Home > Uncategorized > Put Up, or Shut Up!

Put Up, or Shut Up!

Tax day is here, and I have sent out the check to the IRS. Passing over the irony of tax day being delayed for “Emancipation Day,” there were two interesting news stories making the rounds over the weekend. Neither one of the stories alone is all that surprising, but taken in concert, they illustrate exactly what I believe our current “tax or reduce spending” debate is all about.

The first story was that 45 per cent of all households pay no federal income tax. They are what I call “net consumers” of federal tax dollars. Roughly 70 percent of these households make less than $50,000 per annum. Only 5 percent make more than $250,000. The other 55 per cent, who pay federal taxes, are “net payers.” I am excluding FICA, Medicare, state, and local taxes from this figure. By net consumer, I mean someone, who at the end of the year, has contributed no money to the treasury. Contrast that with the net payer, who has contributed some of his or her wealth to the common weal.

The second story concerned the net payers, and how much they paid. It turns out that, on average, those households earning $250,000 or less pay about 9.3 percent of their gross income in federal tax. Those households earning above that number pay about 17 percent of their gross income. That’s about twice the percentage paid by those in the first group. Note that these figures are based on gross income, and therefore don’t include deductions and credits.

These stories tell me one thing. That is that class warfare is alive and well in America. We are barraged by news stories about the rich failing to pay their fair share. Our president claims that the fortunate should pay more than they currently do. The liberal blogosphere is all atwitter over Paul Ryan’s budget proposals, and the conservative blogosphere is likewise all agog over Obama’s budget speech. The op-eds go on about whether we should cut spending or increase taxes. The Nation has a headline in the May 2 edition, “Obama’s ‘Shared Sacrifice’ Hits the Poor and Middle-Class Hardest .” That reminds me of the William F. Buckley quip that if the world were to end tomorrow, the N.Y. Times headline would be: “World to End, women and minorities hardest hit.”

What we fail to realize, or at least mention publicly, is that half of America is footing the bill for the whole thing, including a large portion of transfer of wealth payments to the other half. The top 5 percent of earners pay more than 60 percent of income taxes. The top 10 percent of earners pay more than 70 percent. And the top half of earners pay just shy of 100 percent of income taxes. The half that pays no tax has an economic incentive to vote in the way that maximizes their wealth, just as the half that pays tax has an economic incentive to vote in the way that maximizes their wealth. Obama recognizes that, as do most liberals, who realize that the lion’s share of the “net consumer” group vote left. Consequently, Obama can rail about shared sacrifice while giving the net consumers a nudge and a wink.

As long as half the electorate has an economic incentive to vote to continue to receive, public policy is skewed in that direction. Resulting in, mirabile dictu, a 14 trillion dollar national debt and a 1.4 trillion dollar budget deficit.

So here’s my solution to the problem. Not the immediate, this year, problem, but the long term problem of “economic-interest” voting.

First, only net payers get to vote. If you don’t have cash on the table, you don’t get to play. If you want a say in how GE, for example, is run, you buy stock and vote at the shareholders meeting. If you want a say in how America is run, you “buy stock” in America and you get to vote. Net consumers of tax dollars don’t get a say any more than mere buyers of GE light bulbs get a say in GE’s affairs.

Second, no tax change can take effect until an election has intervened. Same policy as we have for congressional raises. That gives the electorate a chance to veto congress over this issue.

Third, no more voice votes. Voice votes are a way for congress to weasel out of responsibility. They can voice vote something in, and then deny it with no record. Make them accountable, make every vote a recorded vote.

Fourth, single subject legislation. No more burying IRS issues on a health care bill, or public policy issues in a budget bill. Force our representatives to vote on single issues, with a recorded vote, and prevent them from saying, “I would have voted yes, but for…” Make congress accountable, make their votes public, and make their votes about one thing at a time.

These ideas may not fix all our problems, but they’ll go a long way to reining in our ever-growing spending. By the way, in the interest of full disclosure, I am a “net payer.”

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