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Taxes, Texans and Tea

Conservatives from shore to shore rail against the evils of taxation. Tea baggers stand on street corners hoisting their signs skyward bemoaning the taxes they view as unnecessary to pay for the programs that will ultimately care for them such as social security and medicare. “We’re mortgaging our children’s future,” they shout.

For the most part, their time would be better spent singing the lyrics of the scarecrow’s song from the Wizard of Oz.

Oh, I could tell you why the ocean’s near the shore.

I could think of things I never thunk before.

And then I’d sit, and think some more.

I would not be just a nothin’ my head all full of stuffin’

My heart all full of pain.

I would dance and be merry, life would be a ding-a-derry,

If I only had a brain.

With a little better understanding of economics, they might realize that taxation comes in many ways. The Tea Baggers chant about how we can’t afford health care reform while they’ll being taxed into oblivion thanks largely to the policies of the party of that charming Texas brain trust George W. Bush.

Consider this – let’s take a real simplistic view of the situation. Let’s assume for the sake of discussion that a Tea Party member has worked all his life to build a nest egg and has just retired. Let’s say he has a $200,000 house that is paid for, a retirement savings account of $200,000 and a social security stipend of $20,000 per year. Let’s also say he’s earning 5% annually on his savings account (a reasonable assumption in 2007). His annual income is therefore $30,000 and he has a $200,000 cushion in his home equity. That doesn’t put him on easy street, but keeps him in Viagra, prune juice and Depends.

If his taxes increase, something’s got to go. He could cut out the Depends, but then he’d have to forego the prune juice as well. You can’t blame the guy for being upset with the concept of a tax increase. But just as nature abhors a vacuum, she is also very irritable about the concept of indefinitely spending more money than is being taken in. Sooner of later, you run out of money. Two plus two remains four, always has, always will. It’s sort of the law.

The Texan increased spending and cut taxes. A lot of people (including Allen Sherpa) cried out that it can’t continue and that a crash was coming. The books have to balance. It’s not only not nice to fool Mother Nature, it’s damn near impossible.

So now the bills are coming due. They will be paid. I repeat – they WILL be paid. You can’t pay them standing on a street corner with cardboard placards yelling “Barney Frank’s a fag.” That’s small minded or to be a bit more direct, it’s simply stupid. You have to pay the bills.

The Tea Baggers refuse to allow taxes to increase, so how are they going to be paid? Another simple answer – taxes! The trick is to tax the people in a way they don’t understand. There are a couple of options. The government will use a combination of the two most common, both of which amount to a change in the value of the currency. Back to our tea sipping friend.

If the government were to levy a 10% tax on his assets, his net worth, his retirement nest egg, is diminished by $40,000. I can see why he opposes new taxes. But at the same time, if the markets are manipulated such that the value of his home falls 30%, the value of his retirement investment portfolio falls by 30% and the return on his savings falls from 5% to 1%, then his house is now worth $140,000. His retirement nest egg is worth only $140,000. His income from his investment falls from $10,000 per year to $1,400 per year. His net worth fell from $400,000 to $280,000 and his annual income dropped from $30,000 to $21,400. It’s a good thing he’s a closet socialist or he wouldn’t have social security to lean on in lean times. But the good news is his taxes didn’t go up!

What does it take to see the light? Life in general and the economy in particular are not as simple and straight forward as the Limbaughs and Becks of the world paint them for their flock of Tea Baggers. Our retired Tea Bagger would have been far better off if the government had levied a 10% tax on everything he owned rather than let the realities of the last couple years of the Bush administration run like a lava flow across the land.

Oh and one other difference, the $40,000 tax the Tea Bagger is so opposed to would have been used to pay for goods and services that would have benefited him. As it is the $120,000 that has gone “missing in action” has through some sleight of hand gone toward building the mansions and buying the yachts of the Wall Street thieves and their banking cronies. Regardless, our friend is $120,000 lighter and has had his income reduced by nearly 30%.

Has our friend not been taxed? Is not a rose by any other name still a rose? The man’s money has disappeared. He has been taxed, levied, robbed, cheated – call it what you will. It’s arguably a tax. The bills will be paid.

When the fox got into the hen house, the chickens at least had the good sense to run and try and avoid the catastrophe they faced. Unlike the Tea Baggers, they didn’t line up on the street corners of the farm and wave signs proclaiming the virtues of living with the fox.

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