For most of this country's history, taxes were supposed to be progressive. This meant that everyone was able to make a basic living and as they got wealthier, paid a larger portion of the taxes. It's certainly not a perfect system, but it's one that seemed to solve the need for basic goods and services, yet allowed those who came to this country with no capital to get a foundation built for a better life. Now, I’d much rather see a system where everyone paid a flat rate over a specific inflation-adjusted threshold such as, say, $20,000 per year. That way, it won’t matter if you make $50,000 or $50,000,000, every penny over that hurdle would be taxed at an equal rate so we wouldn’t punish success and hard work.
Unfortunately, that system doesn’t exist right now. For the past few decades, the tax rate paid by working Americans as a percentage of their income has skyrocketed. In effect, hard work has been punished and passive wealth has been rewarded. I’ve been a tremendous beneficiary of this. But there is something fundamentally wrong with the current system when I would only pay $15,000 in taxes on $100,000 in dividend income yet you would pay nearly $50,000 on that same $100,000 due to payroll, Federal, state, et cetera taxes if you actually went out, took initiative, got a job, and worked 40 or 50 hours per week. In essence, I sit on my butt and get to keep most of my profits, you go out and show up on time each day and have to fork over 300% more in taxes. It’s not right. It wasn’t the system that our parents and grandparents grew up under and somehow, a few people in my financial class have convinced the average American that adjusting the system to the way it was for most of our country’s history would be “socialist” – that is, taking from one class and giving to another. Someone should point out that we have already entered a socialist system where the middle and lower classes carry a disproportionate tax burden. That is my point.
The payroll tax, which is almost entirely Social Security, represents the biggest hurdle. In theory, Social Security could have been a great system because it forced workers to take money out of their own paycheck in exchange for benefits later – in essence, a Federal pension plan that covered every worker but that they themselves actually paid for because it was their own money that was being compounded and returned to them; sort of forced savings. The Government got access to low-cost capital to run its operations and there was a safety net put in place so we didn’t have dilapidated poorhouses and urchins running in the street like Rockefeller’s generation had to deal with during their time.
That’s not how it turned out due to the inability of our legislators to keep their hands out of the cookie jar. Unwilling to do the right thing for political reasons, they continued to promise benefits that were disproportionate to the payments sent into the system by workers, while raiding the funds for pay for every pork project over the past sixty years. Thus, what started as an extraordinarily good system slowly and surely transformed into an intergenerational tax whereby the younger workers were forced to support their elders, who had lived beyond their means.
Returning to a system where the tax burden represents a relatively equal percentage of everyone’s paycheck - sort of backing our way into the effect of a flat-tax – is why I support Obama’s tax plans, including a payroll tax credit. Even though my rate may go higher, if my customers have more money in their pockets, I’m going to be able to profit from that (besides, huge portions of my wealth are in retirement accounts and other tax-advantaged funds so they won’t be hit). I want to return to an America where Warren Buffett isn’t paying 17% of his income in taxes, while his Secretary pays more than 30%. We should all carry the burden equally, without penalizing hard work and success. That’s not socialism. It’s fair capitalism.
On a personal note (which has no connection to your question but might also explain my willingness to cross party lines), many of my friends, family, and colleagues have been somewhat disillusioned by the radical fundamentalist bent the Republican party has taken over the past few years. A lot of people in my generation instinctively react when were hear the government wants to get involved in our lives. I’m all for freedom. I love that you can live your life how you want as long as it doesn’t infringe on the rights of others. The party’s stance on gay rights is extremely upsetting – as someone with a brother in the military, the idea that he could be deployed overseas and may be subject to danger because qualified linguists was kicked out of the service due to their personal lives ticks me off, frankly. I’m also baffled by the notion that we, as a society, are voting to forbid committed couples from seeing each other in the hospital and inheriting businesses and property they’ve built together.
