Economics 2012

"Being asked to pay your fair share isn't class warfare. It's patriotism," said Newark Mayor Cory Booker, a rising star in the Democratic Party.

My questions are, what is a person's fair share?  How much of our incomes should we send to government?  Is the progressive tax system good?  Can we talk about tax rate separately from spending?  Is there a limit to how much in taxes and individual should be forced to pay?

Let's talk about each of these.  First, what is my fair share?  There must be a consensus.  Or is there.  Isn't that what most of the battle is?  Progressives and Liberals want a higher amount of taxes, while Conservatives advocate a lower rate, but working to grow the pie, thereby increasing the income to government.  In 1900 there were no individual income taxes on a Federal level.  There was an income tax passed in the late 1860's that was ruled unconstitutional by the Supreme Court.  It took the the 16th Amendment to the Constitution to bring Income Taxes to the masses.  In 1913 the tax rate was 1% for those earning more than $3000 for singles and $4000 for married couples.  (When you look at inflation $3000 would be a little under $67000 in 2012 dollars.)  If you were below that, you owed no taxes.  Was that their fair share?  Perhaps, but it was the amount the Government needed to stay solvent.  If the tax rules were still the same, then only 30,036,430 Americans would be paying taxes today.  181,217,561 Americans would not have to file.

How much of our income should the government be entitled to?  Perhaps many would agree that 1% is not enough.  And shouldn't all Americans contribute in some way to our national needs?  Is 10% fair?  15?  That is what our political system needs to determine.  On my part, my God recommends 10% as a thigh (or tax) to support the good works of the Church.  I have always felt if God can live with 10%, why can't man?

Is it fair to tax higher incomes at a higher rate?  This has always befuddled me.  On one hand, if you are a high earner, shouldn't more be expected?  But, if you penalize high earners, will they not find ways to shelter their money, reducing what they pay.  A big deal was made that GE didn't pay taxes for a number of years.  How can that be?  See a multinational company can shelter income in other countries were the tax rate is lower.  When they do that, it is natural to look at expansion in those countries, since the money is already there.  That means less jobs for Americans, and less taxes collected.  If we competed with those other countries, there would be no reason to leave the money there, and when a new plant was needed the money would be here.

Now on to the budget.  If the Government could function on 1% in 1913, why is 15% the lowest tax rate?  It is because Congress thinks their job is to spend money, our money.  Until there is a mandate to stop, they will continue to spend more and more, it gets them reelected.  For example, the health care debate over the last several years, do we need it?  Maybe, but know that the money comes from you, goes to Washington, pays government workers salaries, comes back in a benefit, that if any thing like other programs will be 20 cents on the dollar.  Insurance companies would go out of business if their expenses were that high. 

Fell free to disagree, but my conclusion is a low flat tax.  All we need to do is agree on what is 'low'.