy Bill, expanded in 2007, mandating ethanol production. That short-sighted, well intended legislation resulted in dramatically higher grain prices and ultimately grocery prices, with little to show in energy production. There are currently calls to freeze its mandates at the current levels.
Social Security, a well intended product of the Roosevelt era, has had progressively steeper demands placed on it, disability benefits, survivors benefits, constantly increasing the meager monthly payments. All the while the population of those drawing SS checks grows as our population lives longer and the pool of those worker paying in continues to decrease as the birth rate declines.
I have two nephews, a niece, two step sons and two grandchildren who will be footing the bill for my Social Security payments, assuming it is still in force 12 years from now. Currently the estimated benefit for myself and my wife is $2489 in today's dollars. In 2020, at the current rate of growth, its estimated that for every recipient there will be 2.4 workers, and the ratio gets smaller every year. (More info)
That means, on average, out of each of their monthly paychecks, about $520 will be taken off the top to pay the social security for me, my wife and every other recipient. That, my friends, is wealth redistribution.
But for those currently coming into power in Washington, its a non-issue. The wealth redistribution they are pushing takes this much further and in the process the Ponzi scheme known as Social Security, Medicare, National Healthcare, Welfare, Child Credit ad nausem will end up breaking the back of the American economy.
Good intentions? Certainly, though some more skeptical will argue its merely buying the vote of the lower economic classes. But good intentions do not make good policy.
We've already seen in microcosm the results of human nature in the financial bailout. Companies are repositioning themselves to become eligible when they weren't before. Companies not related to the financial crisis are demanding a bailout for their sectors. Citizens are concocting schemes, dreaming up ways they think they should get a piece of this action.
What everyone forgets is that it isn't government who foots the bill. Government doesn't create wealth, it only takes it. Government doesn't produce a salable product. The current model seems to be redistribution.
According to the Tax Foundation analysis of 2006 tax data, if you earned $153,542 you were in the top 5% of income earners and paid 60% if income taxes. If you earned a modest $64,702 you were in the top 25% of income earners and one of the wealthy. You and your group paid 86.27% of all income taxes.
What does this tell us? For starters, the idea that the wealthy don't pay income taxes is a myth. Perpetuated by a political class with an agenda of riding wealth envy to power. Secondly, you could have confiscated the total incomes of the top 5%, those making %153,542 in 2006 ($2.43 trillion), and the total going to the government would come close to to paying the $2.7 trillion budget for that year, but only once.
The only answer to this is to reduce spending. In 2006 the federal government spent $248 billion just on interest on the national debt, that is more than twice the $117 billion spent on the Iraq war that year and $22 billion more than the federal deficit that year.
Confiscating wealth, nor redistribution of wealth, is the answer. A fair review of the data is convincing. The only answer for the fiscal dilemma our government is in, less government.
The only problem with this is the current and the incoming leadership on both sides of the aisle seem committed to more government, more intrusion into the private sector, more spending, more and increased entitlements, more deficits, and a higher national debt.
I've oft repeated this quote from Alexis de Tocqueville, "The American Republic will endure, until politicians realize they can bribe the people with their own money."
Our legislators discovered this long ago, the people are swallowing this hook into their collective gut and it will eventually rip us all inside out.
I want more for my nephews, niece, step sons and grandchildren. They deserve more, yet sadly, I'm afraid their generation may have fallen victim to the elixir of wealth envy and may well be bringing to power those who will orchestrate their own fiscal demise.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: federal budget deficit, national debt, politics, Social Security, socialism, taxes, wealth envy
Sunday, October 12, 2008
Sophie Scholl: The Final Days
I just finished watching a DVD I heard about on Steve Brown Etc. several months ago and had put on my list of must see videos. It is Sophie Scholl: The Final Days.
If you have never heard of this story, or haven’t yet taken time to view it, you must do so. It is a lesson, first in the strength of character of those who truly believe in their cause and secondly, a treatise on the dangers of a government that believes it alone has the right to determine what ideas are proper and must destroy those whose ideas oppose it.
In a nation where government becomes so powerful that it invades the private economy, nationalizes industry, socializes its education and humanitarian sectors, that power is an elixir to the population and a source of control for those in power. The people become either emasculated through fear or gratitude, or a few rise and speak out against the iron claw of those in power.
Sophie Scholl, her brother Hans and a group of others known as the White Rose chose the latter. When they saw, either with their own eyes or through reports from others, the abuse of a government self-described as Nationalist Socialism, they knew it was their duty to speak out, even in the face of possible death.
That death came at the end of a kangaroo court where the laws and constitution of Germany were suspended for the sake of expediently dispatching those who opposed Hitler’s Third Reich.
The lessons for today are many. Throughout the film, which was created after interviews with many who were witness to the events as well as uncovered court records, Sophie, Hans and Christopher Probst were interrogated and harangued for defying the state in spite of their state provided educations.
How could they rebel against Germany after all Germany had done for them? With the continued intrusion of federalism in the United States into the educational system, the attempts to criminalize home schooling in California, and the control of the public (read “government”) education system by such liberal organizations as the National Education Association which allies itself with the Democrat party, our children may soon be asked the same question.
The education system envisioned by “Obama and Biden will create Early Learning Challenge Grants to promote state "zero to five" efforts and help states move toward voluntary, universal pre-school.” It was Kruschev who in 1960 declared before the United Nations General Assembly ”America will fall without a shot being fired. It will fall from within.”
He was referring to the Communization of America, extolling the bullet points of the Communist Manifesto. What we are interested in here specifically is plank five, “Free education for all children in public schools.” An Obama nation would provide “free” education to all children, starting at birth; to indoctrinate them in the glories of a government controlled society.
It’s not surprising that Obama would promote such a scheme in that his college years included a plethora of socialist connections that have continued in one form or another to today. Black Liberation Theology, espoused by Rev. Jeremiah Wright whose Trinity United Church of Christ Obama attended for years, is rooted in Marxist philosophy.
But getting back to Sophie Scholl, it is important, even more so as we approach this coming election, that we remind ourselves of the dangers of empowering one who lifts himself up as the answer to all societal needs and will administer those remedies via the power of the state.
When we assign to the state our right of self-determination, we assign to the state our freedom as well. Freedom is not easy; moreover, it is difficult to determine ones course for ones life and family. When government assigns to the people certain entitlements, with each entitlement comes a loss of freedom.
Incrementally since Roosevelt’s New Deal we are assigning our freedom and liberty to an increasingly socialist government. With Social Security, the expansion of government education, the welfare system, Medicare and Medicaid, now with the advent of corporate welfare in the recent bailout of Wall Street and the intrusion of government mandating private industry rewrite legal contracts and looming on the horizon the specter of national healthcare, the American electorate is blindly and ignorantly reducing themselves to wards of the state.
Alexis de Tocqueville, who lived from 1805-1859 stated, “The American Republic will endure, until politicians realize they can bribe the people with their own money.”
Sophie Scholl, as she headed to the guillotine said in part, "How can we expect righteousness to prevail when there is hardly anyone willing to give himself up individually to a righteous cause.”
de Tocqueville’s prediction is now coming true in America. The question is, is there anyone left who is willing to ascribe to Sophie Scholl’s admonition? I pray there is yet a remnant who will rise up stand. If not, it may soon be illegal to publish a dissenting article such as this.
Other sources:
Accuracy in Media - Obama’s Communist Mentor
Accuracy in Media - Obama’s International Socialist Connections
The New York Times - The Mask Slips
The Conservative Voice - Barack Obama Lauded by Marxists
American Thinker - Another Obama Marxist
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: abuse of power, Alexis de Tocqueville, democracy, education, election, Medicaid, Medicare, Nazi Germany, Obama, politics, Social Security, socialism, Sophie Scholl