Thursday, April 16, 2009

Bring on the Real Tax Tea Party

Something very odd was brewing across the country on tax day, the time that most people ignore when it comes to their federal income tax.

Spurred by the miscreants at Fox News and CNBC's Rick Santelli, whose inspid rant on the floor of the Chicago Board of Trade inspired the tea party talk, the rally was little more than a lot of people waving signs.

They just didn't seem to have any, well, focus.

Some held up signs protesting the income tax itself. If they were like some, who falsely claim that the tax is illegal, they should have been holding up "spring me from jail" placards. Nobody seemed to mind that the tax code is more than 10,000 pages long, seems to favor everyone and no one, and is the source of far too many migraines.

Others simply went for bigger fish like eliminating the Federal Reserve Bank or wanting to return to the gold standard. How do you issue money then and back a $14 trillion economy with the yellow metal? Is there that much gold in the universe? These arguments were about as well thought out as how the Starship Enterprise manages to travel faster than the speed of light. Hint: Einstein said you'd just turn into energy and maybe not back into matter again.

Then there were the folks who thought Obama was spending too much or wanted to fire Congress. According to the constitution, Congress okays all spending. And they have not been too good at reining in the pursestrings. I'll give them that much. The national debt is now more than $11 trillion. Here's another way of looking at it:

The estimated population of the United States is 306,014,725
so each citizen's share of this debt is $36,675.96.

The National Debt has continued to increase an average of
$3.91 billion per day since September 28, 2007!

That's a lot of poster board! But how do you get Congress to stop? We're in a deep recession, we've shoveled off hundreds of billions to banks, GM, Chrysler, AIG and thousands of other financial concerns, yet no one knows where it's going to end. What do we cut? Medicare? The Air Force? The Census? Aid to millionaire farmers? Citizens Against Government Waste ( has hundreds of ideas, but how do we make Congress listen? No suggestions were forthcoming at the tea party.

So these folks were all over the place. There wasn't any one particular theme, save for the fact they didn't like taxes, didn't know which government programs to cut and probably didn't want the program cut that impacted them personally. Most of them probably didn't vote for Obama, either. I was thinking of what I get mad about when I think about taxes.

* Not enough bad things are taxed. I know gambling, cigarettes, gasoline and booze are taxed. But maybe they need to be taxed more? At what point do high taxes begin to get drunk drivers off the road, help pay for lifestyle diseases and stop people from gambling their homes away? Whatever that tipping point is, I don't think we've reached it.

* Let's tax the stuff that comes out of exhaust pipes and smokestacks. Forget about a carbon tax or cap and trade. Let's make it simple: The more bad stuff (carbon dioxide, carbon monoxide, etc.) you belch into the air, the more it's going to cost you. The befouled air levy would create a whole industry of emissions testers, another one to fix the problem and a whole pool of money from folks who don't want to change their ways. We could pay for health care this way.

* Working is for suckers. I don't mean this literally, but this is what the tax code tells us. Let's say you're living off your investments or buy and sell real estate for a living. The federal rate on capital gains is no more than 15 percent. On stock dividends, it's the same. On a payroll? You'll pay up to 35 percent for federal tax alone. Add to that state income tax (Illinois is no more than 3%), AND Medicare/Social Security (or FICA) of 7.65% (double if you're self employed). Even if you retire and convert your 401(k) to a lump sum or annuity, the income is still taxable at up to 35 percent federal plus the state tax. The one exception is a ROTH IRA or 401(k). You pay taxes on contributions, but not on withdrawals.

* Property Taxes Never Go Away (if you own property). You can be retired for 40 years and you still have to pay them on property you own. Since taxes are averaged three years into the past, you will not likely see them go down, either.

* Sales Taxes. They never go away, either. State, county and local taxes add up at the cash register. You can pay up to 10.25% in California, which includes all taxes on retail purchases. Some of the tea party folks want to institute a national sales tax to replace the income tax. What would happen to state and local taxes? It's not clear, but keep in mind, these people don't like any sort of income tax!

For simplicity's sake, it sounds like intellectual cheesecake to roll all of these taxes into one national tax. It's certainly not fair to tax people on a payroll a lot more than those non-retired folks living off their investment portfolio or real estate. And it would be morally right to have some way of paying for health care for every American. That should be part of our constitution. And I still like the idea of federal air traffic control, a well-outfitted armed forces, medical research, education and a host of other things that we call real civilization.

But how much should that one big tax be? If we said 25% was a good round number, then those who were paying up to 35% get a real great deal and those who were paying 15% get screwed. The devil is in the details. We've already gone through the Bush-Reagan tax-cut years and it hasn't fixed the banks, lessened our proclivity for greed nor got us national health care or financed Social Security and Medicare for the next 50 years.

Are more taxes on the way? Probably. Unless somebody finds a way to cut government programs big time without prompting people to burn down parts of cities, this argument about excessive taxation won't go any further.

Maybe we should all sit down and have a cup of tea or two to discuss it.

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