The Weiner Component #21 – Regressive Taxation

Tax

ALL TAXES PAID IN THE UNITED STATES ARE REGRESSIVE; THE MORE A PERSON EARNS THE SMALLER THE PERCENTAGE OF HIS/HER INCOME IS PAID IN TAXES.

 Mitt Romney released his income taxes for 2011 during the Presidential campaign in 2012.  He paid 14% of his total earnings, after deductions, in income taxes for that year.  He chose not to take one particular charity deduction of several million dollars so that his taxes would be as high as 14%.  After losing the election he probably filed an amended tax return and was able to lower his 2011 taxes to 12% or better.

 The official United States Government level of poverty, as issued by the Census Bureau in 2012, is $11,170 for one person.  $3,960 is added on for each additional individual above in number. The poverty level for a family of four would be $23,050.  The rate is somewhat higher in Alaska and Hawaii.  Do these people pay the graduated income tax?  I think not.  No one pays any income taxes on the first $10,000 they earn; but everyone does pay a goodly percentage of their incomes in all other taxes.  Of course, the more one earns the smaller a percentage of their income is paid on all taxes.

 No one in the middle or lower class pays as little as Mitt Romney does in income taxes.  The total taxes they pay would be between 25 and 35% of their gross incomes; and that is after all the deductions they can take.  For example, out of all earning up to $110,100 every employee has 10.4% taken out for Social Security.  That amount will rise to 12.4% in 2013 when the payroll tax will return to its original level.  Medicare, with no maximum limit, takes out 2.9%.  While it can be argued that these are government insurance programs they are still part of what every employer has to pay for each worker he hires.  Together these constitute 15.3% of every employee’s total compensation.

 It would be much fairer and far less regressive if the social security maximum were raised to include everyone’s total compensation package.  However it has been argued by a group of high earners that the $110,000 maximum income for social security should not be raised because it will create havoc in the society; but they say the retirement age for social security recipients should be raised to 75 years of age.  Self-interest seems to go far.  The economically privileged group would like to stay privileged. 

 In California the gasoline taxes are 69 cents per gallon.  In Wyoming they are 34.4 cents per gallon and in Alaska the cost is 24.4 cents.  All the other forty-seven states range between California and Wyoming, with Hawaii coming in as the second most expensive at 68 cents per gallon.  These amounts do mot include all Federal, state, city and local sales taxes.  Is the use of gasoline more extensive with the wealthy or is it a generally fixed amount for everyone?  Actually everyone pays about the same amount, either directly or indirectly, for gasoline usage and the greater the income the smaller a percentage of the income that is.

 The above is one example where the tax is included within the price of the item.  Another example would be cigarettes.  In 2009 the Children’s Health Insurance Program Reauthorization Act was signed into law.  It raised the Federal tax on cigarettes from 39 cents per pack of twenty to $1.81 cents.  In addition the individual states have taxes going from 17 cents per pack to $4.32.  There are also sales taxes in each of the states that tax not only the cost of the cigarettes but also the cost of the hidden taxes placed on them.  Granted that cigarettes have been proved harmful to the people using them but the taxes here are put on other taxes.  Do the well to do smoke more or is this both a sin and regressive tax?

 If we take a look at all the taxes paid in the United States on all levels of government they are all regressive; the more you earn the smaller a percentage of your income is paid in taxes.  There are no exceptions to this be it income, sales, excise taxes, tariffs or licensing. 

 While there are assorted rationales for many of these taxes there still should be a rationale for a fairer system of taxation.  Mitt Romney, if I remember correctly, earned eight million dollars in 2011.  He paid 35% of his income after deductions on his income over $379,150.  A person earning a half million dollars, $500,000 paid the same on his income over $379,150.  Who paid a lower rate of taxes?  Obviously Mr. Romney did.  Yet even Romney’s income is low next to many CEOs of major corporations.  The major irony here is that about 98 percent of the U.S. population earns well under $110,000, the cut-off point for social security.  They all pay a far larger percentage of their more limited incomes in taxes.  And these people are the consuming base of the country.  It is their expenditures that determine the Gross Domestic Product, the amount of money spent for goods and services in the United States. 

 The taxing system in the country is absurd.  In 2013 the top income tax level was raised to 39.6% for those earning more than $400,000.  For basic fairness it should be raised again at one million dollars, and again at two million dollars, and again at three million dollars.  It should be continuously raised until it reaches ninety five to ninety nine percent.  After all, how many millions does one need to provide for themselves and their children into future generations?

 Isn’t it time we had a fair system of taxation, one that stopped exploiting the lower end of the population for the benefit of the upper few percent.

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