© 2013 Rick Adamson
By Rick Adamson 1.16.13
Let’s start with the table. Federal Income Taxes based on income tax returns for 2009[1] Click here to retrieve the worksheet.[2] [3]
Observations:
About one half of the population does not file tax returns. About one half of those who do file make under $32,196 per year and pay about 2 percent of all income taxes. Portions of the population that do not file include children, retired people and the sick but it also include a lot of people who live off of illicit activities.
Therefore, 3/4 of the population either do not file or if they do file they pay very little in income taxes. Conversely, 1/4 of the population pays 98 percent of all income taxes.
When our politicians talk about saving taxes for a certain percentage of the people they are incorrect. They should say a certain percentage of taxpayers because as illustrated in the table ½ of the population do not file or pay taxes and are, therefore, not affected by changes in tax rates.
As the table shows, the income tax system is highly progressive (the more one earns the more they pay). In addition, many States collect income taxes and that system in progressive.
People should realize that there is another part of the system that taxes just about everything we purchase and that system is highly regressive (not based on income). There are State and local sales taxes. There are property taxes, toll road fees and there are hidden Federal and State taxes on gasoline, utility bills, insurance policies, you name it. So, it is hard to argue that we are under taxed.
Between 2009 and 2012 revenue increased by 34 percent while spending increased by 74 percent. This excludes social security and Medicare because these programs are (or should be) paid for by withholdings from workers’ paychecks. These programs are, therefore, not considered “entitlements” by this writer. These two programs must be put back on a sound footing by increasing taxes and extending the eligible age and by reducing fraud.
Mandatory spending (entitlements and interest on our debt) was 38 percent of all spending in 1970, 64 percent in 2012 and is projected to be 82 percent by 2040. We are quickly approaching the point where there will be hardly any money left to pay for anything else, including salaries for the Congress! [4]
Households that have a net worth of $1,000,000.00 or more (excluding their home) amount to approximately 2 percent of all households. These households are roughly divided between Democrats and Republicans. Only about 200,000 families earn $1,000,000 or more per year (.014 percent of all taxpayers). This group tends to lean toward the Republicans by about 3:1. [5] [6]
Many people consider the Republican Party to be the party of the rich. The facts do not support that belief. There are just as many rich Democrats as Republicans. This belief, it seems, is due to the fact that many Republicans talk about cutting spending thus some segments of the population take that to mean cutting their benefits. Further, the Democrats have successfully bought this segments’ vote by supporting massive entitlement programs that are now out of control. They refuse to look seriously at the problem of spending simply because they are afraid of offending their constituents who may decide not to vote for them again.
Since Johnson, under the “Great Society” program, we have spent $14 Trillion on welfare programs aimed at reducing the poverty level, revitalizing slums, providing benefits for dependent children, Medicaid and many other so called welfare programs. However, it has not worked. We have not reduced the poverty level or improved conditions in the slums of New York, Chicago and Detroit, among others, one bit. The programs simply have not worked. They have only insured that those affected have become dependents of the Government. See article by Thomas Sowell. We need to come up with a more effective system for helping the needy one that rewards and encourages them to improve their circumstances and does not encourage the breakup their families.
You can see from the table that by far most Americans are not rich (defined as income above approximately $100,000.00 per year). There are about 14 million of them out on a total population of 305 million) and it is clear that there simply are not enough rich people to pay all of the Country's bills. See article by John Stossel The solution, therefore, seems to be to figure out how to create more good paying jobs so that more people are working and making more money and, therefore, paying taxes. In addition, we have to cut back spending. We are borrowing about 40 cents of every dollar spent which cannot go on forever.
At the same time, we need to change our culture in order to instill in our young people the fact that it is their personal responsibility to develop a skill and/or get an education because this is the most assured way to get ahead financially. We have a cultural problem because almost 30 percent of our young people do not graduate from high school. This is in spite of the fact that a high school education is provided free to all of our citizens and others. And, in my opinion, any child that wants to go to college can go. There are numerous ways to finance that education if one wants it bad enough.
We now live in a World where low skilled work can be farmed out to other Countries. A World where if you want to earn a good income you must have a marketable skill. There is increasingly limited room in this Country for low skilled workers. We must realize that in order to succeed here we must do work that is innovative and intellectual in nature. Work that low skilled people in other countries cannot do for if they could the work would be farmed out to them. This is simply because people want products that are as inexpensive as possible and due to technology it is possible to have certain products produced in a Country with less expensive labor. A good example is Apple and its iproducts. The design and intellectual work is done in the U.S. while production is done elsewhere.
Too many of our citizens make bad decisions about their skills and/or education and have the expectation that the Government will take care of them. Our politicians talk about the importance of education all of the time. It is important but it is not something that can be fixed by throwing more and more money at, especially from Washington. If a person does not want an education we can not force it on them. We hear a lot of talk lately about teachers, good teachers. I think they are getting a bad wrap because if their students do not want to learn they will not. What about the family’s responsibility? It is a cultural problem!
We have to teach our folks that if they make bad decisions about their skill and/or education then there will be consequences and that the rest of us are not obligated to take care of them. The consequences are long hours and low pay, it is each individual’s decision.
The middle and upper class taxpayers need to realize that they represent less than 1/4 of the population and that they end up paying for almost everything the Feds spend. This is where the largest number of taxpayers is and, therefore, where the money must come from. Once this realization occurs, the middle class will get on the spending reduction bandwagon.
[1] http://taxfoundation.org/article_ns/summary-2009-federal-individual-income-tax-data
[2] http://www.washingtontimes.com/news/2012/jul/10/cbo-rich-pay-outsized-share-taxes/
[3]http://www.usgovernmentrevenue.com/year_revenue_2009USbn_13bs1n#usgs302
[4] http://www.aei-ideas.org/2013/01/defens/
[5]http://wiki.answers.com/Q/Which_political_party_has_more_millionaires
[6]http://www.kiplinger.com/features/archives/how-your-income-stacks-up.html
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