Thursday, January 3, 2013

Taxing The Rich

I've been quite amused this past week as Democrats rejoice at passage of the latest tax laws on the rich. You see, I learned two principle lessons from my college Econ 101 and 102, after poring through many a late night cram of Paul Samuelson's text and graphs thirty years ago.

1)  When the government tax the rich they end up getting less revenue than before the tax was implemented.

2)  There are two types of Ivy League law school graduates; those who major in tax law and those who major in government.

And while government lawyers are tapping a keg of beer in Scull and Bones, or in the back offices of the Harvard Law Review, the tax guys are sipping cognac and interning in high end New York tax palaces.

In other words, the rich always have smarter lawyers than does Uncle Sam.

Note the chart above.  One can argue over whether or not the rich need to pay more than the current 70% of all tax revenue, but you can't argue with the facts: When the government raises taxes on the rich, the rich are on the phone to their smart tax lawyers and throwing up barricades to protect their loot.

So, who bears the burden of increased taxation to fund government spending?  Yep, the same old "Joe Taxpayer" that pays the most of "sufferable taxation".   So, after all the tax laws kick in this year, look for that red line above to decline as fewer tax receipts are recorded on those higher tax rates.

Today, we have 47% of America who pay nothing, we have the top two percent, the rich, who pay 70% of all taxes, and we have about 50 million truck drivers and retail workers and small businessmen bearing the burden for those deemed too poor to pay.  The winners continue to be the rich and those who can either hide their real income or have learned to breed enough babies to put them in poverty status.

Each time a Democratic President or a Democratic Congress get ready to increase taxes we hear the same old mantra "the rich need to pay a little more".  Again, I ask you to look at the chart above.  Do you think Congress doesn't know that higher taxation leads to less revenue?  Of course they know!  But you can win elections if you make speeches poking at the rich.  It makes the voter feel better.....for a little while.

Then reality kicks in and Joe Taxpayer sees less and less of his paycheck and says "why?"

Thomas Edison, Henry Ford, John D. Rockefeller and Walter Chrysler saw their net worth increase year after year over their lifetimes.   Different today?  Take a look at Bill Gates, Warren Buffett or the Walmart heirs; they get richer and you get poorer.

So, dear readers, if you don't understand the basics of economics, if tax law has you stumped, keep your funny New Year's party hats and those little blow toys.  Celebrate the great tax hike on the rich with them.

But check back next January.  Google that little chart I provided above.  See if the rich paid any more in taxes and see if your taxes went down.



  1. I just read a post of some mid class guy paying, he figured $30.00 a week for a $1525 yearly total in new payroll taxed. While wondering why he had to pay new taxes when he was promised he wouldn't, he figured they would have been enough to pay for a couple of nights in Hawaii like obama. Another post suggested that if obama was to not have won his first election to office there would be no way he could afford a vacation the likes of which he takes regularly on our dime. How about making politicians pay for their own damn vacations. I like that.
    Thanks for your article here.
    I just read about that great eatery , "Town Hall Diner". I really enjoyed that one. I'm glad you started this, the timing couldn't have been better. It's a place I go to escape I'm finding! Thanks again for that!! It's my vacation on a budget more in keeping with my own.

  2. Ken, the one time when circumstances don't work in Obama's favor. The Anointed One has always been able to exploit America's ignorance by class warfare and waging war on the rich. What's ironic is that the payroll tax is simply your contribution to Social Security and, by keeping the rates at 4.2 instead of 6.2 for the past two years actually just made the fund more at risk since Americans weren't contributing the full amount. Obama was wrong to lower the rate in the first place.
    Now, ignorant America is ranting against a tax that actually "helps" them by saving for their future retirement.
    And now they are crucifying him when the payroll tax reverts to mean. I find that amusing.

    1. That is funny, cut with his own knife. The link here is a great new depressing article about our "Greatest Generation just ask them"! The obama supporters,