Boehner Caves with Plan B and Obama Gloats

Speaker John Boehner offered a "Plan B" to avert the so-called Fiscal Cliff that would raise rates on those making $1 million or more and President Obama had a very predictable response.  Obama welcomed the capitulation from the principle that no one's tax rates should be raised and he scolded and belittled Boehner for holding up an agreement due to his unwillingness to raise tax rates on those making $900,000.

Nancy Pelosi piled on and said her suggestion earlier in the year that we could raise rates on those making $1 million or more (instead of the President's proposed $250,000) was bait.  It was just an exercise to see if the Republicans would accept raising rates at some level.  Now that the Republicans have given up the stand that no rates should go up we can really get down to some negotiations according to Pelosi.

When will the Republicans learn.  There is no level of compromise or capitulation to the President and his Congressional allies that will appease them.  Obama wishes to rub Republicans' noses in this tax hike - either by total surrender or by allowing us go over the Fiscal Cliff.  I believe either is acceptable to Obama.  And in either case he will scold the Republicans for raising taxes and for not caring for the middle class.

If hearing Obama gloat and then scold him is not enough for Speaker Boehner's blood to boil then he is too far gone in DC's political morass.  He should immediately pull back his Plan B and fight for principle.  He should boldly declare that the federal budget is out of balance because they have been spending too much, not taxing too little. 

Everyone, including Obama, knows that raising tax rates on the top 2% or Plan B's Top 1% is not going to solve anything.  It is merely another attack on the so-called rich by Commander-in-Chief of Class Warfare Obama.  Some say that the revenue raised is enough for 8 days of Washington spending.  Obama is not serious about solving anything. He is acting 50% vindictive politician and 50% re-distributor.

Boehner's Plan B is a bad plan economically and will do nothing to cut the deficit.  Obama has rejected it and insulted and bullied the Speaker.  Now Mr. Speaker, show some spine and call Obama out as the one wanting to raise taxes on all Americans.  Pull back to principle.

Pay Your Fair Share?

Popular political discourse today is rife with calls for the rich to pay their "Fair Share."  This begs the question, what is a citizen's fair share in taxes?  And who is to define what a fair share is?  Does this fall to President Obama to decide, or to Congress, or maybe to those who are not paying any income tax?

Let me pose the following multiple choice question to you in which you have a household income of $100,000 and your neighbor has a household income of $50,000 (I know, some of you want to complicate it with deductions and "unearned" income, but stay with me...): 

You pay your fair share in income taxes if you

(a) pay the same dollar amount as your neighbor - say, an imaginary $10,000
(b) pay the same percent of your income as your neighbor - say 10%, meaning you pay $10,000 and your neighbor pays $5,000
(c) pay a higher percent of your income than your neighbor (since you are obviously much more well off) - say you pay 20%, meaning $20,000 and your neighbor pays 10%, or $5,000
(d) pay an even higher rate (since you are obviously much more well off than 90% of America), say 35%, meaning $35,000 in income taxes and since your neighbor unfortunately just lost his job due to the poor economy he pays $0.

In today's environment of class warfare, a,b,c are not acceptable and you would be accused of not paying your fair share. If each individual receives the same services equally from the federal government you could make an argument that we should all pay the same dollar amount (choice "a" above).  However, this certainly would be unpopular with most people and considered unfair to lower income earners. (And do we all receive the same services?)

In choice "b" above you pay proportionally and so does your neighbor.  You have twice the income and you pay twice the income tax.  Seems fair.  However, do you receive twice the benefits or services from the Feds? No, you probably do not, but because you can pay more you are required to help support others, or perhaps allow the government to do more.  The proportional tax is similar to the biblical tithe principle where one is to give (10%) as God has blessed him.  The difference being- the tithe is freely offered where the income tax is confiscated under penalty of law.

Choice "c" above expresses a simple graduated tax code.  The more you make the higher RATE you pay.  (In the U.S. income tax we use brackets and in reality you pay at the lower bracket and only dollars earned above the floor of the next bracket are taxed at the higher rate.)  So the federal government, through the tax code, has expressed that the proportional tax system (my choice "b" above) is not paying your fair share and that to really be fair the higher your income the higher the rate the Feds will impose.  I don't know about you, but logically this seems UNFAIR to me.

President Obama is insisting that the "top 2 percent pay their fair share."  By this he means the richest are currently NOT paying their fair at a 35% rate while some pay at a 10% rate.  Understand that the rich are in reality now paying more than their share.  They are paying certainly many more dollars than you or I for about the same service and are paying at a proportionally higher rate.  According to Obama that is not enough.

Of course what I am pointing out is that the graduated or progressive income tax system that we have already has the rich paying more.  They are paying three and a half times more than those at the lowest tax bracket.  If Obama was honest he would be saying that while the rich are paying more than their fair share he needs even more of their money to redistribute to those he deems worthy.  (Yes, I know that in my simple example I have not accounted for marginal rates and tax deductions and effective tax rates, et al.  I think you would agree with me that even with those complications that most of the "rich" pay at a much higher rate if not certainly more dollars. Even Romney's effective tax rate of 14% was higher than 97% of Americans.)

How did we get here?  Well, we have allowed the rhetoric of class warfare to go unchallenged. Obama is the king of it.  Republicans fearing to be connected to evil rich will not argue against him.

The founders would have been appalled. The principle behind the progressive income tax—the more you earn, the larger the percentage of tax you must pay was rejected by them. James Madison said, “the spirit of party and faction” would prevail if Congress could tax one group of citizens and confer the benefits on another group. In Federalist No. 10, Madison warned, “The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice.”

You'll find that in the 1800s thinking usually conformed to the founders’ guiding principles of uniformity and equal protection. There was an exception during the Civil War, when a progressive income tax was first enacted. However, the tax had a maximum rate of 10 percent, and it was repealed in 1872. A Congressman Justin Morrill of Vermont declared, “in this country we neither create nor tolerate any distinction of rank, race, or color, and should not tolerate anything else than entire equality in our taxes.”

The temptation was too great and in 1913 a constitutional amendment permitting a progressive income tax was ratified; the ideas of uniform taxation and equal protection of the law for all citizens were overturned. Seven percent was the top rate first set by Congress.  Married couples were only taxed on income over $4,000 (equivalent to $80,000 today). During debate over this tax, William Shelton, offered a selfish reason to support the income tax: “because none of us here have $4,000 incomes, and somebody else will have to pay the tax.”

This leads me to one of my rules of thumb on taxes: Never support a tax increase on someone else, because it is only an amount of time until they have one for you!

I've had it with the demands that the rich pay their "Fair Share."  Let's face it, when President Obama says that all Americans need to pay their fair share he doesn't mean that we all pay the same.  He isn't even suggesting that all Americans pay the same percentage in taxes.  President Obama's definition of "Fair Share" doesn't even mean that the so-called rich pay more total dollars or be taxed at a higher rate.  He means that the rich need to pay more than their "Fair Share."