Jon Keller comes out with an interesting take on why the public - save some really die-hard greenies with some money to burn - won't buy a $40,000 electric plug-in automobile.
The Volt is not the modern-day Edsel by a longshot, but even though electricity is cheap and plentiful and we can plug in any other device to recharge without a second thought, the thoughts of getting stuck in the middle of nowhere without any power - say, a busy highway - scares people. That's what also killed the GM EV-1 - not the fact that it didn't emit noxious fumes, but the prospect of finding a plug where there wasn't one and running out of battery power.
Furthermore, where there are far more fuel-efficient vehicles out there for a fraction of the price of a Volt, it's little wonder why, even with a $7,500 energy credit, why people are hesitant to buy them. Sure, buying gas would be expensive, but it would certainly beat having to call AAA for a charge back home. However, those that can afford the $32,500 are likely more affluent and can afford to buy a Volt (or a Leaf or even a Honda Prius). The Volt is a niche car, a novelty for the smug, something you show your friends in the hopes they get jealous because they're driving around in their less fancy car.
It was the same thing with calculators in the '70s - even the most basic calculator cost $100, which in today's dollars would be around $600 - but now that calculators are mass produced, that same $100 can buy a calculator with far better power and functions - I had a TI-85 that I used for fifteen years - and a basic calculator can be had for under a dollar in some places, thanks to cheaper costs in technology and the ability to mass produce. It also explains why when in the '90s, 2GB of flash memory cost over $100; now a thumb drive with the same amount can be had for less than $10 - again, thanks to mass production.
If the car companies can mass-produce electric vehicles, you will then see the price of an electric vehicle decrease appreciably. Then you'll have the $15,000 electric car that can charge from no battery power to 100% in 2 hours, run 250 miles on a single charge, and have the MPG equivalent of 150. It isn't here yet, but give it time and it will be.
2/11/2012
Why BBC and PBS are "worlds apart"
Imagine for a moment that you could have the best show on American television. It's critically acclaimed, has a giant fan following, and the network wants to have several spinoffs.
The catch? You have to pay $600 a year for the privilege. If you don't pay this $600 a year, the TV Enforcement Police will come and take you to jail.
Sounds silly, right? Not if you're in Britain. An "As You Were Saying" column in the Saturday Boston Herald breathlessly extols the "fresh and innovative" programming of the BBC over the "stuffy, predictable" PBS. Britons pay $230 a year for a TV license, which is a mandatory tax which is paid to the British government and is considered a criminal offense to try to evade it.
Unlike Britain, however, Americans have the luxury of not paying a TV tax to fund PBS, as PBS is already funded by taxpayers - partly by the government and partly by viewer donations through fundraising drives. The programming might be a little less than the BBC offers, but it's still good programming nonetheless.
Furthermore, the BBC has had its share of controversies and criticisms - thanks to its left-leaning political bias. Britons may not mind forking over $8 billion a year for improved programming, but when that money is used to promote political agendas from its directors and viewers that some Britons don't believe in, then it's no wonder Britons are not too keen on paying an excise tax just to watch TV.
If PBS were to take the licensing tax route, The Corporation for Public Television - PBS's parent - could demand that everyone pay for their network programming through a TV tax. In some respects the programming might improve, but at the expense of having the political opinions of the CPB overshadowing the next Office or Doctor Who. It would also result in many viewers and non-viewers going up in arms against paying for something they don't need, want, or use - which is the reason why PBS doesn't have a big a budget as BBC and must engage in such tactics as selling $20 DVD's for $240 and to have Sesame Street characters plead that they'll be joining Mr. Hooper in Heaven if PBS doesn't get funding.
The commercial and cable networks self-sustain through advertising and cable fees; they can cancel shows when they are not bringing in viewers, even if they are "critically acclaimed" and are much better than the various permutations of lowest-common-denominator TV, designed to give people their 15 minutes of fame before disposing them. PBS does broadcast commercials to a point, but even so, some upper-class viewers would immediately object to having McDonald's ads mixed in with Dora the Explorer, or ads for various drugs sponsoring This Old House.
If the intent of the writer was to promote a TV tax to fund PBS, he might want to read up on why the American Revolution got its roots - from the tax on tea.
The catch? You have to pay $600 a year for the privilege. If you don't pay this $600 a year, the TV Enforcement Police will come and take you to jail.
Sounds silly, right? Not if you're in Britain. An "As You Were Saying" column in the Saturday Boston Herald breathlessly extols the "fresh and innovative" programming of the BBC over the "stuffy, predictable" PBS. Britons pay $230 a year for a TV license, which is a mandatory tax which is paid to the British government and is considered a criminal offense to try to evade it.
Unlike Britain, however, Americans have the luxury of not paying a TV tax to fund PBS, as PBS is already funded by taxpayers - partly by the government and partly by viewer donations through fundraising drives. The programming might be a little less than the BBC offers, but it's still good programming nonetheless.
Furthermore, the BBC has had its share of controversies and criticisms - thanks to its left-leaning political bias. Britons may not mind forking over $8 billion a year for improved programming, but when that money is used to promote political agendas from its directors and viewers that some Britons don't believe in, then it's no wonder Britons are not too keen on paying an excise tax just to watch TV.
If PBS were to take the licensing tax route, The Corporation for Public Television - PBS's parent - could demand that everyone pay for their network programming through a TV tax. In some respects the programming might improve, but at the expense of having the political opinions of the CPB overshadowing the next Office or Doctor Who. It would also result in many viewers and non-viewers going up in arms against paying for something they don't need, want, or use - which is the reason why PBS doesn't have a big a budget as BBC and must engage in such tactics as selling $20 DVD's for $240 and to have Sesame Street characters plead that they'll be joining Mr. Hooper in Heaven if PBS doesn't get funding.
The commercial and cable networks self-sustain through advertising and cable fees; they can cancel shows when they are not bringing in viewers, even if they are "critically acclaimed" and are much better than the various permutations of lowest-common-denominator TV, designed to give people their 15 minutes of fame before disposing them. PBS does broadcast commercials to a point, but even so, some upper-class viewers would immediately object to having McDonald's ads mixed in with Dora the Explorer, or ads for various drugs sponsoring This Old House.
If the intent of the writer was to promote a TV tax to fund PBS, he might want to read up on why the American Revolution got its roots - from the tax on tea.
1/06/2012
Making memories - the last day in Hyde Park
I was going to "plead the Fifth" of why I left Hyde Park, but now
that I'm here in West Roxbury, I feel that I should tell you why I (and
my mother) left.
After thirty-six years, Hyde Park just wasn't the same anymore. When people who lived here long ago remark that it looks like a ghost town, with hardly any vibrancy and reason to linger, it's time to go. If residents (and the police) think you're more an interloper than a resident, you know the neighborhood you grew up in isn't yours anymore. Hyde Park is still a bedroom community, but over the years there's a stark, unspoken line divided by the overcrowded, only-line-in-town Route 32 buses and the infrequent, expensive, yet designed-for-the-suburban-resident Commuter Rail.
After two days of moving back and forth between the old and new houses (I was tired, nay, exhausted, from hauling in boxes after boxes after boxes of stuff - and in significant pain), yesterday was the final day I would be at the old house, just to clean up the last things there. My brother came to see the house for the last time before he went back to his apartment in Roslindale.
While my mother cleaned out the house on Summer Street, I volunteered to walk to Central Hardware in Cleary Square to get new keys for the new house. Mainly, the walk was a way to clear my head, escape from all the stress of the move and the leave, and have a moment to myself other than constantly load and unload things out of boxes.
During my youth, I had walked to Cleary Square to get food, pizza, sundries, etc. All the old stores had gone, replaced by tacky stores and many empty storefronts. Even the bus stop, which for many years had conveniently been placed in front of what had been Mama Mia's and Van's, had been moved to in front of Most Precious Blood, which is now a charter school.
I got my keys, and walked back to Tedeschi's for a New York Post and some lottery tickets. I walked down Summer Street for the final time, like I had done many times late at night coming home from the Stoughton train. I came up the stairs for the last time as my mother finally cleaned everything up so the new tenant could move in.
After I turned in my keys and we locked the door for the last time, we visited my grandfather, and by then I knew the end was coming. When we had our last family Thanksgiving at Summer Street, I felt no emotion other than elation. This time, I beginning to choke up. Not cry like a banshee, but have that hefty, lump-in-the-throat feeling with stinging in the eyes. I quickly walked back to the car once we were done.
We got in the car, drove through the potholes of Parrott St for the last time, and then we were gone. Only the ghosts of memories past - good and bad - remained behind.
After thirty-six years, Hyde Park just wasn't the same anymore. When people who lived here long ago remark that it looks like a ghost town, with hardly any vibrancy and reason to linger, it's time to go. If residents (and the police) think you're more an interloper than a resident, you know the neighborhood you grew up in isn't yours anymore. Hyde Park is still a bedroom community, but over the years there's a stark, unspoken line divided by the overcrowded, only-line-in-town Route 32 buses and the infrequent, expensive, yet designed-for-the-suburban-resident Commuter Rail.
After two days of moving back and forth between the old and new houses (I was tired, nay, exhausted, from hauling in boxes after boxes after boxes of stuff - and in significant pain), yesterday was the final day I would be at the old house, just to clean up the last things there. My brother came to see the house for the last time before he went back to his apartment in Roslindale.
While my mother cleaned out the house on Summer Street, I volunteered to walk to Central Hardware in Cleary Square to get new keys for the new house. Mainly, the walk was a way to clear my head, escape from all the stress of the move and the leave, and have a moment to myself other than constantly load and unload things out of boxes.
During my youth, I had walked to Cleary Square to get food, pizza, sundries, etc. All the old stores had gone, replaced by tacky stores and many empty storefronts. Even the bus stop, which for many years had conveniently been placed in front of what had been Mama Mia's and Van's, had been moved to in front of Most Precious Blood, which is now a charter school.
I got my keys, and walked back to Tedeschi's for a New York Post and some lottery tickets. I walked down Summer Street for the final time, like I had done many times late at night coming home from the Stoughton train. I came up the stairs for the last time as my mother finally cleaned everything up so the new tenant could move in.
After I turned in my keys and we locked the door for the last time, we visited my grandfather, and by then I knew the end was coming. When we had our last family Thanksgiving at Summer Street, I felt no emotion other than elation. This time, I beginning to choke up. Not cry like a banshee, but have that hefty, lump-in-the-throat feeling with stinging in the eyes. I quickly walked back to the car once we were done.
We got in the car, drove through the potholes of Parrott St for the last time, and then we were gone. Only the ghosts of memories past - good and bad - remained behind.
10/19/2011
Student loans = wage slavery
Here's a story for Hub Blog in regard to student loans:
When I began paying off my undergraduate loans in 1995 (one year after I graduated from college and about six months after I dropped out of grad school), I paid about $355 a month.
Now, $355 doesn't seem like much, but when you're earning $8-$9 in temp jobs; get laid off (and disinvited from the company Christmas Party) on a job that paid $7.50 an hour, and have to live at your parents' home for several years - meaning no starting a family, no apartment, no discretionary money, no parties, no real vacations, no transportation, no 401(k) contributions - $355 is HUGE.
Thankfully for me, I was hired at a company (where I have celebrated my 15th anniversary), and I took advantage of that. $255 of that money was in MEFA loans, split up into four coupons. The other $100 a month was Sallie Mae. The MEFA loans were forgiven in 2005 thanks to the bonds being paid off; and then the Sallie Mae loans were paid off in February 2008.
I wholeheartedly agree: the student loan complex all but encourages wage slavery - where every single dime someone earns is endorsed to the loan company for decades. When a student loan payment is the same amount as a rent payment (at least in Boston), and graduates are only making enough to have pocket change as discretionary income, it's time to thoroughly investigate who's making a mint off of graduates.
Quite an expensive keg party - one that might be paid off when you're ready to retire.
When I began paying off my undergraduate loans in 1995 (one year after I graduated from college and about six months after I dropped out of grad school), I paid about $355 a month.
Now, $355 doesn't seem like much, but when you're earning $8-$9 in temp jobs; get laid off (and disinvited from the company Christmas Party) on a job that paid $7.50 an hour, and have to live at your parents' home for several years - meaning no starting a family, no apartment, no discretionary money, no parties, no real vacations, no transportation, no 401(k) contributions - $355 is HUGE.
Thankfully for me, I was hired at a company (where I have celebrated my 15th anniversary), and I took advantage of that. $255 of that money was in MEFA loans, split up into four coupons. The other $100 a month was Sallie Mae. The MEFA loans were forgiven in 2005 thanks to the bonds being paid off; and then the Sallie Mae loans were paid off in February 2008.
I wholeheartedly agree: the student loan complex all but encourages wage slavery - where every single dime someone earns is endorsed to the loan company for decades. When a student loan payment is the same amount as a rent payment (at least in Boston), and graduates are only making enough to have pocket change as discretionary income, it's time to thoroughly investigate who's making a mint off of graduates.
Quite an expensive keg party - one that might be paid off when you're ready to retire.
5/08/2011
Who gives a damn what they think of us? Osama bin Laden death edition
Maureen Dowd (via Hub Blog) is exactly right on the end results of Osama bin Laden being killed by United States Navy Seals, under the direction of President Barack Obama.
What says even more about OBL's death is that there's not only evil still in the world, but cowardice by hand-wringers and the tut-tutters are decrying this as "an unjustified killing." That OBL was in a wealthy suburb south of Islamabad, is a huge clue to OBL's own ego - he loved being a PR man as much as Public Enemy #1. Those who protected OBL - the wealthy, the government of Pakistan, NGOs with their own twisted versions of utopia - are equally guilty of giving OBL a haven, as he was likely their meal ticket to perpetuate and justify their own myths, to raise funds, or to simply be one of his propaganda points. Bringing OBL to trial, rather being buried undersea, would have generated far more publicity and fervor for him and his group than to satisfy the blatant ignorance of those who think celebrations are barbaric and medieval.
In fact, maybe this hue and cry is the upper classes of our world chagrined that the lower and middle classes took out one of their fellow travelers - an evil, bloodthirsty thug who ruled with an iron fist, just like the aristocrats of the past did. They dream of a day where they can rule without question, can execute people for even the slightest bit of disagreement, and take everything they can from those who are too weak to resist.
The myth of Che Guevara as the hero to the oppressed was smashed to bits once it was discovered he was a bloodythirsty murderer of epic proportions as he murdered anyone who got in his way. Like Osama bin Laden, he came from an aristocratic, upper-class background; he too was executed when he was caught.
We're going to celebrate the death of evil to the end of days - whether it's the arrogant politician who was arrested and jailed for lining his own pockets, the killer who gets hundreds of consecutive life terms plus a few more 99 year terms for good measure, the dictator who draws his last painful breath in his bed from cancer, the foaming-at-the-mouth agitator who gets caught with their pants down on something trivial, or the rogue banker who made the wrong bet and caused an economy to collapse.
A lot of countries praised the USA, but some said "We're glad OBL's gone, but terror still exists." That caution is completely acceptable, and is more out of wisdom than of fear. Celebrating and shouting "USA!" is also a catharsis of the horrors of September 11, not a sign of jingoism. And celebrate we should, until we're too hoarse to shout and too tired to lift our arms. Once the celebrations are through, it's a sign to move forward.
What says even more about OBL's death is that there's not only evil still in the world, but cowardice by hand-wringers and the tut-tutters are decrying this as "an unjustified killing." That OBL was in a wealthy suburb south of Islamabad, is a huge clue to OBL's own ego - he loved being a PR man as much as Public Enemy #1. Those who protected OBL - the wealthy, the government of Pakistan, NGOs with their own twisted versions of utopia - are equally guilty of giving OBL a haven, as he was likely their meal ticket to perpetuate and justify their own myths, to raise funds, or to simply be one of his propaganda points. Bringing OBL to trial, rather being buried undersea, would have generated far more publicity and fervor for him and his group than to satisfy the blatant ignorance of those who think celebrations are barbaric and medieval.
In fact, maybe this hue and cry is the upper classes of our world chagrined that the lower and middle classes took out one of their fellow travelers - an evil, bloodthirsty thug who ruled with an iron fist, just like the aristocrats of the past did. They dream of a day where they can rule without question, can execute people for even the slightest bit of disagreement, and take everything they can from those who are too weak to resist.
The myth of Che Guevara as the hero to the oppressed was smashed to bits once it was discovered he was a bloodythirsty murderer of epic proportions as he murdered anyone who got in his way. Like Osama bin Laden, he came from an aristocratic, upper-class background; he too was executed when he was caught.
We're going to celebrate the death of evil to the end of days - whether it's the arrogant politician who was arrested and jailed for lining his own pockets, the killer who gets hundreds of consecutive life terms plus a few more 99 year terms for good measure, the dictator who draws his last painful breath in his bed from cancer, the foaming-at-the-mouth agitator who gets caught with their pants down on something trivial, or the rogue banker who made the wrong bet and caused an economy to collapse.
A lot of countries praised the USA, but some said "We're glad OBL's gone, but terror still exists." That caution is completely acceptable, and is more out of wisdom than of fear. Celebrating and shouting "USA!" is also a catharsis of the horrors of September 11, not a sign of jingoism. And celebrate we should, until we're too hoarse to shout and too tired to lift our arms. Once the celebrations are through, it's a sign to move forward.
4/25/2011
Getting rid of tax envy II
In the previous blog entry, I wrote about the people who want high earners to pay higher taxes. I alluded to that kind of thought as tax envy - that the low earners want the high earners to pay up more.
Here are some things that will never fly: total confiscation of income above a certain level (communist!); national income taxes (regressive!), flat taxes (super regressive!) and value added taxes (double secret super regressive!) Income redistribution raises a lot of hackles, and sometimes ends up being entirely circular, defeating the purpose (i.e. the money taken from the high earners goes to the low earners as some form of "social justice" payment, and the government charges sin taxes, paid by the poor earners, and spirits it back to the government).
Rob Sama has a fantastic outline of what he'd do with the current tax code, but I have some ideas to eliminate (or at least reduce) tax envy is as follows.
1. Keep the progressive tax structure, but adjust the tax rates and broaden the income levels they fall under. The rates would be as follows:
- 5% absolute minimum tax (deducted from any refunds; explained below)
- 10% (income $15,600 and under)
- 20% ($15,601 to $78,000)
- 30% ($78,001 to $390,000)
- 40% ($390,001 to $1,560,000)
- 50% ($1,560,001 and above).
For head of the household, multiply by 1.25; for married filing jointly, multiply by 1.5.
Also, $15,600 is the minimum wage per year if you work 40 hours a week and 52 weeks a year, not including holidays. If the minimum wage increases or decreases, the structure also increases.
2. Everyone who works pays something - no ducking the IRS. I would propose an absolute minimum tax of 5% for people who have $100 or less in taxable income - and it's deducted from your refund. If you earned $20,000 in a year and had no tax liability, yet you had $3,000 withheld, the IRS will take $150 from your refund, leaving you with $2,850. If you earned $100,000 in a year and had a tax liabillity of $50, and had $15,000 withheld for the year, your absolute minimum tax would be $5,000 and would be deducted from your refund of $15,000, leaving you with $10,000.
The people who claim zero tax liability at both ends of the earning spectrum is part of the reason for tax envy, and curing that is as simple making sure no one escapes the IRS.
3. Change the Alternative Minimum Tax into the Alternative Income Tax, with a flat rate of 55%. However, unlike the current alternative minimum tax, which has rates of 26% and 28%, filers can choose to this higher tax, but there would be no exceptions, deductions or deferments allowed. The AIT would be applied to gross income, including income, stocks, bonds, investments, and other items. This would give those who truly want to give more a chance, but at a steeper rate.
Example: You've earned $1 million in a year. You decide to file the AIT instead of paying at 35%. You pay the government $550,000.
These ideas might not satisfy everyone, but it's a start.
Here are some things that will never fly: total confiscation of income above a certain level (communist!); national income taxes (regressive!), flat taxes (super regressive!) and value added taxes (double secret super regressive!) Income redistribution raises a lot of hackles, and sometimes ends up being entirely circular, defeating the purpose (i.e. the money taken from the high earners goes to the low earners as some form of "social justice" payment, and the government charges sin taxes, paid by the poor earners, and spirits it back to the government).
Rob Sama has a fantastic outline of what he'd do with the current tax code, but I have some ideas to eliminate (or at least reduce) tax envy is as follows.
1. Keep the progressive tax structure, but adjust the tax rates and broaden the income levels they fall under. The rates would be as follows:
- 5% absolute minimum tax (deducted from any refunds; explained below)
- 10% (income $15,600 and under)
- 20% ($15,601 to $78,000)
- 30% ($78,001 to $390,000)
- 40% ($390,001 to $1,560,000)
- 50% ($1,560,001 and above).
For head of the household, multiply by 1.25; for married filing jointly, multiply by 1.5.
Also, $15,600 is the minimum wage per year if you work 40 hours a week and 52 weeks a year, not including holidays. If the minimum wage increases or decreases, the structure also increases.
2. Everyone who works pays something - no ducking the IRS. I would propose an absolute minimum tax of 5% for people who have $100 or less in taxable income - and it's deducted from your refund. If you earned $20,000 in a year and had no tax liability, yet you had $3,000 withheld, the IRS will take $150 from your refund, leaving you with $2,850. If you earned $100,000 in a year and had a tax liabillity of $50, and had $15,000 withheld for the year, your absolute minimum tax would be $5,000 and would be deducted from your refund of $15,000, leaving you with $10,000.
The people who claim zero tax liability at both ends of the earning spectrum is part of the reason for tax envy, and curing that is as simple making sure no one escapes the IRS.
3. Change the Alternative Minimum Tax into the Alternative Income Tax, with a flat rate of 55%. However, unlike the current alternative minimum tax, which has rates of 26% and 28%, filers can choose to this higher tax, but there would be no exceptions, deductions or deferments allowed. The AIT would be applied to gross income, including income, stocks, bonds, investments, and other items. This would give those who truly want to give more a chance, but at a steeper rate.
Example: You've earned $1 million in a year. You decide to file the AIT instead of paying at 35%. You pay the government $550,000.
These ideas might not satisfy everyone, but it's a start.
Getting rid of tax envy
I write this blog for free. Gratis. I get no income from it, and the only value I put on it is that people can read it.
Whenever I hear grumblings and sniffs that the higher earners* should be taxed more, and supporting propaganda such as "X% of higher earners pay Y% of all tax while Z% of low earners pay nothing," "The zillionaires should have their earnings (taxed heavily, confiscated above a certain level)," and "the fair tax/flat tax/Richard Simmons Shake Your Left Leg and Rub Your Tummy tax is regressive to the poor, the blind, and David Letterman", there is one word that sticks out like a sore thumb: Envy.
Envy is a powerful thing. Little wonder why the lower classes cast a huge green eye at the upper classes, and wish they were taxed to the stratosphere.
But there's a problem with punishing the high earners with punitive taxes, even though in the past, it was acceptable to have an income tax rate of 90% during WWII and a 70% rate in the 1960s and people were just as prosperous. The problem is that when there's a disincentive in place to earn money, the ambition to avoid that tax will go up exponentially. Whether it's plowing it into investments, putting it into an overseas tax shelter, or giving it away to charity, the high earners will find every which way but loose to avoid having that money snared by the IRS. And, when the high income earner gets fired, laid off or their business heads overseas, that narcotic tax income that the IRS has enjoyed evaporates - usually because the business itself cannot sustain handing over a high corporate tax rate plus salaries, so the jobs are either eliminated to save money or are sent overseas to countries where the tax rates are far lower and the employment rules aren't as strict.
The lower earners lose also, because to paraphrase John Scarne, Old Man Tax Collector will find a way to get their money, and it's as high or higher than the upper tax bracket of 35%. The lower earners think they pay no income tax, but they pay high taxes on cigarettes (45-70% effective), gasoline (10%), cell phone bills (12-20%), excise taxes, sin taxes, and many others. So while it's great to get all that money IRS withheld in your paycheck due to tax credits, all it takes is a sick kid or a major car repair (or a missed rent payment) to wipe that refund out in a jiffy. Meanwhile, even though the high earner is paying 75% to the government in income tax, they have the ability to save good chunks of their income and can live comfortably, whereas the low income earners are forced to live paycheck to paycheck while paying a ton in hidden taxes.
Ironically, when the lower income earners move up and make comfortable salaries, the revenge fantasies go away. They don't care if the guy across the street has four BMWs and just returned from a 60 day cruise around the world; so long as the mortgage is paid and the credit cards are current, that's all that matters. Even the former higher earners, when they lose their job and find a new one that pays less, get the ever-vigilant eye of the IRS off their backs because they've gone down two or three brackets. Sure, you're not earning as much as you did, but so long as the mortgage is paid and the credit cards are current, that's all that matters.
In my next entry, some ideas to reduce tax envy.
* Rather than using "the rich" as a pejorative term, "high earner" is a little more accurate to me because I'm not putting a random dollar amount on how "rich" a person can be.
Whenever I hear grumblings and sniffs that the higher earners* should be taxed more, and supporting propaganda such as "X% of higher earners pay Y% of all tax while Z% of low earners pay nothing," "The zillionaires should have their earnings (taxed heavily, confiscated above a certain level)," and "the fair tax/flat tax/Richard Simmons Shake Your Left Leg and Rub Your Tummy tax is regressive to the poor, the blind, and David Letterman", there is one word that sticks out like a sore thumb: Envy.
Envy is a powerful thing. Little wonder why the lower classes cast a huge green eye at the upper classes, and wish they were taxed to the stratosphere.
But there's a problem with punishing the high earners with punitive taxes, even though in the past, it was acceptable to have an income tax rate of 90% during WWII and a 70% rate in the 1960s and people were just as prosperous. The problem is that when there's a disincentive in place to earn money, the ambition to avoid that tax will go up exponentially. Whether it's plowing it into investments, putting it into an overseas tax shelter, or giving it away to charity, the high earners will find every which way but loose to avoid having that money snared by the IRS. And, when the high income earner gets fired, laid off or their business heads overseas, that narcotic tax income that the IRS has enjoyed evaporates - usually because the business itself cannot sustain handing over a high corporate tax rate plus salaries, so the jobs are either eliminated to save money or are sent overseas to countries where the tax rates are far lower and the employment rules aren't as strict.
The lower earners lose also, because to paraphrase John Scarne, Old Man Tax Collector will find a way to get their money, and it's as high or higher than the upper tax bracket of 35%. The lower earners think they pay no income tax, but they pay high taxes on cigarettes (45-70% effective), gasoline (10%), cell phone bills (12-20%), excise taxes, sin taxes, and many others. So while it's great to get all that money IRS withheld in your paycheck due to tax credits, all it takes is a sick kid or a major car repair (or a missed rent payment) to wipe that refund out in a jiffy. Meanwhile, even though the high earner is paying 75% to the government in income tax, they have the ability to save good chunks of their income and can live comfortably, whereas the low income earners are forced to live paycheck to paycheck while paying a ton in hidden taxes.
Ironically, when the lower income earners move up and make comfortable salaries, the revenge fantasies go away. They don't care if the guy across the street has four BMWs and just returned from a 60 day cruise around the world; so long as the mortgage is paid and the credit cards are current, that's all that matters. Even the former higher earners, when they lose their job and find a new one that pays less, get the ever-vigilant eye of the IRS off their backs because they've gone down two or three brackets. Sure, you're not earning as much as you did, but so long as the mortgage is paid and the credit cards are current, that's all that matters.
In my next entry, some ideas to reduce tax envy.
* Rather than using "the rich" as a pejorative term, "high earner" is a little more accurate to me because I'm not putting a random dollar amount on how "rich" a person can be.
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