A Matter of Taxes

A little story about tax inequity

 

A key battle of the class war is being fought in the tax code. While millions of Americans are without work and millions more are unable to make economic progress or to find financial stability with the low pay jobs that they have managed to find, a small knot of Americans are prospering unlike any other group in history. So when this latter group balks at the premise of paying a little more into a system from which they conspicuously benefit, it makes the rest of us who are just trying to survive this recession without losing our homes, and those of us who are not so lucky, question the validity of our national system. We don’t want to tax the rich to punish them, we simply want them to pay an amount commensurate with the benefits they derive from being members of this society. There’s no doubt that they are benefiting magnificently at the public expense. Now it’s time for them to pay for these benefits.

In an inane attempt to distract us from such glaring inequalities some are trying to suggest that 47% of Americans pay no taxes at all, so why should we focus on the tax inequities of the top 1%? Isn’t that hypocritical? Of course, it isn’t. This argument is nothing more than an attempt to make working Americans look the other way while corporate gangsters steal our thin wallets.

According to the Working Poor Families Project, fifty-one percent of families that fall below the poverty line are, in fact, working. That’s over three million families (note, that’s not three million individuals, but rather families). When you consider that real unemployment is at about sixteen percent, then factor in the number of working poor and that the bottom quintile of family income is less than thirty thousand dollars a year, that 47% figure doesn’t seem so outrageous. The 53%ers are, without intending it, making the case that profound economic inequalities do, indeed, create significant problems with tax revenue. The inferred solution, however, ensuring that poor people pay taxes (they’re fair share?), is simply ridiculous.

First off, let us end the myth that any Americans are paying “no taxes at all.” This is just nonsense. When even the poorest among us, legal residents or not, go to Wal-Mart and purchase a package of underwear, they are paying taxes…sales taxes, which are notoriously regressive.

So, one might suggest that the rich also pay their fair share in sales tax. In fact, since they buy more, they are probably paying more than their fair share.

Well, it’s not quite so clear cut. The rich have access to networks that the rest of us do not have. These networks allow them access to greater wealth resources, but also provide the means to escape paying their fair share. Take, for example, yachts. Yachts are a luxury reserved for the wealthy. One would think that the purchase of yachts would generate significant revenue through sales tax. I had the opportunity to discuss this very issue with a yacht owner. We watched a 90-100 foot yacht sporting a Virgin Islands registration pull into a yacht club. The cost of this magnificent vessel was estimated at over $10 million. Yet not a single penny of this sale was received in sales tax. The vessel was purchased in Norway (if I remember correctly) which does not tax the purchase of yachts. It was then registered in the Virgin Islands, again to avoid paying taxes and registration fees in the United States.

The American owner of this giant toy denied the state over $600,000 in tax revenue. We can argue that the poor get out of paying taxes by making use of deductions and exemptions reserved for the poor. How much revenue is denied state and federal coffers under such circumstances? A working head of household for a family of four making $20,000 does not currently pay an income tax. If he or she did, however, pay as much as twenty percent, that would add no more than $4,000 to tax coffers. So if we taxed a hundred and fifty such poor people we would break even for what the wealthy yacht owner was able to duck out of due to social networks that only he and his social class has access to. Of course, that would mean that this head of household must then figure out how to sustain his family on just $16,000 a year. In the meantime, Texas and Florida are engaged in a battle over who can tax yacht purchases the least.

Getting less attention is the benefit that the yacht owner derives from this arrangement. The marked channels in Southwest Florider were dredged and maintained by the state at the taxpayer’s expense. The yacht owner gets to navigate his floating palace through these channels and waterways while most taxpayers will never have the opportunity to use the very infrastructure that they paid for. Here’s another instance of the wealthy benefiting from tax payer subsidized resources while avoiding obligations to contribute their fair share. The poor head of household introduced above has no means by which to duck the few tax obligations that she has, but the wealthy yacht owner has countless measures at his disposal to avoid his obligations, and just as many opportunities to enjoy the fruits that American society has to offer.

This is yet another demonstration of elite privilege. Yes, according to US tax code, the wealthy may pay a slightly smaller percentage of their income in taxes, but it is really no big deal. It’s a matter of one or two percent here or there. Well, this yacht purchase and the corresponding tax scheme are not reflected in statistics on tax inequality. At the same time, it demonstrates the tremendous benefit that the wealthy receive by living in the United States. The yacht owner makes use of communication systems, subsidized by the taxpayer, to make international purchases, denying American jobs, using computer operating systems subsidized by the taxpayer. He then makes use of infrastructure paid for by the taxpayer to enjoy his purchase. Meanwhile he and his ilk are offended that there are so many poor people who “sponge off the system with their fancy Medicaid and TANF and unemployment compensation” without paying into the system. Those leaches.

It’s a topsy-turvy system that expects, nay demands, that the poor pay into a system that does not benefit them, while at the same time allows those who benefit the most to duck their obligations. Only a mass movement focused on economic justice, a movement with teeth, a movement willing to tear down the ramparts of power/privilege, can right this mess.

 

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