Taxes

First, a little history. Originally, income taxes were only for the top tier of earners. It’s still mostly that way. The Top 20% of wage earners pay 90% of the taxes. After every tax rate reduction (under Kennedy, under Reagan, and under Bush II), revenues went up due to the economy being stimulated. When the government increased tax rates (Herbert Hoover, F D Roosevelt, Johnson, Nixon, Carter, Bush I, Clinton), within two years revenues decreased due to a downturn in the economy. And contrary to current popular wisdom, Bush II’s tax cuts shifted a larger burden of the tax collection from the poorer to the richer. In 2006, the top 5% of U.S. taxpayers, those with gross annual incomes of at least $153,500, paid about 60% of all income tax collected, while reporting only about one-third of the total income of the U.S. This is up from 55% under Clinton. The top 20% pay 80% of the taxes.

The current tax rates are about right and should be extended before they expire in 2010. Some minor adjustments can be made to optimize revenue. Raising taxes on the rich only ensures that they will not be able to hire as many people, spend as much on goods, or take as many vacations. This is disastrous to the middle class, since the money would go to them. The poor shouldn’t be paying taxes—however, neither should we use “tax rebates” to “redistribute wealth.” This only encourages laxity.

Let’s get one thing straight—corporations don’t pay taxes, consumers pay them. Before you think about “soaking the corrupt corporations,” ask yourself, “Do I want the cost of everything I buy to go up?” Let’s leave corporate taxes where they are.

Inheritance taxes destroy small businesses, which employ half of all private sector employees, pay nearly 45 percent of total U.S. private payroll, and have generated 60 to 80 percent of net new jobs annually over the last decade (according to the SBA). Even if let the current inheritance tax holiday expire, we must eliminate all inheritance taxes on small businesses to keep our economy strong.