Having cut taxes once already on business and workers, President Trump and the Republicans would cut them even more if he could get his way. Yet the Democrats hew to a tried-and-true message: Let’s raise taxes and soak the rich.
They preach a dogma of envy rather than opportunity. The rich fail to pay their fair share. The rich use corruption and clout to rip off the little guy. The reason you are paid too little is because the CEO got paid too much. Billionaires shouldn’t exist — Bernie Sanders actually said that one out loud. Had @realDonaldTrump tweeted that out, the libs would have said he was inviting a mob hit on Jeff Bezos.
Now some Dems want to create an entirely new kind of federal tax. Instead of taxing annual income, they want to slap a recurring tax on accumulated wealth and assets. Sen. Elizabeth Warren leads this mob, and at the Democrat debate on CNN on Tuesday night, several other candidates genuflected and praised her idea.
For the seventy thousand families in America who are fortunate enough to be worth $50 million or more, Greedy Lizzie wants to grab an extra $1 million or more per year from each family, even if they earned no regular income or capital gains at all that year. For the nation’s 585 billionaires, a 3% tax would kick in. Jeff Bezos, worth $110 billion, would owe more than $3 billion extra every year, over and over.
It is paramount to punishment of Bezos for making himself rich, even though in building Amazon he also created another $770 billion in wealth for thousands, maybe millions, of investors. Plus pension funds for teachers, police officers, firefighters, nurses and such. Makes you wonder why Bezos paid $250 million to buy The Washington Post, a Dem-lib standard bearer that might support Greedy Lizzie’s charging him an extra three billion a year in taxes.
Bezos will be okay, I am sure. He will have plenty of billions left over to squander. (Namedropper note: He once crashed a small dinner party I hosted one night at a conference years ago and sat at my table for two hours, holding court. Turned out we both grew up in Hialeah, Florida. He has the greatest laugh ever.)
The bigger concern is that taxes that start out applying only to the richest people in America can, inevitably and ineffably, filter down to the rest of us. Two examples illustrate this inescapable truth: the history of the federal income tax, and the hefty tax on mobile phone service.
The modern income tax began in 1913 when the states ratified the 16th Amendment. At the start, the tax applied to only to the richest 3% of Americans. In today’s dollars, average income at the time was a shade less than $20,000 a year, and a married couple could earn $70,000 tax-free before paying a 1% tax rate on higher income. The top rate was 7% on income exceeding $13 million a year in 2019 dollars (equivalent to $500,000 in 1913 dollars).
Today, the income tax applies to almost every person and business in America. Earn $19,000 a year in annual income and you pay a 10% rate. If you earn the average U.S. income of $57,000 or so per year, your tax rate is 12%, and it jumps to 22% if you earn more than $77,000. The top rate of 37% applies to all income above just $600,000 per year.
Thus, somewhere along the way, the federal government’s definition of “rich” changed from $13 million a year in income to $600,000, and some Dems say it should be just $250,000 a year. Reverse inflation. In New York, $250K ain’t bupkis.
This slow tax creep happens a lot. Thus, our second example: the high taxes and fees on cell phone service. When cell phones first began to take hold in the early 1990s, they were the super-expensive toys of the very rich. So government laid on new taxes with alacrity.
Today wireless service serves more than 450 million accounts (exceeding the U.S. population of 320MM people), and even the poorest Americans subscribe. Yet the taxes and surcharges that first applied only to fat-cat early adopters have stayed largely intact.
My recent Verizon bill shows the damage: $144.87 for a month of service — and an extra $15.70 in taxes, fees and surcharges. That is a de facto tax rate of almost 11%. Numerous government entities have a hand in this gargantuan grab bag (an 11% skim from the $230 billion-a-year U.S. wireless industry is more than $25 billion a year). My bill shows a $5.49 Federal Universal Service Charge, a $3.52 Gross Receipts Surcharge, and $4.76 in taxes and fees split up among eight different NY state and city tax funds.
This hefty tax burden is imposed on most everyone regardless of how low their income, for a basic necessity that now is integral to most people’s daily lives. This makes smartphone service one of the more regressive tax systems in the U.S. economy, hurting low-income people more than everyone else.
Of course, we never have seen any valiant effort to reduce the tax hit for lower-income customers. No tax, once imposed, ever gets lifted, really. It is government’s black hole. And to think, at the very start, all these taxes, surcharges and fees were okay — because only the rich would have to pay them.
Just like what the Democrat presidential pack is telling us now.
This article is Part 2 of a series. To read Part 1 — Click Here Now.
Dennis Kneale is a writer and media strategist in New York. Previously he was an anchor at CNBC and at Fox Business Network, after serving as a senior editor at The Wall Street Journal and managing editor of Forbes. He helped write “Wealth Mismanagement: A Wall Street Insider on the Dirty Secrets of Financial Advisers and How to Protect Your Portfolio,” by Ed Butowsky, published in August 2019 by Post Hill Press. To read more of his reports — Click Here Now.
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