Wednesday, July 27, 2011

Fat Tax

While it isn’t the central issue in the debt ceiling crisis, the term “flat tax” keeps popping up in Republican talking points. It’s often paired with the word “simplified” to make it more palatable to those who can’t tell winners from losers. What’s meant is the same tax rate for everyone, rich or poor.

Supporters often point out that an overwhelming amount of tax dollars already come from the richest taxpayers. This is nothing more than simple arithmetic supporting the Willie Sutton doctrine. A more meaningful argument would be that rich provide the jobs. Not many paying jobs are provided by poorer people.  

To counter this argument it should be mentioned that not all the money available to create jobs is being spent for that purpose. A logical reason would be that the demand for products doesn’t always justify increased production. It’s hard to criticize what may be a prudent business decision. But it defies logic to include a road not taken in a body of evidence. It should also be mentioned that a significantly large number of the rich have made a life’s career doing nothing but managing their portfolios.

What I find most laughable is the claim that a 4% tax increase on annual income over $250 thousand would discourage “small business.” I don’t believe for a minute that the businesses of major concern are small by any definition. But let’s give them this one and dissect a recent claim by a right wing talking head of a disincentive to a businessman anticipating a $300 thousand profit. Granted this trifling amount could cause Exxon/Mobil to throw in the towel. But it’s another story for our hypothetical small businessman. By the president’s proposal, with its $250 thousand breaking point, Mr. Small Businessman would have to pay an extra $2,000 in taxes, on only the excess income, in addition to the roughly $90 thousand he would ordinarily have paid on all his income. This prospect wouldn’t discourage me one bit.

The saving grace of the right wing’s idea of shared sacrifice is that only Singapore and Hong Kong have a greater disparity of wealth and income than we do and we’ve always prided ourselves on being number one.

 

 

 

 

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