Straight Talk from Al Jacobs

 

THE JOY OF PAYING TAXES

 

The headline is certainly provocative: “One nation, undertaxed.” The creator of this article is Edward Kleinbard, law professor at the University of Southern California. Having been named as one of several 2016 International Tax Persons of the year by the nonpartisan policy organization Tax Analysts, and author of We Are Better Than This: How Government Should Spend Our Money, he’s no stranger to taxation. Whether or not he’s a friend of the taxpayer is another matter.

 

There are those among us who believe taxes should be minimized. This is an outgrowth of a belief the earner of income is a better judge of who should decide how the earned income should be spent than some self-anointed government agency. Evidently Professor Kleinbard does not share this belief, and he does not equivocate on this view. He bluntly states: “There is no law of economics that says record-low tax revenues are the prerequisite to a thriving economy. What we really need, like it or not, are more tax revenues to fulfill our promises to support our fellow citizens.”

 

The impetus of this article was clearly recent federal tax legislation, publicized as generating massive tax cuts, but in reality involving modest reductions. As one example, the prior top income tax rate was 39.6%, applicable to income above $480,000. This rate is now reduced to 37% and raised to income above $600,000. Professor Kleinbard contends the top rate should be no less than 40% and assessed on income as low as $250,000. His justification: “The new tax act’s reduction was an irrational gift to the most affluent Americans that undermined the principal of shared sacrifice.” Perhaps my understanding of the English language is defective, but I cannot understand how seizing the property of one group of citizens and bestowing it arbitrarily on another group constitutes “the principal of shared sacrifice.” Shared sacrifice would seem to be a voluntary gesture; the Professor’s method strikes me as what it actually is: confiscation.

 

A final thought: Since the advent of the income tax in 1913, which levied a 1% tax on net personal income over $3,000 and a 6% surtax above $500,000, overall taxes have gone only one way – up. It doesn’t matter who the president is or which political party controls, because it’s not a contest involving the right and left, or between liberals and conservatives. Rather, it’s the perennial struggle between those on the outside paying the money versus those on the inside collecting it. Those in charge always win.

 

 

 

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

You may view them on http://www.roadwaytoprosperity.com