Why a voter needs to think about the details

It is purely not enough to kick out the corrupt politicians and put in new people who promise to do better. You need to know what each person you are considering for office thinks about particular issues. For example, on the matter of a just way to collect taxes and pay for essential services for people, first you need to understand what taxes are and then you need to think about who should pay them and why.

Taxes can be one of three patterns:

  1. regressive (the lower income person pays a higher percentage);
  2. flat (everyone pays the same percentage);or
  3. progressive (the higher income person pays a higher percentage).

Sales tax is always regressive even when people pay the same rate, since you are taxed on what you spend, and the person who spends all of his/her money gets taxed on 100% of their money. A poor or middle class person spends all or most of their money, and if they use a credit card, they can actually pay sales tax on more than 100% of income. A wealthy person not only has unspent money not subject to sales tax, but is able to invest leftover money and earn interest, so taxes are offset by interest earnings. Most people with incomes over $200,000 a year, when their taxes are offset by the interest and dividends they earn on investments, currently pays no tax at all.

Here in Virginia, all taxes taken together — property, sales, and income tax — the poorest quartile of the population pays about 8.5% in state taxes, and the wealthiest quartile pays about 5.2%. This does not take into consideration the matter of interest and dividend earnings that are available to wealthy people to offset taxes.

At the national level, a progressive income tax has been in place in the U.S. for a long time, with the rich paying substantially more as a percentage. Tax shelters have served both the wealthy and middle income people, with middle income tax shelters largely limited to “before tax” retirement and medical savings accounts. A wide variety of tax shelters are available if you have enough money to use them, but most of us do not. The average wage in the U.S., even with rock stars and athletes calculated in, is somewhere around $40,000 to $45,000.

The Bush tax cuts, which all of the Republicans and Tea Party candidates want to continue and make permanent, were a windfall for wealthy people. The intent of the tax cuts was to enrich the wealthy so that they would be inspired to invest and hire more people to work for them. Instead, they have simply taken the money out of the market into their pockets, and it rests there doing nothing for the economy. Large financial magazines and newspapers have commented on this failure to invest as expected, and if you want to read about it, you can Google “tax cuts for the wealthy not invested in jobs” and “businesses sitting on large cash reserves.” There is nothing else that we can give the wealthy to inspire them to invest. In order to get the money back into the economy, we need to roll back the tax cuts for the very wealthy the way that the Democrats want to do.

It is fair for wealthy people to pay a larger percentage in taxes because they make more money, i.e., take more money out of the economy. This is a simplistic statement of why a progressive (rich pay a higher percentage) income tax is reasonable, and if you want to read further on the issue, check out “Why the rich should pay more” over on Thudfactor.com.

Understanding the information above, which anyone can verify easily with nothing more sophisticated than a Google search, indicates a clear choice for Democrats, who support a progressive income tax and the expiration of the Bush tax cuts for the wealthy.

One response to “Why a voter needs to think about the details

  1. I like this reasoning. I do wish though, that aside from retirement and medical reimbursement accounts, that many of the loopholes would be removed. I agree that the wealthiest folks in our nation should pay higher taxes…after all, it is this nation which made it possible for them to be wealthy in the first place!

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