A Few Things to Consider on April 15th

Back then long time ago when grass was green
Woke up in a daze...

...Back when income tax was all we had...

...And while you're in this world

The fuzz gonna come and claim you...

Yes it's April 15^th again and in the United States that means income taxes are due.

Of course because our tax system is such a mess and the Congress cannot reform it, instead they have had to come up with a myriad of ways to offset the tax burden.
Most countries have adopted progressive tax structures, taxing higher incomes at higher rates. A guy who makes a million a year can lose $300,000 and still have $700,000 left, while the guy making $50,000, if he loses $15,000 (which is being taxed at the same rate) is left with only $35,000. It hurts him far more.

So most countries will hit the wealthier guy with a higher tax rate. He can pay more and still have plenty left.

And while many decry the progressive tax in this country few seem to be aware of the many loopholes and ways the wealthy can escape the burden.

Technically our Social Security tax structure is regressive. Normally we are required to pay 15%, but for most people their employer pays half of this. Self-employed people (like me) are responsible for the full 15%... at least most of the time. Under Obama's first few years I only had to pay a portion of that.

But a lot of people don't realize that once you make a little over $100,000... the Social Security tax burden stops.

So if you're making $100,000, you have to pay about $15k in Social Security tax.

But the guy who makes a $1 million a year... he pays about $15k in Social Security tax.

That's a regressive tax structure. The wealthy are effectively paying a lower rate. The guy making a million pays a lower rate than the guy making $100,000 and the guy making $10 million pays the same amount which for him is an even lower rate.

I hope everyone knows that.

Why? Because people who make that kind of money don't care about Social Security anyway. It's pennies to them. They don't want to pay it.

If this situation was rectified it would solve all of the Social Security funding problems in the blink of an eye but would also represent a huge tax increase on the wealthy.

Even the term 'income' can be tricky. That's a technical term with an exact meaning.

I claim 'income' but I don't claim 'wages' like most people who receive a W-2 at the end of the year. I don't get one of those. Wages are income too, but they must be differentiated from money made on investments and property sales etc...

That's Capital Gains.

There are a lot of wealthy people (like Mitt Romney) who don't get paid in wages, or technically in terms of income. Their money is earned through investments, trades and sales. That's all Capital Gains and is taxed at a much lower rate... often around 15%. It varies due to the terms.

Newt Gingrich and others have argued this rate should be taken down to zero, effectively meaning that many of the wealthiest people would pay no taxes at all.

Thus (as it came out in 2012) there are many Americans making $90 or $100k a year and between their income taxes (which might run at about 25%), with about a 7.5% Social Security tax burden... they're getting pummeled, while someone like Mitt Romney was comparatively not only paying a lower percentage but in terms of overall income... he was hardly even feeling it.

Congress has been unable to reverse this situation and thus they have compensated for it with an abundance of tax credits. This is their way of offsetting the burden, the disproportionate burden on the lower and middle classes.

The one's who get really nailed are single people making relatively high incomes. They have no 'credits' to claim and end up having to pay a lot.

For most people with children (unless you're making really good money) these credits effectively end up being a subsidy.

We often refer to our tax 'refunds' but for many it's not really a refund, it's the government giving a little help because the way the system is set up... it's not really fair.

Is a flat tax fair?

Recently we might remember Herman Cain and his 9-9-9 plan. Of course he like Steve Forbes a few years earlier didn't seem to realize that it may be 'fair' for someone like him and represent a drastic cut for the wealthy, but for many of the poor it would represent a massive tax hike... and one which would destroy them.

A Flat Tax would also eliminate the tax credit system, meaning instead of a 'refund' there would now be an obligation.

There are many employers who have not grasped that rather than complain about the tax-credit system or the progressive income tax or the various government programmes... they should be thankful.

Why? Because if the programmes were eliminated, the credits removed, and taxes effectively raised, their employees would be soon homeless and desperate.

They would either have to deal with filthy, bitter, angry people coming to work... and more likely to steal... or they would lose these employees...

Or,

They would have to pay them more, so that they could live.

And that would hurt profits wouldn't it?

I'm only speaking in terms of pure economics. If we add in questions of ethics, as in, is it right for you to hire someone at a wage that leaves them homeless?

Well, that's a different question isn't it and one I'm afraid most Christians in the United States will answer wrongly.

There are companies like Wal-mart who have a business model that is dependent on government subsidies and tax-credits... not only for their stores but for their employees.

Wal-mart is counting on the fact that many of its employees will sign up for Medicaid, LIHEAP, Food Stamps and much more.

Oh, and all those refund checks...who gets that?

Wal-mart ends up getting a pretty good chunk of that too, because unlike me and a few others, most people still shop at Wal-mart.

There's no doubt that whole budget needs re-tooling and reforming. But to me, it's all moot unless the United States starts drastically cutting military spending. Please note I did not use the term Defense. It has precious little to do with that.

When you consider military spending you must remember there are a lot of sectors like the Nuclear Programme, the Department of Homeland Security, Veteran's Affairs, and military projects related to NASA and other organizations that are not included in the Defense Budget.

When you add these things in the United States spends more than the rest of the world combined.

The USA is like Assyria. It's a military empire. The military is basically the largest sector of our economy.

Military cuts would effectively destroy our economy. That's the jam we're in. There seems to be no way out.

If anyone speaks about cutting the military the myriad of congressmen who are bought and paid for by the Military-Industrial Complex scream and cry foul.

That means the only other place to find money is to cut government programmes and ultimately Social Security, Medicaid and Medicare. This has been the Republican project since the days of Barry Goldwater and Ronald Reagan.

Either way it spells disaster for the US economy.

If the military is cut, the industrial class takes a hit, but for the poor... it won't really affect them.

I vote for drastic military cuts and an end to the US Empire.

Either way it will come to an end. This pattern cannot continue. Eventually the US will bankrupt itself paying for million dollar missiles and its worldwide network of bases.

Or... cut the other programmes and the inequality created by our economic system will create a hinterland of shanty towns and chaos.

Take your pick.

But there's one thing you can count on... the mainstream media will not explain any of this to the public. Even during the 2012 election they did a pretty poor job (deliberately it seemed) in explaining this to the public.