Saturday, December 6, 2008

How Income Tax Hurts

How Income Tax Hurts
By William L. Pressgrove
December 5, 2008
As I work with my students to help them conceptualize the significance of the ideology the Founding Fathers used as they put together the Constitution I try to cover several topics. First, I want my students to realize the Founding Fathers wanted a Constitution that would provide the power and influence necessary for a central government to handle the affairs of state when dealing in areas such as international affairs, interstate commerce, national defense, the general welfare, and monetary issues. At the same time they wanted to allow the States to have the maximum degree of allowance to manage the affairs of state within their own borders. Second, I want them know that there were differences of opinion on just how strong that government should be. Some wanted it to have a very narrow interpretation with very literal meaning while others wanted a very broad interpretation with vague and malleable meaning so as to adapt it to varying circumstances.

It appears that human nature has played a significant role in just how narrow or broad the Constitution has been interpreted mainly through the different ideologies of the political parties. Depending on which major party was in power, legislation would favor the philosophy of that party. However, politics and statesmanship are not necessarily embodied in the same individual therefore, philosophy often takes a back seat to expediency, compromise, and out and out favoritism much of the time.

Sometimes a political ploy will backfire because the very smart, but sometimes not too wise politicians try to use a strategy that is the exact opposite of what they believe to put an issue before the people thinking that in no way will they embrace such an ideology. Such is the history of the Sixteenth Amendment. It was never supposed to be ratified and it was intended to put the issue of an “income tax” to rest by having the states reject it, but instead they ratified it and it changed the Constitution.

The Sixteenth Amendment was touted to be “fair” because it placed a larger portion of the burden of running the Federal Government onto the backs of the more wealthy members of society and to them that was fair. This paper is to show how that has in reality put enmity between the wealthy and the not so wealthy in this country. The rationale that will be used is the same fundamental logic used by the Founding Fathers when they put the Constitution together and attempted to set forth a plan of governance that would treat each citizen equally.

The Sixteenth Amendment the income tax was to be graduated so that the wealthy paid a larger percentage of their income to the government than the middle or lower classes had to pay. It is difficult to conceive of this as being “fair.” However, it has continued to be so ever since and at various times it has been used to garner votes from certain sectors of the populace to win elections. We have recently had an election where income tax played a major role. The masses were promised that their taxes would be reduced while those of the upper class were told that they would have to pay a larger portion of their income to support the government. How then, when the wealthy should be able to use their wealth to sway the election toward their point of view, could the election be given to those who would be the benefactors of that wealth instead? It is simple, politicians play the numbers game. When there are more people in the middle class and poorer class than there are in the upper class, the upper class would lose the election even if 100% of them voted against that politician and only a fraction (just one vote more than all the wealthy) of the middle and poor class would be needed to out-vote the upper class at the polls.

How can a situation like that ever be considered fair? Why, when they carry a major part of the burden to finance the government, dont the wealthy have more of a "say so" in what government does? They shouldn't because each voter should have just one vote. On the other hand, each person that votes should have equal responsibility for carrying the burden of financing the government. Only then can there be fairness. As it stands, the poor have no vested interest in how the country runs, except as recipients of some of the bounty government has taken from the upper class, because they don't have to pay for any of it. On the other hand the rich have a very strong vested interest because the country is running on the money they provide. However, the wealthy lack the power to influence government at the ballot box because of the sheer numbers of poor and middle class that are being marshaled to out vote them. In order to return fairness at the ballot box, all voters need to be participating equally in the expense of running the country. Equal power at the ballot box requires equal responsibility for paying government expenses. The only way to attain this kind of equality would be for each voter to be paying an equal percentage of their income as their share of the expenses of the government.

What would this accomplish? It would be the first time since the Sixteenth Amendment was ratified that the sovereign of this country, in its entirety, would have equality in their accountablity for paying the country’s bills. When there are no more “free riders” then all people would be more interested in what the revenue is being used for. Congressmen would be hard pressed to make a case of taking more from the rich and giving it to the poor to buy votes from the poor.

Emphasis would then be focused on how government spending is affecting future generations. When people begin to pay taxes they begin to realize that the National Debt is a tax on future generations and those who will have to pay that debt aren’t here to represent themselves and cry “foul, foul, taxation without representation” in the same manner that our Founding Fathers did when Great Britain was taxing them in the same manner.

One of the solutions as to how to raise the revenue needed, without having the Communistic "heavily graduated" income tax system we now have, is to do away with the Internal Revenue System and change the tax system to a national sales tax. This kind of a tax would hold each individual that earns money responsible for their fair share of the burden of government. An organization with a website that explains how this could be done fair and equitably is called fairtax.org. They have worked out every detail. They have even worked in a “prebate” system so income below the poverty line would be reimbursed for taxes paid thus removing an undue financial hardship from those living below the poverty line (however, if they buy on credit and exceed the poverty level for their size family, they would be paying tax just as everybody else has to). When I checked the difference in disposable income between what I am currently paying in income tax and the disposable income I would have with a 23% sales tax in place, I found the fair tax plan would increase my disposable income by 32%. If you check out Senate bill S-1025 which is this proposal, you might find that you are in the same boat.

2 comments:

Anonymous said...

I think I get it. I find your views interesting and intriguing. Can I give my family members your blog address? A few of them would be interested in this.
Love You, Stephanie Pressgrove

Anonymous said...

I am in the tax business and I am a conservative who feels that the wealthy pay their fair share already. But here are a couple of things to think about. One would be charitable giving. This would all but go away and non profits and churches would go away. Also if you put it all on a sales tax, which is based off of consumption then lots of people would stop spending. I understand how some income would increase but that doesn't mean everybody would spend it and the tax revenue would redue significantly.