Ronin of the Spirit

Because reality is beautiful.

Middle class

I’ve doing more thought/discussion/research into the whole taxes thing.

I stand by my belief that taxes are the axis of government. In the end everything spins around taxes. Inflation, by the way, is a very special form of tax. With inflation the government has its money at the value it decides, but your money buys less. I once read that inflation is the natural policy of a society that likes government programs but dislikes taxes. Its probable true.

If you read up on taxes you start to run into something interesting: class divisions. You can’t talk about tax reform without talking classes. The problem is real, and I don’t know what the solution is, if there is one. See being poor costs money, being middle class doesn’t, and it pays to be rich. Sound odd? Its true.

See, if you’re poor, you can’t afford to save money. If you don’t have savings, then emergencies that must be funded become debt. How far you are up and down the chain of lower class decides how much the interest rate is. If you buy your car insurance by the month you will pay a penalty for not buying it 6 months at a time. You probably can’t afford a good car, and you are buying more gas because of it. Most likely you don’t have health insurance and you must pay in cash (which you don’t have). Alternately if you qualify for medicare you can be in spot where a $500 a year raise (a $0.25/hr raise) can cost you all of your Medicare coverage. Replacing Medicare with insurance of the same quality is going to run a family of 4 around $6000 a year. So its totally possible to be in a spot where making an extra $500 will COST you $6000. Like I said, being poor costs money. (By the way, that actually happened to a good friend of mine.)

If you are rich than all sort of deals are open to you which are not open to any else. House payments are tax deductible so a person living in a $500,000 home need only pay the taxes of a person living in a $100,000 home. If you can afford to pay a personal tax accountant then, ironically, you get a larger portion of your taxes back. If one has $1000 in checking, than one pays certain fees. If one has $10,000 in checking than the bank pays interest to YOU. (That would be nice, wouldn’t it.)

And middle class? Well, they are in the (not surprisingly) middle.

If you look at what the take home pay actually does for the person spending it, I put forward the following guidelines.

If when all is said and done every dollar you spend costs you more dollar to spend, you are lower class.

If when you every dollar you spend spends without hidden costs dollar for a dollar, you are middle class.

If each dollar you have can get you more than a dollar (interest bearing) you are upper class.

I pretty much accept what is above as an immutable law of the universe. If I am making a decision about taxes I don’t try to fix the above, I just try decide things as fairly as possible. But SOME people think that a system is only fair if the taxes give every person, regardless of income the EXACT same purchasing power. That’s why we have progressive income tax, and why the FairTax proposal probably won’t gain ground even though it is a pretty sharp idea.

March 24, 2007 Posted by | Uncategorized | 1 Comment