As promised.....

OK so I'm a little late in getting back to you on my claim that the rich don't pay taxes. They do not. The middle classes pay a vast majority of all tax revenue levied by our governments. I love the stat that shows how 5% of Americans paid 60% of Federal Personal Income Taxes. While this is likely a true statistic it is not an accurate way to compare tax burden. It's very important that we distinguish between INCOME TAX and TAX. Why? Well because they are two very different issues. While the "rich" might pay more INCOME TAX they are not burdened by taxes the way the average American is. The actual number of pages in the Federal Tax Code depends on how you define it. Depending on your definition of the Federal Tax Code it can range from about 2,000 pages to as high as 70,000 pages. Depending on what state you live in you could practically double that number. The NYS tax form is twice as long as the federal 1040. If you are like me you don't really have the time to KNOW how to pay less taxes and likely you don't have the resources to pay someone who does KNOW how to pay less taxes. For example, did you know that for every $ you make over $102k you aren't required to pay SS on it? I bet you didn't. Did you know the fact that you actually pay 15.3% of your income to SS and Medicare rather than the 7.65% shown on your pay stub? Yeah, your employer pays the same amount you pay for you. That money could've been in your paycheck instead it's off to the feds. So now lets look at what the average American pays in Federal Income Tax. It's about 25%. Add that to the 7.65% and we're talking about 32.65% of your income going to the Feds. That doesn't condsider the OTHER 7.65% you could have been paid by your employer but aren't. In effect it's a "hidden" tax on your wages. So the TOTAL paid is actaully 40.3%. That's not even beginning to calculate state income taxes. Now the "rich" income tax rate maxes out at 35%. As we mentioned earlier they stop paying SS and medicare payments on anything over $102k. So if they made $1.102 million they pay 35% on the $1.102 million and 15.3% on $102k. So while the average American is paying 40.3% on their income the weathlier American is pay 35% on a vast majority of the income. As you can see they do not have a greater burden than the average American. Now lets consider a recent HOT topic in the media....bonuses. What almost none of the media outlets mentioned in regards to the AIG bonuses was that many of the individuals that got those "bonuses" had opted to get a $1.00 yearly salary in exchange for the bonus. What!? Yep that's right. Why the heck would they do that? Well because bonuses are not taxed as "income" they are taxed under the capital gains heading. Which is 15% rather than 35%. In addition they don't pay SS and Medicare on it. So when comparing the RICH to the AVERAGE American it's truly absurd to make the claim that the Rich have a greater tax burden.

Now let's consider the impact of raising taxes on the rich. I know, I know, I've just said they don't pay hardly any taxes compared middle income Americans. However, lets look at what we can expect with raising taxes on the rich. To do this consider what happens when your purchasing power is reduced. When your cost of living goes up you look at where you can make cuts to save money. For you and I it's things like eating out less, canceling cable TV, shorter or no vacations, etc., etc. For the wealthy, it's more along the lines of investments, and business expansion. If the rich have less to spend they don't debate HBO or Cinemax with their spouse. They look at laying off employees or reducing their stock portfolio. They have their team of lawyers and accountants locate tax shelters where they can put their money to ride out the storm of the tax hike until someone cuts taxes.

So lets go after their businesses! Cap and Trade! Higher Corporate Tax Rates! Well, sure that's fine. Know this, a business NEVER pays taxes. The consumers of the products or services that business produces or provides pay the taxes. When a business does a cost analysis it must figure in the cost of the tax it will pay. It then incudes that into the price structure for it's goods and services. So, for example, placing a tax on a coal burning electric plant is essentially placing a tax on all of the consumers of that electric plant. The plant doesn't pay more tax. They pass that cost on to you. The plant doesn't pay for it greener technology. You do. If that electric plant can't compete and closes, guess what? Your rates will increase with increased demand on fewer plants and less competition. In addition, raise taxes on an electric plant only serves to make more expensive engery more competitive. It doesn't make you life less expensive.

This idea that we can make the rich pay an equal share is mythical under the current tax structure which has been created by both Democrats and Republicans. Do you truly believe that Obama will raise taxes on himself? Well lets look at that. He and Michelle reported earning $2.6 million from book sales in 2008, about $200k in income and a small amount of money from some investments. They paid $855k in taxes. Ummmm...what? Do the math. They paided less than 35% of their total income. I wonder HOW they were able to do that? Obama was able to reduce his tax profile there by reducing his tax burden and effectively NOT PAYING HIS FAIR SHARE!

There would be ONLY 1 method to make all pay their fair share. That would be a national sales tax on EVERYTHING. Nothing would be exempt. No need for thousands of pages of tax code. You can't hide your money from it because to live in the USA means your spending money in the USA. The more money you make the money money you'll probably spend therefore the more money you'd pay into the tax coffers. You could dramatically reduce the size of the IRS. No one would need to fear April 15th. No more dreaded knock on the door by the IRS wanting to see your records from 10 years ago. It's the purest way to fund the federal government without burdening some while others aviod it. Now I am not saying I'm in favor of taxes nor the federal government having such a large budget nor some of the programs that are being funded. HOWEVER, in 2009 it's estimated that the federal government spent about $3 trillion with a budget deficiet of about 400 $billion. The GDP of 2008 was about $14.3 trillion. With a national sales tax of about 25% would've covered the 2009 budget, the deficiet and still had some jingle in the governments pocket to begin to pay down the National Debt and make up for the SS and Medicare projected short falls. When you consider that the average American is already paying about 40% of their income to the Fed just counting Income Tax and FICA you can see how much more money the middle class would have. Now think about all the other taxes you pay to the Feds that wouldn't exsist with a national sales tax. Gas would cost less for example. I would ONLY suggest a nation sales tax if all other federal taxes were scrapped. Just think about it.