Let’s tax the poor
By Phil Krinkie
The Daily Record Newswire
Every time there is a discussion about budget deficits, President Barack Obama’s call is for higher taxes on the rich. If there is a call to reduce government spending, his immediate response is that “we need a balanced approach,” shorthand for “we need more tax revenue.”
So let’s have a balanced approach — a truly balanced approach — to income taxes. Let’s increase taxes on the poor, so everyone pays the same tax rate. Let’s get rid of the “Earned Income Tax Credit,” the tax program that actually gives low-income people money, and instead impose one simple tax rate for everyone. After all, when we go to the grocery store we all pay the same for a gallon of milk or a loaf of bread. When we go to the gas station, we all pay the same for a gallon of gas. If you buy a car or a television, the price isn’t based on what you earn; the price is the same for everyone.
Why, if we are consuming government services, should it be any different? We all benefit from a strong national defense, good public schools, and a well-maintained transportation system. Why shouldn’t everyone pay a portion of the cost? Why should the cost of government services be any different for the person who earns $10,000 from the person who earns $10 million? Does the person who makes $10 million receive more government services than the person who earns $10,000? The likelihood is that the person who earns $10,000 per year consumes more government services than the individual who makes $10 million. At a minimum, a single tax rate imposed on the rich and the poor would obviously still result in a rich person paying more in taxes.
But the mantra of “the rich don’t pay their fair share” is the code for more income redistribution. The progressives’ proposed solution for every budget shortfall is “tax the rich.” For over 100 years in the United States, the system of taxing the rich to pay for government has been promoted as the solution. But a look at the facts shows it doesn’t work. One hundred years ago this month, in 1913, the states ratified the 16th amendment to the constitution, which allowed the federal government to levy an income tax. Years earlier, the Congress had passed an income tax, but the Supreme Court struck it down as unconstitutional. In 1909 Congress passed a constitutional amendment, and by 1913 three-fourths of the states had voted to ratify the 16th amendment.
Within eight months of adoption of the amendment, Congress passed the first income tax code, which featured a graduated tax schedule starting at 1 percent with seven tax brackets and a top rate of 7 percent.
If those original tax brackets were adjusted for inflation, the bottom rate of 1 percent would apply to incomes of less than $460,000. In other words, only the very rich would have to pay more than 1 percent in federal income tax. But, of course, there were numerous exemptions and deductions, which meant that only 1 percent of the population paid 1 percent of their net income. Within three short years, Congress raised the lowest tax rate from 1 to 2 percent and increased the top rate to 15 percent.
By 1918, another tax rate increase was passed to raise the bottom rate to 6 percent and the top rate to 77 percent. But even with these dramatically increased rates, only 5 percent of the population paid income taxes.
During the booming economy of the 1920s, Congress repeatedly cut tax rates, ultimately returning to a bottom rate of 1 percent and a top rate of 25 percent. With the onset of the Great Depression, Congress soon returned to their tax-and-spend ways and raised tax rates to a low of 4 percent and a top rate of 79 percent. Later, the top rate was raised to 90 percent, and President Franklin Roosevelt even issued an executive order taxing all net income above $25,000 at a rate of 100 percent.
Another important income tax regulation that changed in the 1940s was the implementation of tax withholding by employers. This greatly eased tax collection and substantially reduced the awareness of how much tax was being collected, which made it easier to raise taxes in the future.
Now fast forward to our current economic dilemma. Just weeks ago, Congress raised the income tax rate on the top 2 percent of earners in response to out-of-control budget deficits and pressure from Obama — despite the fact that 49 percent of Americans pay zero federal income tax. Congress believes it’s OK to increase taxes on those who already pay 40 percent of total federal income taxes.
So let’s reverse the income tax policies of the last one hundred years and start taxing the poor. Instead of giving money to low-income workers, let’s tax their wages. A simple flat tax rate of 10 percent should work. The individual who earns $10,000 would pay $1,000 in federal income tax and persons earning $1 million would pay $100,000 — no exemptions and no deductions.
The liberals would pity the poor and therefore not want to increase taxes, and the rich would pay their fair share. Everyone would contribute something to support needed government services for the benefit of society.
