Class Warfare

Posted by PITHOCRATES - January 3rd, 2013

Politics 101

Over 99.5% of all Rich People ARE paying Federal Income Taxes

President Obama won reelection by denigrating Mitt Romney.  He didn’t win by running on a successful record.  He did not win by running on a plan to pull the economy out of one of the worst recoveries in history.  No.  He won it by getting people to hate Mitt Romney.  And by getting people to hate Republicans.  Who they painted as evil rich people who want nothing more than tax cuts for the rich.  And to take away birth control and abortion so only rich people can have access to them.  As well as taking welfare benefits from the poor.  It’s called class warfare.  And it can be very effective.  For it won President Obama a second term despite a horrible first term by almost any metric you measure it.  At least based on the majority of the electorate that just believed the rich aren’t paying their fair share.  So let’s just see who is paying what (see Table 3.  Number of Individual Income Tax Returns, Income, Exemptions and Deductions, Tax, and Average Tax, by Size of Adjusted Gross Income, Tax Years 2001-2010).

The above chart shows who are NOT paying any federal income tax.  Approximately 40% of all taxpayers.  Are these the evil rich people like Mitt Romney?  And those rich Republicans?  No.  Contrary to the Left, it’s not the rich.  They’re paying their taxes.  It’s the poor and the middle class not paying their fair share.  Those earning $5,000 and less pay virtually no federal income taxes.  Over 80% of those earning from $5,000 to $13,000 pay no federal income taxes.  You have to get up to those earning $25,000 or more before more than half of that income group pays any federal income taxes.

We don’t see who actually pays the majority of federal income taxes until we get into the middle class.  Where those who DON’T pay any federal income taxes rapidly drop away.  Those at the low end of the middle class taking advantage of the tax code to maximize their tax credits and deductions (mortgage interest, energy tax credit, medical and dental Expenses, child and dependent care credit, etc.) to reduce their tax bill.  While those at the higher end of the middle class are likely small business owners suffering a business loss.  Or a personal or business bankruptcy.  Approximately 0.8% of those earning $100,000 – $200,000 pay no federal income taxes.  While less than half of one percent of those earning $200,000 or more pay no federal income taxes.  Perhaps this tiny sliver of income earners are not paying their fair share.  But one thing for certain is that over 99.5% of all rich people ARE paying federal income taxes.

Those earning $1,000,000 and more account for less than 1% of Tax Exemptions and Deductions

So are the rich taking advantage of the tax code to reduce their taxable income and federal tax bill?  We hear a lot about tax loopholes.  Those perfectly legal tax credits and deductions written into law by the United States Congress.  That both those on the Left and those on the Right take advantage of.  Yet those on the Left have convinced enough of the electorate that these legal credits and deductions are tax evasion.  And that only the rich on the Right are using these to evade paying their fair share.  So who is taking the biggest advantage of the tax code to reduce their tax bill?  In 2010 this totaled about $3 trillion.  Is this why those earning $100,000 or more paid no income tax?  For those few not paying any federal income tax?  Not exactly.  (The dollar amounts in the following charts are in thousands of dollars.)

In 2010 taxpayers claimed in total about $3 trillion in exemptions and deductions.  The deficit in 2010 was about $1.3 trillion dollars.  So perhaps this is the reason why we had a deficit in 2010.  This is what the Left would have us believe.  It’s those tax loopholes that the evil rich take advantage of to avoid paying their fair share of taxes.  The only problem with this is that it’s not the rich taking advantage of these tax loopholes.  It’s the poor and middle class.

Those earning $1,000 and less account for less than 1% of these exemptions and deductions.  Those earning $1,000,000 and more also account for less than 1% of these exemptions and deductions.  It’s those earning from $1,000 to $1,000,000 that are taking advantage of these tax loopholes.  Especially those earning from $50,000 to $200,000.  The only income groups claiming 10% or more of the nearly $3 trillion in exemptions and deductions claimed.  So not only are the evil rich paying federal income taxes whatever they claim as exemptions and deductions doesn’t even come close to what the poor and middle class are claiming.

Prosperous Economic Times brought about by Tax Cuts INCREASED Tax Revenues

These numbers don’t exactly support the claim that the rich aren’t paying their fair share.  They’re paying federal income taxes.  And what tax loopholes they exploit hardly makes a dent in the amount of tax revenue the IRS collects.  Which can only mean one of two things.  Either the poor and middle class need to pay more federal income taxes.  Or the federal government is just spending too much.  Well, as we just witnessed in the fiscal cliff debate, President Obama and the Left want to raise taxes.  Blaming the record Obama deficits on the Reagan and Bush tax cuts.  Their deal includes higher income tax rates on households earning $450,000 or more.  But NO spending cuts.  Which will be a problem.

In 2010 the total adjusted gross income totaled just over $8 trillion.  Most of which came from 4 income groups.  About a trillion each from those earning from $50,000 to $75,000, from $75,000 to $100,000 and from $200,000 to $500,000.  Those earning from $100,000 to $200,000 earned in total almost $2 trillion.  Which means the new higher tax rates aren’t going to bring in much new tax revenue.  Because they aren’t taxing the people with the money.  The middle class.  And with some additional spending instead of spending cuts the deficit will only grow larger.  So this whole fiscal cliff debate was nothing but theatre.  For it wasn’t about deficit reduction.  It was about politics.

The Left wants to destroy the Republican Party.  And to do that they need to turn prosperous economic times brought about by the tax cuts of the JFK, Reagan and Bush administrations into the source of all our problems.  Yes the economy boomed, goes the argument, but at what cost?  Massive deficits.  Deficits not brought about by tax cuts.  But by spending.  For those prosperous economic times brought about by tax cuts INCREASED tax revenues.  The deficits resulted from spending increases greater than the revenue increases.  But with a successful campaign of class warfare they have revised history.  Those deficits are now the result of the rich not paying their fair share.   Which helped them increase tax rates on the rich today.  Because the Left got everyone to hate the rich.  And the Republican Party.  Even though the rich are the only ones paying their fair share.  In fact, they’re paying more than their fair share.  But the majority of the electorate doesn’t know this.  Because of that successful campaign of class warfare.

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FUNDAMENTAL TRUTH #87: “In a democracy you hold the keys to the treasury. So be careful of what you ask for.” -Old Pithy

Posted by PITHOCRATES - October 11th, 2011

The Founding Fathers Purposely made it Difficult for the New Federal Government to Spend Money

Benjamin Franklin knew.  He knew what would happen once the people learned they held the keys to the treasury.  “When the people find they can vote themselves money, that will herald the end of the republic.”  All the Founding Fathers knew this.  This is why they created a representative government.  They put other people between the people and the treasury.  A lot of people.  Responsible people.  People who knew better.  Or should know better.

It started with the separation of powers.  The country needed a leader.  But they didn’t want a king.  They wanted a leader with limited powers.  So they limited the president’s access to money.  The Founding Fathers gave the power of the purse to the House of Representatives.  The president could only spend the money Congress allowed the president to spend.  The president could veto spending.  But Congress could override this veto by a two-thirds majority in both the House and the Senate.  So the president can try to stop spending.  But he simply can’t spend at will.

But neither can the House.  Because the Senate has to approve any spending initiated by the House.  Before it can even get to the president.  The Founding Fathers purposely made it difficult for the new federal government to spend money.  To limit the power and breadth of the federal government.  By limiting its money.  Even after the president signs it into law.  Should any questionable spending pass both houses, and the president approves it, we can still challenge it.  By the third branch of government.  The judiciary.  Which further checks the power of federal government.  On the rare occasion when the federal government passes bad legislation.

As Originally Written in the Constitution the States’ Legislatures Voted for a States’ Senators

Back at the Founding the states were very powerful.  They were nation-states.  Joined together only by a loose and weak confederation.  And very suspect of any distant, centralized power.  Whether it be a king on the far side of the Atlantic.  Or a president on the near side.  To get the new Constitution ratified the Founding Fathers knew they had to appease the states’ concerns.  And they did that with the Senate.  The states’ house.

As they originally wrote the Constitution, we elected the members of the House of Representatives by popular vote.  But not the Senate.  The states’ legislatures voted for their states’ senators.  These state legislators who we elect by popular vote in their states.  This put even more people between the people and the treasury.  And gave the states a way to rein in a federal government that strayed too far from their Constitutional boundaries.

But that all changed with the Seventeenth Amendment (1913).  At the dawn of big, progressive government.  When great amounts of power transferred from the states.  To the growing federal government.  And the spending began.  The states’ legislatures no longer voted for states’ senators.  The people now voted for their senators.  By direct popular vote.  And got closer to the national treasury.

Growing Spending and a Declining Population Growth Rate required Higher Tax Rates and Class Warfare

The federal government grew as we removed these other people from between the people and the treasury.  Responsible people.  People who knew better.  Or should know better.  Now people were closer to the federal treasury.  And they slowly learned what Benjamin Franklin feared.  They learned that they could vote themselves money.  And did.

Responsible, limited government went out the window.  Pandering for votes was in.  Rugged individualism was descendant.  And the nanny state was ascendant.  Federal government spending grew.  Federal taxes grew.  And federal debt grew.  Because you won elections by giving people stuff.  Paid for with other people’s money.  Which was key.  You didn’t win elections by raising people’s taxes.  You won them by raising other people’s taxes.  And the way you do that is with class warfare.

In the beginning class warfare was easy.  Because the federal budget was a lot smaller than it is today.  So you didn’t need very high tax rates.  And the population base was growing.  A lot of families had closer to 10 children than the 2.3 children of today.  So having lots and lots of new taxpayers in subsequent generations would produce a steady and growing stream of federal tax revenue.  But as spending grew and the population growth rate declined, that caused revenue problems.  Requiring higher and higher tax rates.  And more and more bitter class warfare.

The General Trend of Defining ‘Rich’ Downward has Redefined the Middle Class as ‘Rich’

With the higher spending and falling revenue budget crises followed.  Which ramped up the class warfare.  Pitting the ‘rich’ against the poor and the middle class.  Of course they kept redefining ‘rich’ as they needed to raise more and more tax revenue.  First calling the superrich fat-cat industrialists and Wall Street bankers ‘rich’.  The billionaires.  Then they included the millionaires.  But when they could no longer pay for the growing cost of the federal government people earning less and less were lumped in with these super rich.  Until today it’s someone making as little as $250,000 a year.

Anyone who says these people should pay their fair share should understand the general trend of defining ‘rich’ downward.  And that line that defined ‘rich’ has moved a long way down.  Closer and closer to the middle class.  Like those earning $250,000.  Many of these people aren’t rich.  Not by a long shot.  Despite earning $250,000.  They’re small business owners.  People who risk everything to run a restaurant.  Or start a construction business.  The number one and number two type of business that fails.   Because they can’t cover their bills.  And grow their businesses.  Despite having business income of $250,000.

The problem isn’t that the rich aren’t paying their fair share of taxes.  It’s that the government is spending too much.  In their eternal quest to buy votes.  By granting more and more government largess to the poor and middle class.  Courtesy of the rich.  Who will soon be anyone with a job.  Because of that growing federal spending.  And a declining birthrate.

Today’s Benefits are Paid by the Rich and Future Generations

As Benjamin Franklin feared this spending is threatening the health of his republic.  And governments around the world.  Because people learned that they could vote themselves money.  And politicians were only too glad to oblige.  Promising ever more.  In exchange for votes.  By providing ever more generous and growing government benefits.  Confident that they didn’t have to pay for these costs.  Instead, they could simply pass the cost of this largess to future generations.  Who don’t vote today.

So today’s benefits are in fact paid by the rich.  Who are small in numbers.  And future generations.  Who aren’t voting yet.   You see, it’s easy to provide benefits today.  That helps garner votes for today.  When the costs of these benefits will be borne by a subsequent generation.  A generation so far out into the future that they have no say today.  But over time this future generation has gotten closer and closer to the current generation.  So close that people alive today will be paying for benefits of today.  More importantly, this future generation is already voting today.  And that’s a BIG problem for a growing government.  So expect the class warfare to get uglier still.

This could herald the end of the republic.  Unless the current generation learns that they are in fact the future generation.  And that they are the new ‘rich’.  Regardless of how much they earn.  And they’ll learn this fast as they pay for everyone else.  After which they’ll see that there’s nothing left for them.  Then they’ll take notice.   And stop the insanity.  Then, and only then, will they stop voting themselves money.

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