Taxing "The Rich" vs "Don't Raise Taxes On Anyone"

Yesterday morning, Saturday December 4, 2010, I was up watching the television news channels - I am typically up and around by 5:00 am or so everyday - so I was able to get the "Breaking News" update live from CNN and MSNBC that the votes in the U.S. Senate which would extend the current tax rates for incomes below $250,000 ($500K for couples) or $1,000,000 in the proposal from Sen. Charles "Chuck" Schumer (D-NY) failed as was widely expected. The votes were mostly along party lines however there were also 5 Democratic members who voted with the Republicans to raise taxes on everyone if the richest 2% don't get to keep their 4.6% tax cut, too.

The arguments were pretty clear from the outset on this:

The Republicans say, "Don't raise taxes on ANYONE in a recession, period!"

The Democratic Party's argument goes something like this:

"For the last 30 years, since the beginning of "Reganomics" or the "Trickle-Down" theory*, the wealthiest Americans, the top 2% - whose adjusted gross income (AGI) is at or above $250,000 per year - have received an abundance of the benefit of economic policies which have now created a huge problem for the other 98% of Americans and, by virtue of the fact that the US dollar (USD) is the default currency of the entire planet that 'problem' extends far beyond our geographic borders.

The cost of extending "The Bush Tax Cuts" for the top 2% of wage earners is about $700 Billion over 10 years. Because we are already in debt 'up-to-our-eyeballs', and deficit spending is at record levels, we'd have to borrow that $700 Billion, probably from China, and we just cannot afford to keep up this pretense of borrowing ourselves into prosperity. The rich have gotten richer and the poor have gotten poorer - the middle-class hardly kept up with inflation and stayed about the same in financial terms but the number of families within the middle-class went down, quite literally, into the poverty levels."

The Democratic Party argument goes on to explain how the deregulation of the financial and other industries, driven by "Reganomics", perpetuated by the Clinton administration and codified by the 2nd Bush administration, has moved America from the leader and envy of the world in just about every respect - education, innovation, technology, you name it and America was, or was thought to be, the best at it. America was called "The Land of Opportunity" by those, like my parents, who came to America in the 1940's & '50's.

Now America is something like 12th in college graduation and falling, 37th (according to the W.H.O.) in health care and falling, 46th in infant mortality, and these are only a few of the places where America is falling behind where we used to lead the way. The answers are not easy and they "require hard choices" and "sacrifice" if we are going to get back to the principles that got America to the top in the first place.

More tax cuts for the top 2% is just insane, on so many levels. We just cannot afford the $4 Trillion price tag of the "Bush Tax Cuts", but the "bottom 98%" could not absorb the brunt of the impact from an across the board tax increase. The overwhelming majority of whom make less than $100,000 per year (less than half of what the lowest earners in the top 2% earn annually) and have far less than $3.5 Million in net worth (the lowest level that is effected by the estate or 'death' tax).

So what is proposed is to extend the "Bush Tax Cuts" - what the Republicans are now referring to as "the current tax rates" - for the 98% of American families that earn less than $250,000 per year and let them expire for the top 2%, incomes over $250,000 would revert back to the 2000 tax rate of 39.6% from the current 35%.

In terms of dollars and cents, here is an example:

Let's say that a person makes $260,000 in 2010. That is just about the bottom of the infamous top 2% of incomes and it gives us some easy numbers to use as a practical example of what this actually means in real numbers.

If the rates go back to the 2000 rates of 39.6% on and a "taxable income" of $260,000 that would be a tax bill of $102,960 leaving an after-tax-income of $157,040. If however, the tax rate on that same $260,000 is only 35% the resulting tax bill would be reduced to $91,000 with a net after-tax-income of $169,000. That is a net difference of $11,960 or a difference of just over 2 weeks of income - $260,000 per year equals $5,000 per week! Most Americans don't get $5,000 per month let alone $5,000 per week!

As you can see by the strength of their argument that the Democratic Party has the right idea and is pretty much right on about what they are saying. Well, actually you could if you were able to accurately comprehend what they were telling you, which most Americans seem unable or unwilling to even attempt. Most Americans are sheep, to lazy and to stupid to see that they are being lead to the slaughter by the "Industrial-Corporate-Military-Congressional Complex". If the people don't get their collective heads on straight this nation is done as a world power and this is not a good thing for the prospects of liberty as a world goal.

Pres. Obama has said that he is hoping for compromise on the tax issue. This morning (Sunday 12/5/2010) Sen. Minority Leader Mitch McConnell (R-KY) told David Gregory on "Meet The Press" "It isn't going to happen. All the Republicans and 5 Democrats voted against raising taxes on anyone during a recession." It seems to me that Sen. McConnell and the GOP are willing to stand on their belief that the Democrats in congress will blink first and be too afraid of the tax rates going up for everyone that they'll give-in on the "tax the rich" strategy without getting anything meaningful in return from the Republicans.

If that doesn't bother you you're not paying attention. If it does bother you:

GOOD! YOU SHOULD BE BOTHERED! Now go and do something about it!

Write your Senators and Representatives in Washington, D.C. and tell them that you do not want an additional $700 Billion heaped on the backs of your kids and grandkids just so the fat-cats can keep hording larger and larger portions of the wealth in America. We do not need, want, nor could we withstand, another "Gilded Age" in America.

*More properly called "Supply-Side" economic theory, it basically states that when the wealthy gain in prosperity it will "trickle down" to the rest of society because the rich will spend their additional wealth on goods and services that are provided by the lower financial classes so that everyone will get a benefit. Add the fact that typically it is the wealthiest classes (the top 2% of incomes) that own the majority of the business interests in America, so they will reinvest some of the additional profits into their businesses and thus create more jobs and, again, everyone wins because the net effect is that a rising tide lifts all boats.

"A rising tided lifted all yachts, the rowboats got left behind" - Warren Buffet, appearing on ABC's "This Week with Christiane Amanpour" 11/28/2010