-Caveat Lector- from: http://www.zolatimes.com/V3.14/pageone.html <A HREF="http://www.zolatimes.com/V3.14/pageone.html">Laissez Faire City Times - Volume 3 Issue 14 </A> ----- The Laissez Faire City Times April 5, 1999 - Volume 3, Issue 14 Editor & Chief: Emile Zola ----- The "Soak the Rich" Tax Scam by Don Lobo Tiggre Each year, in the Infernal Revenue Service instruction booklets for the various evil incarnations of Form 1040, there is a set of pie charts. The first of this year�s charts looks like a chipped 1960s peace symbol; it is a graphical representation of the federal government�s income. The second chart looks more like a broken dinner plate; it represents federal outlays (spending). These simple charts tell some very interesting stories about where the United States federal government�s money comes from and how it is used�they are a sort of balance sheet for the nation. A concerned taxpayer might look at these charts and notice that the largest slice of the income pie is labeled �personal income�: 46 percent! The weary taxpayer might then notice that �corporate income taxes� only amount to 11 percent. Not only that, but the �social security, Medicare, and unemployment and other retirement taxes� slice�the part taken out of every paycheck with no way to stop it, reduce it, or get a refund�is another 34 percent. This means that individual taxpayers are supporting 80 percent of the immediate cash cost of the federal government. In this light, it is all too easy to understand why so many taxpayers and voters seem to fall for the �soak the rich� rhetoric of politicians who win support by promising more government programs (spending) at the expense of those nasty corporations. Why, those greedy rich corporations are only paying 11 percent, and they have a greater obligation to support the needy! Or so the ploy goes. This rhetoric ignores the fact that many single proprietor businesses, family businesses, and small partnerships are corporations. It also ignores the fact that the owners of corporations have their earnings reduced by corporate income taxes, and then pay the same income tax�or more, if they really are rich�as everyone else. Another inconvenient fact ignored is that most of the owners of large corporations are not Armani-clad Wall Street types�there are only so many of them�but middle aged people and senior citizens. Now, it may be that the Armani class controls the corporations, but they don�t own them all. It�s the collection of "little old ladies next door" and "guys down the street" who either own stocks directly, or have a lot of their savings tied up in mutual funds that own stock in corporations. And the most important thing this rhetoric ignores is that any tax levied on a corporation is just another business expense to be passed along to customers, as far as corporations are concerned. And who do you think pays those estate, gift, and miscellaneous taxes? (One hint: it�s not the Easter Bunny!) So, yes, it may seem "unfair" that personal income taxes are shouldering ten percent more of the tax load than they were five years ago (they went from 36 percent to 46 percent of federal revenue), while the burden has only increased from 8 percent to 11 percent for corporations. But this is only at first glance. The thing to remember is that corporations don�t really exist. They are legal fictions. What exists are people, individual people, and they are shouldering 100 percent of the burden, whether that be through corporate taxes passed on to consumers, personal income taxes, retirement taxes, or any other form of legalized theft you care to name. The only exception is the portion shifted to our children via deficit spending, and even then it�s still individual people who pay they just do it in the future. The deficit, by the way, has gone from 18 percent to 1 percent in the last five years, which is why all the other income pie segments have gotten larger. Okay, so forget about corporations, those darned rich people need to help out more�from each according to his ability, to each according to his need. Never mind that the top 50 percent of America�s wealth creators pay more than 95 percent of all income taxes. Yes, never mind the facts, think of the poor! The poor? The unusually conscientious taxpayer might then look at the spending pie to see how �the poor� are being helped. �Social programs��none of which are authorized by the Constitution�only comprise 18 percent of federal spending. That is almost as much as the constitutionally-authorized amount spent on national defense (including spending on veterans and foreign affairs: 20 percent). However, neither of these come close to the whopping 38 percent spent on social security, Medicare, and other retirement programs that are not means-tested. So, while it is arguable whether or not social programs actually help �the poor,� it is clear that the largest portion of the money extracted from �the rich� is going to older citizens, many of whom are by no means poor. Now, remember that the ownership of corporate America lies only in small part in the hands of wealthy tycoons; a far greater portion lies in the hands of our parents and grandparents. Bill Gates, the richest man in the world, has only a fraction of the net value of many of the pension and mutual funds that rule today�s Wall Street. Most of the investors in these funds are older Americans who�ve pulled large amounts of money out of savings accounts because of the record low interest rates banks are paying. In other words, the people who are the recipients of the largest portion of federal spending are the people who own most of the stock of large corporations�the very people crusading politicians claim to be soaking. Soak the Young In fiscal 1997, the federal government took in $539 billion in non-refundable taxes dedicated to retirement and unemployment benefits. This came mostly from people between the ages of 18 and 65. In the same time period, the federal government spent $632 billion on those same benefits. This went mostly to people who are over 65 and are not poverty stricken. Is this taxing the rich to help the poor? Looking at the outlay pie again, we see that $244 billion�15 percent!�did not go to any programs at all, but was spent on interest. Now the deficit is almost under control, for the time being, but the US government is more like a reckless spender who has charged up his credit cards and can�t make any new charges than a person in sound financial shape. Such mismanagement suggests that �soaking the rich� in order to give them retirement benefits is, at the very least, inefficient. The words "criminally insane" also come to mind. That reality, as unpleasant as it may be, must be faced; what we have is a coercive inter-generational siphoning of money that has nothing to do with "social justice" (not that there really is such a thing). The self-defeating policies begun with the New Deal and accelerated during the Great Society debacle are hitting home with a vengeance. America�s producers are being sacrificed to America�s former producers, at a rate of $0.63 trillion a year and climbing. Even those who have the greatest incentive to maintain this untenable status quo, the politicians who depend on senior citizen votes, know that this situation simply can not be maintained. Notice the glee with which the president recently announced that Social Insecurity and Mediscare will last a few years longer than previously estimated before defaulting on their obligations�as though that would make any difference! Pumping money in giant circles through the horrendously leaky mechanism of government will soon leave us all sucked dry. This is so obvious that even the last true believers in President Johnson�s Great Society have been forced to read the writing on the wall and are (once again) talking about reforming Social Security and Medicare. Should the will of these reformers weaken, the American people will remind them (at the voting booth) to do the right thing. The people know the score: they see the break in the pavement looming in the headlights (don�t they?). The government should be gotten out of (mis)managing retirement. This willingness to even think about taking the federal government�s fattest sacred cows to the block is a major step forward, of course, but is it too little, too late? ------------------------------------------------------------------------ Don Lobo Tiggre is the author of Y2K: The Millennium Bug, a suspenseful thriller. Tiggre can be found at the Liberty Round Table and The Liberty Channel. -30- from The Laissez Faire City Times, Vol 3, No 14, April 5, 1999 ----- Published by Laissez Faire City Netcasting Group, Inc. Copyright 1998 - Trademark Registered with LFC Public Registrar All Rights Reserved Disclaimer The Laissez Faire City Times is a private newspaper. Although it is published by a corporation domiciled within the sovereign domain of Laissez Faire City, it is not an "official organ" of the city or its founding trust. 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