The article Obama’s debt talks alarm Democrats about Social Security is worth reading for some of the comments.
However, I need to talk about the article Commentary: Obama’s tax plan to pay off debt counts on ‘rich’ who aren’t, in order for you to see where I was coming from in my response to the article mentioned in the first paragraph above. The author of the commentary article had made the following assertion:
No matter what Democrats say, the richest 1 percent of Americans – that’s everybody making $380,000 or more – do not get a free ride under the current tax code. They earn 20 percent of all income in America but pay 38 percent of income taxes.
I’ll get to my comment on this second article in a moment. However, by the time I saw a comment on the first article, I had refined my ideas about the second. In response to a comment about tax loopholes for the poor, that I found in the first article I wrote:
The issue being debated by Congress and the President is future cuts in cost of living allowance, not past cuts. Don’t muddy the waters.
Putting purchasing power in the hands of the people who would spend it and boost the economy (earned income tax credit) is not the same as putting the money into the hands of the ultra wealthy who suck it right out of the economy and invest it overseas or lend it back to the government by purchasing treasury securities (whose interest payment to the wealthy is not taxable.)
The rich may earn 20% of the income and pay 38% of the taxes, but remember that almost every penny of what the middle class earns is counted as income, but the vast majority of what the rich earn is not even counted.
The rich have vast amounts of unrealized capital gains that are not counted as income. Any realized capital gains in tax deferred accounts are also not counted as income.
How else do the rich earn so little income, but their wealth is skyrocketing? The wealth of the people who are earning 80% of the income is falling. Remember the golden rule, “He who has the gold, makes the rules.”
Now here is what I wrote in response to the claim that the payers of 38% of the taxes earned only 20% of the income:
Why limit your tax calculation to income taxes.? The middle class pay much more of their taxes as payroll taxes than the income taxes. Convenient ommission, don’t you think?
They may make only 20 percent of the income, but remember the tax code leaves out a whole bunch of stuff from what is included as income. If the rich are so burdened by the tax code, why has their share of wealth skyrocketed over the last 20 years while the middle class’s share has plummeted? How does that wealth get hidden from the tax collector?
That is like the corporate reports that claim we made x amount of profit, excluding certain items. In other words excluding certain items that say we made far less than x amount of profit. The GAAP (generally accepted accounting principles) do not allow them to exclude certain items.
In the case of the wealthy, the books they want to show us and the IRS are the ones that say they are burdened by the tax code. The books they keep for themselves show quite a different story.
I have always said, I’ll believe a corporate CEO is poor when I see him brown bagging for lunch.
By the way, unrealized capital gains are not counted as income until you sell the stock. If you sell the stock in a tax deferred account 401k and IRA are exmaples, then you don’t count it as income until you withdraw the money from the account even if the income is realized by the sale of the stock.