This year, my family is anticipating a tax return and I was motivated (partly intrinsically and partly by the prodding of my better half) to get our federal tax return completed and submitted early. Maybe it was the festive nature of getting money back from the government or maybe it was my feisty Irish blood that takes delight in defying the government, but I chose Saint Paddy’s day for the delightful experience of spending a couple of hours with TurboTax.
 
Upon completion, the software asked whether I would be interested in seeing how my finance and tax situation compares with the national average. I admit there was some pleasure in seeing that comparison, but I also admit that I could have handled a lot more pleasure! All this time working on taxes spurred my thinking on the subject.
 
I am quick to claim that I (actually we all) pay way too much in taxes and that I don’t ever feel like I get my money’s worth from the federal, state, or local tax authorities. Almost without exception, government continually reaffirms that it is inefficient, corrupt, and incompetent, and I resent the way elected officials waste the money I worked hard to earn. And, if surveys are to be believed, I stand with the majority of Americans in these sentiments.
 
The typical American worker is committed to 260 work days per year. He is excused from 10 of these in observance of national holidays and takes another 10 days for vacation. Inc Magazine reports that another 7 days are taken as sick days. So, while we are paid for 260 days, we actually work 233 days on average. As a percentage of the 365 day year, 233 days does not sound too bad. It is definitely more than most Europeans work, but far less than our forefathers did. What is truly disturbing, though, is how many of those 233 days we are working to just pay our taxes to the government.
 
Where Our Earnings Go
Before I get to a breakdown of the various taxes we pay, it is interesting to see where our hard-earned income goes. As you can see, an alarming 31% of our income goes to funding government (20% for federal taxes and 11% for state and local taxes).

What Taxes We Pay
Of the 31% of our income that we pay in taxes, the lion’s share is taken in the form of individual income taxes by the federal government. The next biggest chunk is taken for social insurance programs, Social Security and Medicare. The depressing thing about these taxes is that the social nets they are designed to fund will be long bankrupt by the time most of us need to start collecting. The biggest surprise to most of us, though, is that we are actually paying corporate income taxes on top of all the other taxes we pay. This hidden tax is paid every time we purchase a product or service; the corporations we patronize pass on the taxes they pay in the form of higher prices to us. In reality, corporate taxes are actually consumer taxes paid in a different way. It might be noted that the U.S. corporate tax rate is one of the highest in the world.

Implications
As you work on your taxes, and each time you get a check stub, it is advisable to think about how much money the government is taking from you. Ask yourself what you would do if you were allowed to keep most of that money; how would it help you, and how would it help the economy if you spent it? Also, remember that the funding of numerous stimulus and bailout plans will add to the amount you pay in taxes (pundits are suggesting we can expect an annual increase of $3,000 per household in federal taxes). Don’t forget the dramatic increase in the money supply to help fund these plans is stoking the flames of inflation, which is simply an especially well hidden form of taxation. The government reported yesterday that we are seeing the highest inflation rates in a couple of decades - tracking at about 5% per year – and we are just now beginning to see that rate begin to rise.
 
When you have reflected on all of this, pause and ask yourself: “Am I getting my money’s worth?” Then consider a basic tenet of conservatism, small government. Given that government is inefficient, corrupt, and incompetent, wouldn’t it be better if the free market were unshackled and allowed to address most of the needs of society, while government focused on the few things that only it can do?  This approach keeps systems and programs efficient and cost effective and ensures vital needs are met. If things get too costly or needs fail to be satisfied, competition will spur a better, less expensive alternative. When the government runs the show however, where can the competitive alternative develop?
 
Let these reflections spur you to action. Join a local tea party, pound your elected officials with input on the subject, and vote your pocketbook on your next ballot.

Rob from the Rich…
This notion may have originated with Robin Hood, but it was Karl Marx who made the doctrine infamous. The Marxist equivalent, “From each according to his ability, to each according to his needs” epitomizes communist principles. Slowly and quietly, the radical left has championed this Marxism in America for eight decades, working slowly, cautiously and mostly through stealth. With the election of the country’s most radical senator to the office of president, the left no longer needs to resort to secrecy.

Much of the Economic Destruction Plan recently passed by Congress shamelessly fosters the transfer of wealth. Due to the magnitude of that legislation, most of the public has no idea what it will do. Hearing very few objections from the electorate, Obama has been emboldened and is marching proudly forward with the Marxist agenda he trumpeted during the presidential race. (Click for a good and thorough backgrounder on Obama’s politics.)

Cap and Trade
Sources close to Obama have said he is moving forward with a proposal to tax carbon emissions. Leaving aside for a moment that our breath has been classified as a pollutant and that human-generated carbon dioxide has no demonstrable impact on the climate, Obama plans to tax businesses and industries emitting the evil gas. His little scheme is called Cap and Trade.

Under Cap and Trade, businesses will be forced to curtail their carbon dioxide emissions or buy permits if they cannot, or choose not, to reduce these emissions. The permits are sold by the government, which can set ridiculously low limits and charge whatever it wants. The European model of Cap and Trade has been operational for 4 years and has resulted in significantly higher costs while doing very little to lower emissions. American Cap and Trade will increase the jobless rate and act as significant tax on every American business and consumer as nearly all segments of the economy will be impacted.

Hey, but there is a bright side to Cap and Trade—the proceeds (after government administration expenses) will be distributed as welfare payments (tax credits) to the poor and to help people deal with higher energy costs. (Now there is some lunacy, tax energy because it is evil and give those tax funds back to the tax-payer to help pay for the more expensive energy they have to consume.)

Punish the Rich
Mr. Obama is also proposing to dramatically increase taxes on high-income earners, specifically those households earning a combined income in excess of $250,000. Their marginal rate will increase to 41.6% when their hidden deductions are phased-out. Additionally, tax rates are set to increase for capital gains (profits from selling items like real estate, stocks, or gold) and stock dividends. By the way, these last two taxes are paid by almost all investors regardless of their income levels. The plunder taken from rich will be used to fund the $634 billion overhaul of the U.S. health-care system. Unfortunately, these additional taxes won’t come remotely close to paying the proposed health-care bill. (see WSJ article)

Obama is confident that most Americans won’t be too offended that he is socking it to those dastardly rich folks. However, most of us are clever enough to realize that it is this group of people who take their money and invest it in the stock market, in businesses, in new jobs, and in the overall economy. If they are punished for making money, they will do what any sane person would do; find the best ways to avoid taxes. History shows that when the rich start conserving their money and avoiding heavy tax burdens, the economy slows, jobs dry up, and the stock market stagnates along with nearly everyone’s retirement funds. So who is really being punished, the rich who are preserving their wealth or you and me trying to scrape together enough to pay our bills and taxes?

The Lessons of Marxism
One hundred and fifty years after Karl Marx, our world can evaluate numerous examples of communism at work. As we all know, not one communist regime has been even nominally effective at building a thriving economy, lowering joblessness, driving innovation, ensuring liberty, or significantly improving lifestyles for its people. Communism and its close cousin, socialism, are however very effective at keeping a tight rein on the populace and preventing people from improving their personal economic situation. In other words, “tax the rich and give to the poor” translates into financially tethering the common guy.

So buckle-up and get ready for a wild ride. If Obama pursues the objectives he has written about and campaigned for, Cap and Trade and Tax the Rich are just the beginning of his unabashed drive to a Marxist America. Next on the agenda are: 1) socialized medicine, 2) disarming the public and/or curbing our right to bear arms, and 3) silencing the opposition through some form of the “fairness doctrine”.