The "progressive" taxman cometh
By Henry Lamb
A farmer told two men they each could have all the watermelons they could harvest in four hours. The first man harvested 100 melons; the second man harvested 200 melons. Before they loaded their trucks, an IRS official appeared and told the first man the government required 28 of his melons as tax. The second man, watching the encounter, began counting out 56 melons for the taxman. The IRS official said to the second man: "no, that's not enough, the government requires 70 of your melons."
Is this fair? Is this right? Is this smart?
Why should the second man, who had the ability and the will to produce twice as much as the first man, be penalized for his effort?
Now meet Joe Hardworker. As a young man, Joe worked hard, paid every penny of tax his government required, and still managed to buy some land as an investment. Now Joe is old. He sold his land for a respectable profit, with the hope it would be sufficient for his retirement. An IRS official appeared, and told Joe he must pay the government 15% of his profit as capital gains tax.
"Why?" asked Joe. "I paid tax on the money I earned to buy the land; the government did nothing to increase the value of the land, why does the government deserve any portion of my profit?" The taxman replied: "just be thankful you sold your land before Barack Obama becomes president. Your tax would be nearly twice as much after he's elected."
Now meet Sara Businesslady. She started a small business ten years ago, producing packaged cookies baked from her grandmother's recipe. She has 23 employees, and pays better wages than local retail outlets. She must first pay a Certified Public Accountant several thousand dollars to tell her that she must pay the government 25% of her profits. Had her business been more successful, she would have had to pay an even higher rate.
Here is Mr. Ten-Forty. On the first day of April, he began collecting his bank statements, receipts, and his IRS forms. The instruction book is at least four times longer than the U.S. Constitution. Aside from the several pages of forms in the package, he has to download half-a-dozen additional forms. After investing at least 15 hours of frustrating effort, looking for every possible deduction, he discovers that he must pay 28 percent of his income to the government. Had he earned more income, he would have been punished by having to pay an even higher rate.
In an ideal world, every person and every corporation would pay the same tax rate on their income, with no deductions for anything. A universal flat tax rate would be fair, and for most people, the rate would be lower than the rate now being paid. A single tax rate would reduce the IRS bureaucracy to a mere shadow of itself. Tax attorneys and CPAs would need to find productive work. First-time employees and low-wage earners could assume the same tax responsibility everyone else bears. Tax returns could, indeed, be no more complicated than a postcard.
This, of course, is not a perfect world. The "progressive" tax rate system arises directly from the socialist philosophy "From each according to his ability; to each according to his need." Despite all the political rhetoric about fairness, there is nothing fair about the progressive tax system.
Barack Obama thinks it is fair to increase the tax on the man who harvests 200 watermelons, and reduce the tax on the man who harvests 100 watermelons, using the flawed logic that since the second man has more, he can afford it. This logic ignores the principle that what a person earns should be his. It ignores the principle of equal opportunity, and equal burden. And, perhaps worst of all, it penalizes productivity and success.
Progressive politicians are clamoring to impose "windfall" profit taxes on big oil companies. They are quick to recite the $36 billion in profits big oil reported during the first quarter of 2008. But they fail to mention that this amounts to less than eight percent of gross income. If progressives can justify this tax, then why is the tax not applied to every corporation that earns eight percent profit, or more? During the last quarter of 2007, Microsoft earned more than 40 percent profit on gross income. There was no cry for a "windfall" profit tax on Microsoft.
U.S. tax policy is horrendous, and every time Democrats gain control, the tax policy worsens. This issue should be among the highest priorities for every voter in 2008.
Get weekly updates about new issues of ESR!