Folks, this paper offers you at least two views on just about every subject. Even the largest national newspapers rarely offer opposing viewpoints. I make note of this because, in his latest article, a fellow columnist claims that “the rich” are the ones “who really create jobs.”
He seems to be worried that the temporary tax break that was given to “the rich” in the early part of this century is not going to be extended beyond this year. This year is when the temporary tax break ends. So, let’s take a look at the tax break and what has happened to our country during its life.
You and I work for a paycheck, if we are lucky enough to have a job. The rich make their money from other money. We pay an income tax that ranges from 10 percent to 35 percent of our check. The rich pay a capital gains tax of 15 percent. The idea is that they will use their money to create jobs for the rest of us. When we talk about the rich, we are not talking about the person who we went to high school with who made good.
The people who benefitted from the temporary tax break are the super wealthy, the very uppermost members of our society. Several writers have
relabeled them as the “over class” to separate them from the upper class. By paying at a lower tax rate than we do, does not mean that they are cheating on their taxes. Nope, we gave it to them.
Warren Buffett, one of the very richest people in the whole world, probably says it best with his statement to the effect, “There is something wrong with the system when my secretary pays a higher tax rate than I do.”
Even if the temporary tax break, for those citizens whose earnings come from investment rather than a paycheck, is not extended or renewed the gap between Buffett and his secretary will be narrowed, but not eliminated. Buffett will still pay a lower tax rate than his secretary. When this tax cut was put into place, everyone was given something. But for citizens who work for their income, the tax break wasn’t much more than a happy meal. By the end of this year, the total tax cut will be in the area of $2.5 trillion, with the richest 5 percent, the over class, benefiting the most.
The top 5 percent received about half of the $2.5 trillion. The good thing about the tax cut was that the economy grew for about six years. The bad thing was that our middle income citizens did not share in this economic growth. For only the second time in our country’s history, the middle income families lost ground during a boom period.
The first this happened was just before the Great Depression. To put things in real perspective, about a million and a half middle income families are declaring bankruptcy each year. And, more than $5 trillion of family savings and pensions has evaporated – just disappeared with the stock market bust.
Other indications of the hurt that has been inflicted upon the middle income families are that 11 percent cannot make the minimum payments on their credit cards, and 12 percent are now receiving food stamps.
So, what happened to the $2.5 trillion in tax cuts? For certain it wasn’t used to reduce our federal deficit. The first trillion went dollar for dollar to create jobs – in communist China. I say this because at the same time that the first trillion of the temporary tax reduction was taking
place U.S. financiers were investing that same amount in China.
The rest of the $2.5 trillion probably was invested in other parts of the world also, but I just haven’t had the time to do the research. We do know, however, that before the tax cuts, we actually had a government surplus and after the tax cuts our government ran the largest debt numbers in our country’s history.
I have been harping for years that buying and doing business locally is the thing to do. Small, locally owned businesses are not in the same boat as the super wealthy, over class. They are in our boat, paying the high income tax the same as all other Americans in the middle income group.
In fact, independent businesses owned locally get hit by taxes the heaviest of all, but that is a column for another day.
All across our country people are angry and are joining or forming populist groups. Each group has its own thing to be angry about. If they could come together as a force, either the politicians would listen or they would be replaced.
What did we learn from this great experiment of putting money in the pockets of the super wealthy, the over class, the ones “who really create jobs?”
The first part of the temporary tax break worked very well. The pockets of the over class are full. The second part did not work. We are 8 million jobs short of where we were and 15 million jobs short of where we need to be. And, the third part, “unintended consequences,” we increased our government debt during this experiment by the largest dollar amount in the history of our country.
Folks, this is not about conservative or liberal economics; it is about what President Lincoln said in his Gettysburg Address, “…Government of the people, by the people, for the people…” We, the people, need to get involved, and not just on Election Day, but every day.
Bill Horne is a professor at Southern State Community College and a columnist for The Highland County Press.
