Why punish the rich with more taxes? AKA equal taxes or none at all!, page 1

It wasn't that long ago that I would have agreed with you. After all, getting rich is what the American dream is all about, right?

But as I began to study the economy and how it really worked, I realized something: capitalism is flawed! Now, before anyone gets all bent out of shape, I am not suggesting we revert to communism or socialism or anything that drastic. All I am saying is that the inherent checks and balances of a capitalistic economy have limitations that are sometimes inadequate for extreme situations. For example, few would state that we need to stop all help help for the poor, even though I believe most people not on welfare are unhappy with the way present welfare works. The reason is that disaster can occur to anyone, and it is uncivilized to not provide some means for people to survive when a terrible situation is not of their own doing. But welfare in any form is anti=capitalism. Capitalism in its purest form would demand that the unfortunate be relegated to a (short) life of abject poverty.

On the opposite end of the spectrum is runaway profit. As one's income increases past a certain point, they begin to be able to purchase things that should not be for sale: political favors, stock market manipulation, and other advantages that can make a mockery of the concept of 'free trade'. This is why we have laws against monopolies, to stop the power of a corporation from becoming so great that it alone effectively controls an entire section of the economy. They are also able to use their wealth as a means of producing income itself, through investment. this makes the further acquisition of wealth easier, almost effortless for those in the very highest economic tier.

Tariffs have been used by many countries in different historical eras throughout history. They are a punishment on goods produced in other countries through the use of a special tax. Yet their purpose is not to squelch trade, but to balance it. Other countries may have a distinct advantage economically which translates into insurmountable competition for domestic companies, and the use of tariffs to artificially raise their prices to a more competitive level keeps both foreign and domestic companies in level competition. (Wouldn't it be nice if we did that today to keep jobs at home?)

A progressive tax system works along the same principle. Taxes are used, not to punish the wealthy, but to slow their growth when capitalism is no longer able to provide the checks and balances which are inherent on free trade. The problem we face is not a fault of the progressive taxation system we have in place, but rather a result of uncontrolled governmental spending and antiquated taxation levels.

At the rate our government spends our money, no taxation system will ever be able to adequately fund it. there is simply not enough money available. And considering that the vast majority of the money in this country is made by a precious small percentage of the population, the lower income level population cannot even make a dent in the budget. Only those who are wealthy have the means to pay enough to fund our ever-increasing appetite for socialistic programs.

Also, consider for a moment two people of differing means: Joe makes $20,000 a year, while Richie makes $2,000,000 a year. Let's say that the tax rate is 25% (which is much lower than it would need to be with a level tax system). Joe pays $5000, leaving him with only $15,000 to live on. Richie pays much more, $500,000, but still has $1,500,000 each year for his lifestyle. Who wins? Obviously Richie still has plenty of wealth at his disposal and probably doesn't have to hold a regular job; at that rate, his investments no doubt make plenty of cash for him. But poor Joe is eating Pork 'N' Beans 6 nights a week while trying to find a second job.

Now let's look at something a little more present: Joe and Richie make the same amount, but now Joe, after deductions are counted in, pays maybe $500 per year in taxes. He still has $19,500 each year to cover his needs. Richie, on the other hand, is now paying close to 40% tax, which comes to $800,000 per year, leaving him with $1,200,000 left... still much much more than poor Joe, who actually gets to have a decent meal every night now.

You also have to remember that the wealthy find making money much much easier than the poor. Many options such as stock market portfolios, commodity futures, venture capital investments, are all open to he who has money to invest, creating more wealth with no real effort. So while Joe's measly $500 is about 25 hours of work, the time spent by Richie to make $800,000 is probably about the same. So based on hourly effort, there is really no difference.

That's not to say we should over-tax the rich... we must cut spending (and therefore all taxes) or our economy will cut it for us in a massive collapse (which is probably unavoidable now, to be honest). But taxing the poor at the same rate as the wealthy is not the answer - it is more problems.

TheRedneck