The debate between those comfortable with the current progressive system of taxation and those pushing for a fair and equitable flat tax is nothing new. Unfortunately the debate takes on an added fervor in light of our current economic dilemma and the furor over the extension of the Bush tax cuts. This crises needs to spur us to look closely at the existing tax laws and see them for what they are: tendentious tax laws that hurt rather than help the economy. Most of us are quick to object when we are being treated unfairly, but it is easy to turn your head the other way when a person or group you don’t identify with is the one being exploited.
Consider the following tax analogy carefully: You decide to get a job mowing laws for the summer to earn some extra income. At your first company meeting the boss says he has 100 jobs for the week and each employee will receive a $300 paycheck on Friday as long as they complete your assigned jobs. You look around and quickly count the ten other employees present. “Ten jobs each aren’t too bad” you reason. But then your boss says, “I have done a strength assessment on each of you and the distribution of jobs will be based on each of your relative brawn.”
If the employer assigned the jobs the same way we pay our taxes the weekly work would be apportioned as follows:
The first four employees are the weakest, so they will not have to mow any lawns rather they may just stop by and pick up their paychecks on Friday.
The fifth employee would be assigned 1 lawn.
The sixth would be assigned 3 lawns
The seventh would be assigned 7 lawns
The eighth would be assigned 12 lawns
The ninth would be assigned 18 lawns
And the tenth employee, who happens to be you, thanks to your daily sessions in the gym and overall healthy lifestyle, would be assigned 59 lawns.
Besides the obvious unfairness of the situation, how do you think this would affect your desire to continue to go to the gym every day? Rather than motivating you to stay in shape it would discourage it. You may even decide to eat a box of Twinkies every day to make sure you are not the strongest person when the boss allocates the jobs for the next week! Ridiculous? We are doing the same thing to our wealthiest Americans. It is a common misconception that the rich are greedy, spending their evenings rolling around in their wealth like Scrooge McDuck. The opposite is usually true. Compare Forbes list of the 400 richest people in America with Bloomberg’s list of top philanthropists and you will find an impressive correlation. Their millions in contributions are doing way more to change the world than the five dollars the average person throws in the Salvation Army bucket at Christmas time.
Warren Buffet and Bill Gates started a campaign called the Giving Pledge. They asked fellow billionaires to give away 50 percent of their wealth to charity. Several have agreed. Besides the amount they donate, the money they give is also purposed. Most wealthy people got that way by knowing where every dollar is spent and managing their money and their companies in a way that generates the greatest possible revenue. The richest people in our country are also some of our greatest innovators. They not only create new jobs, they create entirely new fields. Think of the computer field and all the people it provides jobs for? The more money in their pocket the more they are able to invest in our economy, create industries and jobs, and fund organizations that are improving our world and providing a better life and future for people across the globe.
Let’s contrast that with the way the government manages their money. Put that same amount of money in the governments hands and they will most likely waste it, misappropriate it or possibly even lose it. The GAO reports approximately $350 billion in waste and fraud every year. In addition obsolescence, duplication, program overlap, lack of accountability, and plain old financial mismanagement wastes billions more.
If you want a clear understanding of how the government handles money give $500 to your 16 year old and hand them the keys to the car for the day. Upon their return the gas tank will be empty. They will have no money left and a very foggy recollection of where any of it went. All they will have to show for it is a bag with a pair of $85 dollar designer jeans and a $40 dollar t-shirt, as well as several empty cups of $4 frappachinos littering the floor of your car.
The flat tax is fair to everybody. There are no loopholes, only a standard deduction based on family size. Each person simply fills out a simple postcard with their labor income minus their allowance based on family size. The IRS then gets a flat percentage of the remaining amount. That’s it. What are the benefits? A flat tax will speed up economic growth, create wealth, improve our global competiveness and it is blessedly simple. Check out http://www.freedomworks.org/issues/flat-tax to learn more about the flat tax and then make your decision. What will it be? Are you going to leave the $500 in Warren Buffet’s pocket or would you rather tuck it in the pocket of you teenager’s designer jeans? It is not a difficult choice. Besides, I bet Warren Buffet would fill up your car before he returned it….he might even take it through the car wash.
Other articles in this issue:
- Churn! Churn! Churn!
- Why Worry About High Blood Pressure?
- Why Monetizing Debt Leads To Higher Precious Metals Prices