Is Our Tax Structure Fair?

With tax season fast approaching, American taxpayers will once again gripe about paying more than their fair share.  They will be right in this opinion; at least everyone reading this will be right.  I’m pretty sure that I don’t have any billionaire friends.  Even with the recent supposed "tax cuts" I don't expect to see any windfall.  So, is our tax structure fair?

I got to thinking about this after an old business associate and Trump supporter, quoted chapter and verse about the rich paying 90% of America’s taxes.  There are plenty of articles backing him up in this statement.  With 2020 election candidates starting to throw their hats, berets, hijabs, yarmulkes, wigs, and hairpieces into the three rings of our American political circus, it seems like a fitting time to research this. 

A few potential presidential candidates are using tax reform as essential planks in their platforms.  Elizabeth Warren has even proposed a “wealth tax” which has raised the ire of a few billionaires.  There’s nothing more dangerous than a pissed-off billionaire, as many of us have come to discover.

My Accountant
From the firm Hear, Speak, and See No Evil

As most know, our income tax system is designed to be progressive where the more affluent among us pay a larger percentage of their incomes in taxes.  If the tax schedule’s sliding scale were the only factor here, the premise of my friend would be easy to believe.  As the adage goes, there are lies, damned lies, and statistics.  The counter to this is that numbers don’t lie but as most us know, sometimes they do.

One factor is deductions.  A good example here can be found in former president Jimmy Carter's 1976 tax returns.  His returns, filed in 1977, showed that he owed no income taxes even though he had $68,251 of income (that would be around $296,500 in 2018 dollars).  Carter’s return showed an adjusted gross income of $54,934.  After deductions, he was left with a tax obligation of $11,675.  However, that obligation was wiped out by a $20,864 investment tax credit stemming from equipment and building purchases for his peanut processing business in Georgia.  Carter, as a newly minted president, felt guilty of his position and donated some money to the treasury.

If you work for a living and draw a salary and I have family money that I inherited which I have invested and we both have the same annual income, who pays more in taxes?  You do.  Your income is taxed as wages and mine will be taxed as a long-term capital gain or a qualified dividend.  If both our taxable incomes are identical, say $300,000, you will pay $104, 767 and I will pay $41,742.  Your effective rate is 34% and mine is 14%.  Does this sound fair?

Two Identical Incomes, Two Very Different Tax Rates

You see the majority of Americans financially in the top 1%, make the majority of their money on income from capital, and not labor.  Business owners can lower their tax bills further by paying themselves in dividends rather than salary.  Wealthy congressional leaders make the tax laws and guess how they structure those laws.  Would they tax themselves more and provide tax relief to the middle and lower classes?  If you said yes, then perhaps you can ask the Easter bunny to help you with your taxes.  While you have the Easter bunny’s ear, ask him for me how he lays colored eggs.

I'm not sure that Elizabeth Warren's wealth tax is the answer but the current structure is not fair.  A flatter tax structure that includes all forms of income from all sources would seem to be the only reasonable plan.  Exempt those below a certain threshold from all taxes, tax all income up to a second level at a flat rate with no deductions, and tax individuals and corporations with incomes higher than the second level at a higher rate.  For example, make the first $25,000 of gross income tax exempt, then tax all income between $25,001 and $5,000,000 at 15%, then tax all income above $5 million at 20%.  These rates would be for all labor income, dividends, capital investments, etc.  Corporations would have the same rates and would be taxed on all profits calculated as annual income minus annual expenses incurred in that year.

Corporations would pay taxes as they were earned with no deferrals for long term investments or other workarounds.  Actual annual expenses would be the only deductions allowed from annual income.  Companies that incur expenses from outsourcing overseas or moving production offshore would only get to use 90% those expense costs when determining taxable profits for the year.  The numbers used here are for argument's sake and are debatable but could be a starting point.  Seems fair to me.  Now let's elect some folks with a conscience and sense of fair play.

Diogenes would give Congress a wide berth

The Attack of the Bubble People

Many Americans live in a bubble.  Some exist in the bubble by choice and some by circumstance.  Living in small-town or rural America brings with it a certain level of sequestration where those residents have limited exposure to people outside their close-knit communities.  In more urban environments, individuals of wealth may selectively build walls, hire doormen, and choose to live in towers or gated communities among others with similar financial circumstance.  In both cases, isolation restricts interaction with people who might otherwise provide a more diverse experience.

These “bubble people” lack a basic knowledge beyond their bubbles and are suspicious and fearful of those they do not know.  This is a breeding ground for xenophobia, racism, and nationalist ideologies.  You are fearful of things outside your own bubble.  You tend to blame the “others” for your problems.

Living In The Bubble

The bubble doesn't make you, 

but it's you that's made the bubble
And you better try to remember that it's in your head
The bubble is a very tricky thing, 

all full of hype, and it's not easy to try to see
The way that things are and they'll always be

Live in a bubble, baby
But it's not the place to be
'Cause it's a place of lies and hype
Don't believe the bubble 'cause it's nothin' but a dream
And when it blows, you'll be alone
Oh yeah

Lyrics from “Living In A Bubble” by Eiffel 65

Our recent government shutdown is a good example of the chasm between the impacted every-day workers and certain wealthy “bubble people.”  There has been a total lack of empathy or understanding exhibited by members of the Trump family and various wealthy politicians for those suffering through the shutdown.  This is made readily apparent by their callous remarks.  Statements like, “have a garage sale, borrow from your credit union, ask family for help, sell a couple of your Gucci bags, etc., are but a few examples.  Yes, I made up that last one but they could have easily said that.

Unpaid Federal Workers Are Going Through A "Little Bit Of Pain"
But This Is Bigger Than Them, Lara Trump

The other bubble, rural America, is more likely to be tribal in their response to events.  It was easy for a billionaire to come to town, hold a “tent service” and promise them a solution for all their ills.  Not unlike the snake oil salesman of yore, Trump promised to protect them from the heathen hoards responsible for their plight.  He promised simple and easy to understand solutions to their complex problems.  Chants like “build the wall” and “drain the swamp” were easy visuals for mass consumption.

The Cure-All

Well, so far, instead of draining the swamp his White House selections make it look more like a Wall Street retreat.  Steven Mnuchin came from Goldman Sachs where he oversaw thousands of home foreclosures following the subprime mortgage debacle.  Elaine Chao, the wife of Mitch McConnell, is now Transportation Secretary and comes from a wealthy shipping company with ties to China.  Oilman Rick Perry was head of Energy Transfer Partners before appointment as Energy Secretary.  The list of alligators appointed to manage the swamp is seemingly endless.

The Truman Show's Arcological Dome of Seahaven Island,
a Fictitious Environment

So, Donald Trump has been a champion of the “bubble people,” both the isolated rural ones and the ivory tower dwellers.  He will only lose this base if he adversely affects their livelihoods.  Farmers are currently hurting after the tariff battles.  GM is closing plants in the US and moving production to Mexico.  The impact of the government shutdown on the economy remains to be seen.  Suffice it to say, with 800,000 federal employees out of work or not being paid for their work, the ripple effect will be long-lasting for millions.

 

GM Plants Targeted for Closure
November 2018

It is easy to see where such isolation foments mistrust.  It seems to be one of mankind’s defense mechanisms to fear the unknown.  Live in a bubble and fear whatever you envision beyond the barriers in your head.  Only by opening up your mind to other ideas and experiences will you truly understand the world you live in doesn’t stop at the “Now Leaving…” sign.

Another musical reference, "Chained to the Rhythm" by Katy Perry

Racism is Alive and Sick in America

I am old enough to have experienced the segregation of 1950’s Miami. My high school in North Miami was all white when I graduated in 1963. There were White and Colored water fountains in the stores as well as separate bathrooms. Some businesses even had separate entrances with racial designations. The city was segregated informally along certain roadway boundaries and most people knew which areas of Miami were white or black. Even though Brown v. Board of Education eliminated segregation of public schools, Miami didn’t comply until the Civil Rights Act of 1964. While slavery was abolished with the 1865 signing of the 13th amendment to our Constitution, it took almost 100 years before we saw much advancement in the south.

Miami Orange Bowl Segregated Seating 1955

Here we are over a century and a half later, and we still find ourselves somewhat shocked that racism is more prevalent than most of us would like to have believed. The racism of yesterday was directed mostly at African Americans; today’s racism has been expanded with a xenophobic rage that now includes all non-whites.

Miami lunch counter sit-in

While I can’t condone racism among under-educated financially challenged Neanderthals, I certainly understand it better than when I see it coming from more educated and affluent individuals. Most recently, the specter of racism has been allowed to come out of hiding with renewed support from the most unlikely of places, our president.

The new face of racism

Donald Trump struck a chord with a closeted segment of racists from across America. The new racists no longer wear white sheets and hoods but now don red MAGA hats with the same associative armor of patriotism and religion worn by their KKK brethren. The acronym on their crimson chapeaus really means Make America White Again, but that would have been politically impolite. Translation, politically impolite equates to political suicide because the racist reference would be too in your face and not merely acknowledged with a wink and a nod, as is the custom.

Donald Trump has removed the stigma associated with blatant racism by making it mainstream. His racism hits on two fronts. It excites his racist base and plays to the financial sector that benefits from low wages, inferior education, and a tax burden shifted to the unenlightened masses. He has created a bogeyman scapegoat for the ills of the lower financial classes and avoids the work he might have if he were to actually attack our nation’s real problems.

Donald Trump’s border wall is nothing but a tribute to xenophobia and racism in America. He rails that brown-skinned people are coming to take your jobs, rape your women, get your children hooked on heroin, spread disease, force you to learn Spanish, and the Muslim extremists hidden in their ranks will bring terror to America and threaten its Christian values. This manufactured fear raises the ire amongst his base and gets him the cheers and applause his insecure persona requires. The man needs the accolades and attention more than the air he breathes.

Trump Supporters

The segregationists of yore promoted a separate but equal philosophy that belied the fact that they had no intention of allowing anything even remotely equal. The first black student I ever met was in college and we were in an auditorium class together. We both had graduated high school in segregated Miami but it was apparent from the reports he was turning in that the education he was afforded was not on par with mine. He was just as smart but just didn’t get the same education. I took his reports, corrected the grammar and spelling and he rewrote them. By the end of that class, he had learned enough that I was no longer making many corrections.

I am writing this on the holiday that we celebrate the birthday of Dr. Martin Luther King Jr. President Trump, unlike former presidents, had no activities planned on his calendar but had staffers write a quick Tweet. It was obvious that he didn’t write the Tweet because it was grammatically correct, had no spelling errors, and expressed a sentiment that could only have come from a person with empathy. We all know that DJT is incapable of pulling off that trifecta.

Staffer's write MLK tweet for Trump

Yes, racism is alive and sick in America. The small-minded among us now have a national platform and a new and powerful leader. We can only hope that recent elections and those in the near future will force these mentally challenged individuals back into the dark recesses of their own tortured souls.

We Are the Borg, Resistance Was Futile

The old adage that truth is stranger than fiction is perhaps no more evident than by comparing our current societal norms with those outlined by the Star Trek antagonists, the Borg.  When the lines between truth and fiction are blurred, when “truth is not the truth,” and repeated lies become accepted as truth, we should not be surprised when fiction becomes reality.

Borg

For Star Trek fans, the title above will have instant recognition.  In the Star Trek franchise, the Borg are individuals who have been “assimilated” into the Collective.  That assimilation turns the victim into a drone through augmentation with cybernetic components.  A drone will have organs and limbs replaced with biomechanical parts depending on their assigned function.  Each drone has a “cortical node” which will control biomechanical functions.  Drones are part of a hive with a group mindset referred to as the Collective.  They are controlled by a subspace network that ensures that each member conforms to the will of the hive and their collective consciousness is a powerful force.

Locutus, Captain Picard being Assimilated

"We are the Borg. Lower your shields and surrender your ships.  We will add your biological and technological distinctiveness to our own. Your culture will adapt to service us.  Resistance is futile.”

We have all been assimilated through technology into various “hives” known as Republicans, Democrats, Independents, or Name-Your-Group.  Assimilation infers that you have been robbed of your individuality, which meant your humanity was also gone. The Internet, with the help of our hyperconnected mobile networks, means we are living in a time of rapid communication.  It also means that we suffer from an inability to process that informational barrage in a meaningful manner.  We get lazy and seek the line of least resistance.  We let the Collective do our thinking.  We give up our individuality in exchange for being part of something larger than ourselves.  We are part of some dystopian future where "I" is replaced with "We."  The individual is gone.  We join the Borg and become one, and none.

Borg Collective in the Hive

We watch and listen to our Smart-Phones and our Smart-TVs and become part of the controlling subspace network.  We are connected through our technology and motivationally influenced by the cacophony of information that assaults our senses on a daily basis.  We have social media, 24/7 cable news media, and print media vying for “eyeball time.”  We are the Borg.

Ferengi

While the fictional Borg Collective had a Borg Queen, she was the totality of the Collective.  She/they had assimilated the cultural identities of the conquered.  We, on the other hand, have joined separate hives with singular identities.  Each hive, however, performs like a Borg Collective.  If I had to guess, Republicans would have been assimilated Ferengi as they were devoted to capitalist accumulation.  Democrats would have merely been Species 5618, aka humans.  Pardon my hive bias.  There is no individual thinking within the Collective, only the mob mentality that pervades the collective conscience.

Borg Queen

Our technological advances have been both a blessing and a curse.  Humans are more connected than ever before.  Information travels at light speed around the globe.  Lies travel even faster, warp speed to maintain the analogy.  We need to know when to filter our information.  When to trust a source and when to remain skeptical.  Somehow an old sign in a paint and body shop I used to use comes to mind.  It read, In God We Trust, all others pay cash.  For our purposes, trust but verify.

Develop your own thoughts and ideas, don’t just parrot the words and memes of others.  If you listen to MSNBC and CNN, switch over and listen to Fox News to see and hear their views.  You don’t have to agree with any one of them, just hear them out and reach your own opinions.  Resistance is only futile if you are lazy.

Time to wake up and draw your own conclusions.