Equal Time: No, the worker is still taxed more

07/28/2011 2:26 PM |

The Equal Time by Mr. Sullivan, “The wealthy already pay more taxes,” wherein he provides an analysis of the “actual” taxes paid by the American worker and the millionaire in support of the claim that the wealthy already pay more taxes is simplistically flawed an myopic in scope.

Personal attacks upon the president, Democrats and Mr. Meinke aside and sticking to the argument made, the analysis conveniently omits many other common taxes paid by all and fails to consider fundamental economic principles and focuses primarily upon only one tax, Medicare. His analysis illuminates the difference between Republicans and Democrats.

The real question is the amount of earned income left after all taxes are paid as a percentage of income. The average taxpayer is a homeowner who pays a property tax based upon the assessed value of his property. Even if the millionaire taxpayer only has one home (an unlikely assumption), the $85,000 worker pays a far greater portion of his earned income than the millionaire.

All consumers, even the poor renter, pay the same tax rate to purchase goods needed to live, a regressive tax which saps more taxes in proportion to total income including salary.

The economic value of each dollar kept after the payment of all taxes is far greater to the millionaire than to the average working taxpayer, a concept known in economics as disposable income. Yet if the millionaire chooses not to buy goods or services, the economic fuel which truly creates jobs, the millionaire is likely to invest his savings after payment of taxes and hopefully gains more money as “unearned” income, taxed at a far lower rate than income earned as a capital gains tax.

The millionaire again adds more to his wealth than if he had earned it by work. It is doubtful that the $85,000 earner has much left over as savings to invest, especially after paying medical expenses and a gasoline tax to enable him to go to work.

We all pay a Social Security tax at the same rate as a payroll tax upon earned income only, but only up to an amount fixed by Congress, currently $106,800. The result is that the millionaire gets to keep any income in excess of this amount. The taxpayer earning $85,000 never reaches this income level, thus spending a greater portion of his income to pay this tax than the millionaire.

Mr. Sullivan correctly notes that the Medicare tax is a “flat” tax without any earned income limits. This tax was devised by Republicans and Democrats alike. Yet, Mr. Sullivan misconstrues the purpose of this tax imposed by Congress. Its goal is not to provide an individual health savings account, but to establish an insurance policy for all consistent with the Constitution’s stated purpose to provide for the general welfare of the country.

It is a jointly held insurance policy available to all, regardless of wealth. Even the wealthy can suffer a catastrophic, life-threatening illness or disability which might exceed his lifetime Medicare contribution.

Finally, the income tax is designed to be a graduated tax, meaning one pays a greater rate as one’s earned income level increases. Yet Mr. Sullivan does not address the tax code, which allows the wealthy to diminish his taxable income by tax credits, deductions, adjustments and other tax gimmicks which offset his total gross income, earned and unearned.

The bottom line is that the millionaire gets to keep a far larger portion of his money than the average taxpayer.

Like Mr. Sullivan, I, too, have omitted commentary about the cost of higher education for the average taxpayer, the taxes not paid by multiple-billion-dollar corporations who park their profits in other countries to avoid the payment of income taxes, record profits of the oil companies who pay millions to their executives, government-sponsored bailouts using taxpayer funds along with the greed manifested by the conduct of the Wall Street wealthy.

Economic history documents that it is the American consumer who ignites our economy by spending what he earns to meet daily living expenses and not the wealthy who advocate the trickle-down theory of taxation, an economic theory which has been discredited.

The consumer allows the wealthy to become more fortunate. It is clearly time for the truly wealthy to part with their treasure, to have pride in our nation by contributing their fair, that is proportionate, share of taxes in order to ensure prosperity for all.

Mr. Meguin is the Democratic candidate for supervisor in this year’s elections and serves as the party’s deputy town leader. He lives in Southold.