October 31, 2017 by Anders Ingemarson
At SEPARATE! we’re advocating for the elimination of all taxes as the only solution consistent with the total separation of state and the economy on moral grounds. However, we realize that we will have to get there one tax cut at a time. From what we’ve seen, the “Big Six” proposal as it currently stands would take steps in the right direction. But as is often the case, Republicans run the risk of diluting their plan by appeasing the “benefit the rich” opponents.
We recently submitted a piece on tax cuts and envy to a Progressive leaning publication in the hope that its editors would recognize the value of our truly progressive insights. Alas, we haven’t heard back so we are sharing them here instead. Enjoy and keep the comment coming.
As the President and congressional Republicans tackle tax reform, criticism is mounting from the opposition. Center stage is the argument that any tax cut will disproportionately benefit “the rich.”
The obvious response to the criticism is of course: “of course!”. Since our tax rates are progressive most of the federal income tax is paid by high income households.
The Tax Foundation’s analysis of IRS data for 2014 (latest data available; emphasis ours) shows that
- “The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.
- “In 2014, the top 50 percent of all taxpayers paid 97.3 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.7 percent.
- “The top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).
- “The top 1 percent of taxpayers paid a 27.1 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).”
It follows that under any serious tax cut proposal “the rich” will have the most to gain. It is simple arithmetic.
However, being sensitive to the criticism, the “Big Six” tax reform initiative is proposing to eliminate the State and Local Income Tax deduction (SALT), which is disproportionately benefitting high income households able to itemize deductions. Furthermore, the initiative is recommending increasing the standard deduction and discontinuing the Alternative Minimum Tax (AMT).
If implemented as suggested (by no means certain) the proposal would allow most tax paying households to keep a larger portion of their hard-earned money. What’s not to like?
So why all the fuzz about “the rich”? Most people will answer along the Robin Hood line of “we need to take from the rich and give to the poor.” But beneath lies often a different motive: envy, or more precisely, the reaction to experiencing the emotion of envy.
From your Progressive elected representative preaching “income equality”, to the “1- percent” talking head you listened to with one ear last night, to your “tax-the-rich” bashing neighbor or co-worker; their open or suppressed resentment is more likely than not rooted in envy.
Envy as an emotion is morally neutral. How you act on it is not. Let’s say your neighbor Sheila got a promotion with a hefty raise. You realize that you are envious—she received something you want. You now have a choice.
You can tell yourself “Wow, I’m envious. I didn’t realize I wanted a promotion this badly. I should work towards this goal as well. I may not get there, but at least I will have given it a serious try.” Congratulations, you just used the emotion of envy to direct your life in a positive, constructive, moral direction.
Or you can tell yourself “Gosh, I’m envious. Why should Sheila get a promotion and not I? She should pay a lot of taxes on that raise.” Sad to say, you are letting the emotion of envy get the better of you, turning your mindset in a negative and destructive direction, perhaps resulting in a future immoral action of voting for a tax increase to “get back” at Sheila and other ambitious individuals; your envy is turning into hatred of the good for being the good. You’ll likely rationalize the decision using the “income equality” mantra provided by the aforementioned politician, or the “1-percent” argument of the talking head, or something similar. But deep down inside you know the not so flattering truth: the reason for your decision is Sheila’s and everybody else’s promotion that you didn’t get.
Obviously, this is a simplified example; the sources of our emotions are often difficult to untangle and act upon correctly. But you get the general idea.
Don’t fall into the envy trap. Instead use envy to your advantage, letting it be a constructive guide for positive personal change, not a force of destruction. The former is a recipe for happiness, the latter for misery. Strive to join the rich instead of “sticking it to them.” With serious tax cuts this fall you’ll be closer than you think.