Is taxation fair? Not bloody likely.

This is something I found and I really thank Idontknowwhy for it.

How I Converted My Republican Co Worker on Tax Policy

by Idontknowwhy

In a typical water fountain discussion my conservative republican co worker raised the issue of his 2014 taxes and how unfair our tax system is when he has to pay 28% to the feds on his six figure income while so many people paid nothing.  I agreed with him that our taxes were unfair and said it was much worse then he realized.  As he knows me as a “liberal” my instant agreement took him by surprise and led him to ask how it was worse.

Rather than answer directly I asked him several questions.  (The numbers here are representative but not actual).  The conversation went like this:

What’s your annual income?  $100K.  What are your expenses, you know mortgage, clothes, food, transportation, kids college savings, health insurance, retirement, rainy day savings if any, and other necessities?  After some thought he estimated around $50K.

What about other expenses like your annual vacation, kids sports, music lessons, occasional dining out, movies, bowling, cable TV, phones etc?  Again after a little thought he said around $10K.

Do you think you live a meager, dignified or extravagant lifestyle?  Dignified, definitely not extravagant.  Do you agree people who work for a living deserve to live in dignity?   Of course.
Ok, so for you to live in dignity it costs you around $60K a year out of your $100K salary leaving about $40K net income after expenses right?  Yes.

So you said your fed taxes are 28% or $28K right?  Yea.  Property taxes?  $8K.  State,  local & sales taxes?  $4K.

So that’s how your income goes each year, $60K to live in dignity the other $40K in taxes, that’s actually 40% you’re paying in taxes isn’t it?  Yea, thanks for making it worse than I thought it was.

Your net income after the cost of living in dignity is $40K and all of that goes to taxes, sucks doesn’t it?  So in reality you are paying 100% of your net income in taxes aren’t you?  You can afford to get by with dignity but after that the government takes everything don’t they?  F-yea!

Now think about a guy who makes a million, the cost of living with dignity costs him the same $60K, or 6%, and say he pays 39.5% in taxes he gets to keep 54% ($540,000) of his post cost of living net income while you get to keep nothing.  The millionaire pays about a 40% tax rate while you pay 100% after accounting for the cost of living.

A puzzled look of comprehension mixed with what looks like fear of losing his religion appears on his face as he begins to see where I am going with this.

No time to let up now……

The corporation and it’s shareholders don’t  pay taxes on their gross income like you do, just post cost of business (living) expenses.  Is it right you pay taxes on your gross income while they only pay on the net income?  If a company makes $10 million in gross income and pays 35% on $1 million net profit it paid 35% on it’s profit while you paid 100%.  The corporation paid just 3 ½% of it’s gross income while you paid 40% of your gross income.  Blank stare…

The kid born with the silver spoon stock portfolio who doesn’t earn any income from working for
a living only pays 28% tax on his capital gains profit on his multi-million annual income and the billionaire hedge fund manager only pays 15% tax on his carried interest profit of $100 million  while you pay 40% on your total income and 100% on your $40K post cost of living income.

The look of being screwed over is now his…

I ask – you think you got it bad?  How about your neighbor who only makes $80K?  If his taxes are like yours, basically 40% of his gross or $32K.  So from his $80K he’s left with $48K to live on.  If living with dignity costs $60K and we only leave him with $48K to live on aren’t we taking his dignity?  How would you feel if you were him.?  Your neighbor’s post cost of living income is just $20K and he is being taxed $32K…  over 150% tax rate and we take away his dignity while we are at it.   No vacation, no diners out, no movies, no niceties, no dignity – he also has to decide to cut retirement savings or the kids college funds or both.

Is that empathy I see on his face now???

While he’s actually listening I ask.

Do we tax wealth in the U.S.A.?  No.  We don’t?  No.  What is your biggest asset?  My house.  Besides your house your only family assets are cars which depreciate away over time and retirement and college savings that will be spent in due course?  Yea.  So your entire family wealth is really your house isn’t it?  Yea.  How much is it worth?  $200,000.  Ok, so your $200,000 wealth is property taxed @ $8K?  Yea.  A 4% tax on your wealth?  I guess so.

So a guy has a $Billion in total wealth including a $10 million house also  pays 4% property taxes on his house or $400.000 in total wealth taxes, .04% of his $billion Vs the 4% of your $200K you pay.

Nodding  agreement, silence and contemplative thought, time to walk away.

To actually have a reasoned conversation with this individual, who often falls back on sound bites and ad hominem attacks, was satisfying.  To see the look on his face as he realized he’s been hoodwinked – priceless 🙂

To quickly run the numbers:

On the post cost of living net income the Billionaire hedge fund manager pays 15% on his “carried interest”,  the unemployed millionaire trust fund kid pays 28% on his “capital gains” income, the guy who earns a million dollar salary for actual work pays 40%,  you who make $100K pay 100% and the poor slob that makes $80k pays 150% which he can’t afford so we take his dignity.  Corporations may pay 3.5% on their gross income while you pay 40% on yours.  You pay a 4% wealth tax while the Billionaire pays a .04% wealth tax.

 

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This entry was posted in Being a decent human being, Laws and regulations, Politics, Wealth disparity. Bookmark the permalink.

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