Unfair Tax Policies That Lead To Wealth Redistribution

“Joe the plumber” stopped Senator Barack Obama on the campaign trail to challenge his two tiered tax plan.  Mr. Obama plans to let the tax breaks implemented by President George Bush expire at the end at their scheduled term for the upper five percent of the tax paying population.  The return to previous tax levels for the richest five percent has been referred to as a tax increase on the public and a means to redistribute wealth.

Mr. Obama’s opponents, Senator John McCain and the McCain supporters like “Joe the plumber”, who’s neither a Joe nor a plumber but rather a “Sam the tax cheat”, want to label Mr. Obama’s return to a more fiscally responsible government income policy as a redistribution of wealth from the rich who have done nothing but worked hard and worked honest to earn their exorbitant incomes to the people who were lazy and unethical and refused to put forth an honest effort to earn a good living.

For example, the guy at the top of one of those financial institutions that went belly up walked away with hundreds of millions of dollars that he earned perfectly honestly while the guy at the bottom who works in a support role down in the mailroom and earns little more than a pittance has to walk away with nothing.  This disparity is capitalism at its finest.

“Sam the tax cheat”, alias “Joe the plumber”, claimed to be a guy working a hard ten hours a days to earn enough money to buy a plumbing business but now he can’t because he didn’t want to be in a higher tax bracket that will tax him at a higher rate than someone who may not be as financially fortunate, like his real loser self.  People want to say that it is unfair for people who can afford to pay more at a higher tax rate be forced to do so.  By all means let’s be fair.

In order to be fair everybody should be paying the same exact tax rate.  Let’s just set a flat income tax of twenty percent across the board for everyone and every entity that earns an income.  For every dollar of income, everyone should pay twenty percent.  The loop holes that corporate entities and businesses get to discount their income should go out the window.  I know I don’t get to deduct my expenses and pay only on my net income.  It’s only fair that businesses be held to that same standard so we don’t have to worry about anyone getting more of a benefit from any tax policy.

This flat tax rate policy on gross income would treat “Joe the plumber” no differently than “Sam the tax cheat”.  Rich people will pay the same tax rate as poor people.  Got any capital gains?  Tax them at twenty percent.  Twenty percent of all gross income should be more than enough to pay for the social programs we value like the military, police and fire departments, education programs, social security, and our other corporate welfare programs, as well as the social programs that we need like universal healthcare and helping others become greater wage earners so we can add their earning potential to the pool of wealth.

We need to stop these programs that are designed to transfer wealth.  Too many people are getting rich, collecting the wealth of the country into a tiny focal point that benefits a few instead of using the wealth of the country to benefit as many of “we the people” as possible.  Based on the housing, credit, and mortgage bubbles that are now bursting all around us and driving the economy down the toilet we can now see how destructive our unregulated capitalistic system can be.

We need to get back to a system where everyone is equal without exception.  A flat tax on gross income will be a tremendous step in the right direction.  And when the system is fair enough to work for “Joe the plumber” as well as it works for “Sam the tax cheat” then we can kick this bull about the redistribution of wealth to the curb where it belongs.  Unfortunately, “Sam the tax cheat” is going to have to pay his fair share along with all these businesses that now enjoy the benefits of an unfair tax system.

The Consumption Tax

The idea of getting rid of the federal income tax and replace it with a consumption tax reeks of more dominant corporate culture favoritism. Somehow, the idea of paying an income tax is supposed to be unfair to the American corporation. Even though American conglomerates are some of the wealthiest entities in the world with divisions all over the globe and executives reaping nine figure windfalls for running their companies into the ground and such. On average the executives of an American corporation will earn well over five hundred times what the average laborer earns.

And if that’s not enough these corporations earn another set of windfalls for their investors. These American companies have to compete in the global market for investment monies just like the corporations in other countries. To say that American companies attract their fair share of investments would be an understatement. Exxon/Mobile announced just the other day that they netted more than a forty billion dollar profit for the year of 2007. For each one of the thirty one million seconds that Exxon/Mobile existed last year the company earned on average over one thousand two hundred eighty dollars. And that’s after all the employees and executives earned their salary and bonuses.

But the way a lot of people tell the story Exxon/Mobile and other American conglomerates don’t earn as much money as they should have. Heaven forbid! The poor American corporations and companies operate at a disadvantage because these companies operate in an environment where the federal government collects revenue through an income tax. It would be a lot better if we stopped the federal income tax and replace it with a consumption tax. That way, companies wouldn’t be penalized for being productive.

The proponents of this theory believe it is unfair for people to be paying more taxes simply because they make more. This punishes people for being successful. What would be fairer is to charge people based on what they consume. Thus, the income tax should be replaced with a national sales tax. This way, no one has to avoid making more money out of fear of going into a higher tax bracket. If people wanted to save on their taxes all they would have to do is spend less and save more. With such a tax plan frugality and productivity is rewarded while consumption is penalized. And with such a simplified taxing structure there would be no need for the Internal Revenue Service.

So with such a tax structure a family of four with an income of about fifty thousand dollars struggling to make ends meet could actually pay more in federal consumption taxes than an individual making a hundred thousand dollars. What if someone was making a million dollars a year but lived simply? Such an individual could pay less in taxes than the struggling family of four. Of course this would appeal to a lot of people who earn a great deal of money and live frugally.

But it should be obvious to anyone with a calculator that this tax plans shifts the burden of tax revenue from people who are able to make larger sums of money to people who have to consume a larger number of products such as a family with children.

By burdening the family companies like Exxon/Mobile can make even more money and look more attractive to investors around the world. This way, the executives can make even more money to increase the disparity between them and the workers. We will continue to make American corporations even more productive while we continue to make American consumers poorer. If I was Exxon/Mobile I’d think this tax plan was a good idea. But I’m not.

The tax structure of the United States can be simplified without the country going to a consumer based tax structure. A flat income tax would have the same result on abolishing the Internal Revenue Service as a flat sales tax. A flat income tax does not shift the burden of taxes to people least able to financially absorb their collection. A flat income tax doesn’t penalize anyone for making more than the next person because everybody pays at the same rate.

This way, when an executive gets a nine figure severance package they will pay their proper share of the tax burden. And I’m sorry if this doesn’t translate to more money for our conglomerates like Exxon/Mobile and other wealthy individuals. However, I’m very sure that that they will have more than enough zeroes in their savings accounts to pay taxes. There’s a big difference between trying to pay taxes with a bank account with a lot of zeroes and a bank account that is a lot closer to zero.