More Myths About Taxes

A Previous comment was not about income equality but about income disparity. To begin with, no one can dispute the fact that a small percentage of taxpayers with extremely large incomes “game” the system to avoid paying tax. While I will agree that no one like to pay tax, most are more upset when a few people are able to take advantage of their influence to avoid paying taxes. The results of this should be obvious to everyone. History will show that every time there was disparities to the extent of those of today there were economic declines, recessions, or even depressions. The very wealthy do not have the numbers necessary to create amount of demand for products and services needed force employers to maintain high employment levels. Going back to the days of Henry Ford, he was wise enough to realize the growth of Ford Motor Company was dependent upon the ability of his workers and others with income similar to his workers to buy the cars made in his factories. As we have seen, when there are fewer people able to buy products and/or services there are fewer jobs. This cycle will continue in decline until such time as the number of wage earners and the level of their wages increase and therefore the amount of demand increases. One problem today is as a result of income disparity, over 10% of the country’s GDP now goes to the top 2% of earners. This is a change from when the top 2% used to receive 3% of the country’s GDP. This results in a 7% of GDP decline in funds available to pay the 98% who are not the top earners. That is 7% less of GDP that will be spent by the top spenders and 7% less of GDP that could create the necessary demand to reverse the unemployment. There is a finite amount of funds available for compensation. If executive compensation consumes an excessive share of those available funds less is left for everyone else. For every one million dollars paid to an executive, a company could, instead, create forty twenty-five thousand a year jobs. The IRS have indicated that there are approximately three hundred thousand executives who were paid in excess of one million dollars. If those three hundred thousand were held to a maximum of one million dollars each, there could be twelve million twenty-five thousand additional jobs. That would mean twelve million more households able to afford to buy food, clothes, cars, pay mortgages, pay taxes, and otherwise contribute to the economy instead of being dependent upon government for their survival and taking taxpayer money out of the economy. The higher unemployment places greater demand on government services that adds to the need for more taxes to provide the higher demand for government services. The higher unemployment increases the numbers of those who do not pay taxes because they do not have income. If one is upset that 47% do not pay taxes keep in mind that taxpayers without income do not pay taxes. Also keep in mind that many more people are retired, living on limited income from IRAs, Social Security, and other sources which are tax exempt. Needless to say, the income of the 47% that is not taxed is less than the income of the 53% that also escapes taxes. Most of the untaxed 47% do not have sufficient income over the basic allowable deductions. While all of the taxed 53% do have income over their deductions, their deductions are always in excess of the basic deductions so the taxed 53% avoid paying taxes on a far greater amount of income than the 47% about whom they misspeak. Finally, there is an argument that capital gains and dividend income is taxed twice. The reality is that all income is taxed a number of times, every time it changes hands. The issue is whether income is taxed the same, and if not, why not. So-called capital gains are usually the results of a trade of equities from one owner to another. Why should that gain be taxed differently than the trade of one product, say an automobile, to another or the trade of one person’s labor to another person needing that labor? Income is income!