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SOUDER: All is ‘fair’ in love & taxes

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For those keeping score at home, this fiscal year will be the fourth in a row that the deficit will exceed $1 trillion, so that, by the end of this year, the national debt will be more than $16 trillion.

By Chuck Souder

I have written before about the quickly approaching catastrophe that our country is facing with regard to the enormous (and rapidly increasing) debt our government continues to pile up.

To make sure we all understand the terms involved, the national debt is the total amount the government owes. The deficit refers the amount the government spends each year over and above the revenue that is generated (which is then added to the national debt).

For those keeping score at home, this fiscal year will be the fourth in a row that the deficit will exceed $1 trillion, so that, by the end of this year, the national debt will be more than $16 trillion.

Because most of us can’t begin to understand numbers that big, let me shrink it down a bit. At our current rate of (over)spending, the national debt is growing at approximately $3 million per minute, or $50,000 every second. Is your head spinning yet?

Now, with a problem so big, some politicians are at least beginning to admit something must be done about it. In fact, in 2009, President Obama himself pledged to cut the deficit in half by the end of his term. Oops. But I’m sure it wasn’t his fault.

To hear many politicians talk about it, the only way to address the country’s deficit problem is to increase taxes. Many would no doubt be surprised to find that you could also reduce the deficit by spending less.

Of course, there are some legitimate functions of government that do need money, so taxes are necessary. However, if you’ve been paying attention to the political rhetoric, you know that there is concern that some – the 1 percent ( that is, the very rich) – aren’t paying their “fair share.”

Unfortunately, I’ve never heard anyone from the president on down explain exactly how much of a person’s income constitutes his or her “fair share.” As far as I can tell, a rich person’s “fair share” simply means “more.”

And although it is easy to earn points (and, I’m sure the president hopes, votes) with the class warfare rhetoric, as William Boetcker (and not Abraham Lincoln, as commonly attributed) asserted, “You cannot help the poor man by destroying the rich. You cannot further the brotherhood of man by inciting class hatred.”

Anyway, I did a little research, and, if your only source of information is the nightly news, you might be surprised at what I found.

According to an IRS report by Ed Feulner of the Heritage Foundation, the wealthiest 1 percent of American households in our country pays more than 38 percent of all income taxes. Further, the we 10 percent of Americans (or those making at least $114,000 in 2008) pay 70 percent of all taxes.

Going further down the line, the top 25 percent (those earning at least $67,280 in 2008) pay 86 percent of the income tax bill. As Feulner concludes, that doesn’t leave much of a tax burden for everyone else.

In fact, nearly half (49.5 percent) of Americans pay no income tax at all. Is 0% their “fair share”?

Now, no one likes to pay taxes less than I do (and in case anyone was wondering, my family’s income falls easily into the bottom 99 percent), but it seems to me like those at the top are paying at least their fair share.

If you are still not convinced, I came across an interesting illustration this week that may help you understand the implications of the idea of a “fair share” when it comes to taxes.

(And for my more conservative readers, remember that this story is about taxes, not beer.)

Suppose that every day, 10 men go out for beer, and the bill for all 10 comes to $100. If they paid their bill the way we pay our taxes, it would go something like this…

The first four men (the poorest) would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh would pay $7; the eighth would pay $12; the ninth would pay $18; and the 10th man (the richest) would pay $59.

So, that’s what they decided to do. The 10 men drank in the bar every day and seemed quite happy with the arrangement until one day when the owner threw them a curveball.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the 10 men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected; they would still drink for free. But what about the other six? How could they divide the $20 windfall so that everyone would get his fair share?

The bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing, saving him 100 percent.

The sixth man now paid $2 instead of $3, for a savings of 33 percent and the seventh now paid $5 instead of $7, a 28 percent savings. The eighth man now paid $9 instead of $12 (25 percent), the ninth now paid $14 instead of $18 (22 percent) and the 10th now paid $49 instead of $59 (16 percent savings).

Each of the six was better off than before, and the first four continued to drink for free. However, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 savings,” the sixth man said, “but he,” pointing to the 10th man, “got $10!”

“Yeah, that’s right,” the fifth man said. “I only saved a dollar, too. It’s unfair that he got ten times more benefit than me!”

“That’s true!” the seventh man shouted. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” the first four men yelled in unison, “We didn’t get anything at all. This new system exploits the poor!”

Working themselves into a frenzy, the nine men surrounded the 10th and beat him up.

The next night the 10th man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, friends, is how our tax system works.

The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.

Tax them too much and attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking somewhere else.

Some today decry the “unfairness” of our capitalistic system, because not everyone ends up with the same thing.

But as Winston Churchill said, “The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.”

Remember that this election cycle whenever you hear a politician talk about someone else’s fair share.

 

Chuck Souder is on staff at Shelby Christian Church. He can be reached at csouder@shelbychristian.org. You can find previous columns at www.SentinelNews.com/columnsor by searing the Web site for “Souder.”