The Erstwhile Conservative has performed a good service for us on his recent blog, Are The Rich Taxed Enough?, by analyzing the issue of taxes (of all kinds) and their burden on the different income segments of society. I started a comment and then realized that I had more to say on the subject.
Some might argue that payroll taxes ought not be bundled with the others because they are intended for specific purposes. However, after receiving payroll taxes, Congress routinely “borrows” that money through the use of “special” Treasury notes and spends it just like its other revenue. Therefore its inclusion here is quite proper. So are sales tax and gasoline tax.
The trope that the bottom half of wage earners pay little or no income tax has become an enduring and effective sound bite for the political right, and that’s misleading because of what the statement omits. It is a clever use of a partial truth.
Sales taxes deserve special attention. I think of them as a kind of stealth tax. (Would it not be interesting if there were a law requiring that all advertised prices include all taxes and fees?) Sales taxes have crept up steadily during my lifetime. For sure, they accomplish a lot and when they benefit almost everyone, such as the recent 1/4 of 1% parks and sewer levy, I can bring myself to vote for them, as I did that one. But sales tax is approaching 10% in many localities, and as Duane properly points out, that becomes very significant to a family that spends almost all its income every month. I suggest too, that a sales tax that tops 10%, and I know of none that does, would become much more noticeable to the average consumer.
Finally, no matter how one views tax issues, what is most significant to me in money matters is discretionary income. Money, as I’ve suggested before, is basically an accounting mechanism that allows us to track contributions and receipts of labor and material things among everyone. But when the smoke clears and the dust settles, after all the taxes, all the deductions, all the tax evasion, all the black-market untaxed transactions, all the tax breaks, all the tax credits, all the hidden tariffs, all the outsourced jobs, what is most significant is how much discretionary income is left to each segment or individual.
I believe there is consensus that the current disparity of discretionary income between the top few percent and the rest is historically high (at least for modern history). So, while we bloggers debate the nuances of such things as kinds of taxes as Duane does in his post, and I’m grateful for his work in doing so, let’s not lose sight of the forest for the tax trees. Tax reform may be a chimera, but if it ever does come to pass there is a world of mischief that can be eliminated that way, and a fundamental goal should be tax fairness that anyone can understand. (Bi-partisan commission, anyone?)
I see that Anson Burlingame has raised a related issue in his comment on my previous post, An Historic Failure, i.e., the question of whether the riots in the U.K. are related to the bad economy and austerity measures there. While I agree that there is no proof of such, such a thing is hard to prove by its very nature. I suppose one would have to have evidence of some kind of conspiracy. But is it not interesting that many of the hoodlums are using Blackberrys which have a texting system that can not be geographically tracked? (Last night’s evening news had that report.)
Joblessness and street violence have been firmly related by economists to income disparity throughout the modern era, including several of the French revolutions and the Watts riots in LA. I for one see the most violent destruction in the U.K. since WW II, which is what the media is calling it, as a big cautionary message.