Today, the Congress is continuing the discussions to decide what to keep of the tax cuts created during the last administration. Currently, there is a discussion as to the taxation on capital gains and the tax rates for the wealthiest Americans. These proposed tax hikes hope to strike at an untapped pool of capital for the Federal coffers. This comes despite the fact that many of these economic gains have been saved, something all economic advisors of this administration have encouraged for the health and sustainability of the economy in the future. Now, this money being set aside will be consumed for the public good, at least that is what they say. The reasons for this are many. Some have argued that these affluent individuals have lived well off these benefits of the previous boom, which many saw decline after the 2008 downturn, that they must pay some sort of debt to the rest society for their fortune being somehow made at the expense of the others.
Others even go on that the wealth disparity in America is too great and that the middle-class is disappearing. Therefore, the rich must be taxed heavily to get the demographic balance back within tolerances. Considering the fact that the majority of America’s taxes are paid by the upper income bracket with the disparity continuing, it is not clear how ratcheting up the rates will do anything to correct the problem. Furthermore, the tax cuts will be continued for those making $250,000 or less. There are two problems with this. First, the individuals who will be part of this tax group pay a lesser proportion of the tax burden already and now would pay even less. These changes put a greater proportion of the revenue burden on the higher income groups who also happen to be the biggest investors and entrepreneurs who provide the jobs for lower income individuals to make a living. Second, in areas where there is a higher cost of living, there will be more middle-class individuals falling into this tax trap. Those of us who are in the middle and upper portion of the middle-class will be taxed at higher rates just because we live in a prosperous area. So much for the defense of the common citizen by these class crusaders.
Another point is whether the government has the right to take monies that are the essence of the fruit of one’s labor, savings and investment. Savings is the money that you do not need to consume for your basic needs and advanced desires. It is the personal profit of one’s wages that can be set aside for a time of need and the more you earn, the more you are rewarded for your efforts. Investment is money that is risked on the chance that the venture you have supported will produce a profitable and/or beneficial return on the initial sum put in. There is always a chance that it will fail and you will never see your hard earned money again. Considering these factors of a person’s time, effort, talent and risk, how can anyone make an argument that this money should be expropriated by the central government?
The final point is on the question of economic demographics. This increased taxation on the rich over the years has not improved the gap between the rich and the poor as well as mutual prosperity in times of economic boom. If one is going to solve the issue of wealth disparity and shared prosperity it would be best to look into the basic income program in Alaska, the Permanent Dividend Fund. This program uses royalties of Alaska’s most precious commodity, their oil reserves (among other things in the portfolio) and converts it into a sum of money given to all residents as their stake in the state’s economy. Everyone gets their fair cut of the action and Alaska’s wealth disparity has actually narrowed, not widened, over the years since it’s implementation in 1982. The way to ensure prosperity for all is by shared dividends not divisive taxes that are counterproductive.
Washington Times Original: http://www.washingtontimes.com/news/2010/aug/17/debate-on-taxes-affects-the-savers/
Alaska Permenent Dividend Fund: Raventos, Daniel. Basic Income: The Material Conditions of Freedom, p. 13.