Federal Income Tax - A License to Steal

The Federal Income Tax officially became the law of the land with the passage of the 16th amendment to the US Constitution in 1913. Originally, the tax rate was 1% of income capped at 7% for people earning more than $500,000 a year, which at the time was a huge income, perhaps equivalent to $5 million or more today. Over the years, the income tax rate has gone up dramatically so much so that when the Bush Tax cuts expire at the end of 2010, with tax increases proposed by President Obama and the Democrat Socialist Congress, the combined federal and state income tax burden in 39 states will exceed 58% of income. State and federal governments will be taking more than half the earnings of many people. While the top 50% of earners pay all the income taxes in the United States, the bottom 50% pay little or no income taxes at all. And, the top 10% of earners pay more than 50% of taxes collected. This is the progressive income tax gone wild.

In essence, many people in the United States actually work not just to support their families; but to support federal and state government employees, all the pork barrel spending designed to buy votes, people on welfare and illegal aliens. It is what it is. Under the Law of Diminishing Freedom, the higher the income tax burden, the less freedom for Americans. The more money we give government, the more regulations we must deal with that limit our freedoms. It really is pretty simple. I don't see much difference between Communism, where the government owns all wealth and being forced to pay 58% or more of income to federal and state governments. The Federal Income Tax really is a license to steal that is out of control.

And, no matter how much money we give government, politicians of both parties often in office for life, will spend more. This year the Federal government will generate around $2.1 Trillion dollars in tax revenues primarily from personal, corporate and estate taxes. Obama and the Democrat Socialists that control Congress are projected to spend $3.7 Trillion, or a deficit of $1.6 Trillion, the highest in American history. My guess is that the deficit will be even higher when all is said and done because the SwindleUS Package is doing little to stimulate jobs. Just for the record, the Bush deficits topped out at around $400 Billion a year during the Bush eight years and we thought that was high. President Bush was a spendthrift compared to President Obama and that was after dealing with the Clinton Recession, 9/11 and fighting two wars.

The fact is that the nation needs an income tax to support the needs of the country. However, the tax should be a fair and not confiscatory tax. No one should have to pay more than 25% of income to the federal government particularly since most people also pay a variety of other state and local taxes. It makes sense to cap the federal income tax rate at 25% and eliminate all deductions to keep it simple. This 25% rate should also apply to the federal corporate income tax to make American companies more competitive in the global economy and Capital Gains Tax. Adoption of a top rate of 25% across the board for Personal, Corporate and Capital Gains taxes is simple and is the best way for government to eliminate distortion in the economy that is tax driven. This will result in more jobs remaining in the US. It may even make sense to eliminate exemptions, which cause single people to subsidize married people with families; though I suppose it may be good social policy to help families. Deductions, like the mortgage deduction just drive up the price of housing. However, everyone should pay federal income tax including the working poor to have a stake in society with a graduation from 1% to 25%. The Estate Tax should also be eliminated completely because income taxes have already been paid on those assets. The Estate Tax is double taxation which is very unfair and detrimental to small businesses and family farms.

We should get rid of the Earned Income Tax Credit, which is just welfare by another name, where the government gives a check to the working poor that pay no income taxes at all. Instead, the government should reimburse up to $5,000 in tuition for vocational or higher education for families earning less than $50,000 to give them job skills and/or education so that they can earn more money. If you give a man a fish, he eats for a day; but if you teach a man to fish he eats for a life time. If necessary, the working poor family, earning below $35,000 a year, should receive food stamps, not actual money, based on family size, if that is not already happening. Community Colleges have great programs that can be accessed for this tuition amount or less. It just makes no sense to give poor people money that may not be put to good use and further does not raise their long term standard of living.

President Obama is a Socialist who believes in redistribution of income. Obama wants to take from the 50% of people that pay federal income taxes and give to the 50% of people who pay no federal income taxes at all to buy votes from his Peeps. Obama wants these people on the dole like slaves dependent on the government plantation for their sustenance. It is bad for those on the dole because it makes them dependent and it is bad for society in general. It is time to completely overhaul the federal income tax system. It is much too complicated. A simple, fair federal income tax will generate more revenues for the government than is occurring today because it will lead to job growth in the private sector. This is the way to bring about economic recovery and lower unemployment in the United States. Instead, Obama's Socialist schemes will lead to the collapse of the dollar, high unemployment, slow growth and high inflation and interest rates. Lowering taxes for all worked when Presidents Kennedy, Reagan and Bush cut taxes because it is simple Economics 101. When people have more money to spend, they can buy more things which stimulates economic growth. The current Federal Income Tax is indeed a license to steal. It is time for change that is fair and simple.