40% Do Not Pay Income Taxes – The Manipulation of the Numbers and Words

Recently the republicans have been making a big deal about Obama's tax plan.  They are claiming that it is socialist in nature since Obama will increase the taxes on the wealthiest and cut taxes on everyone else.  The republicans claim that 40% of US citizens do not pay income taxes but this is just a matter of how you define taxes.  In truth, no matter what your income, we all pay FICA (Federal Insurance Contributions Act aka Social Security Tax) and FMHI (Medicare) taxes, although the republican's call these “fees”.  I, like many hard working people are tired of the play on words, any time anyone has to pay the government it is a tax, plain and simple.  Furthermore, these taxes are based on income and therefore are “income taxes”, from working, so the claim by republicans that only 40% pay taxes is patently false! (If you do not have income from working you will not have these taxes)  Obama's plan is giving people a credit for these taxes paid, they do not get a “free pass” rather they are credited $500 for having paid these taxes.  Currently all workers, unless you make in excess of $100K per year, pay 7.65% of their income for FICA and FMHI, Obama's credit would effectively protects the first $6,500 from that tax. 

Giving those in lower income tax brackets a tax cut is not socialism and charging those in upper income tax brackets a higher rate also is not socialism.  It is all a matter of a difference in opinions of what the tax policy should be here in the US.  Considering how badly those of us in the middle class are being pinched it makes good economic sense to allow us to keep more of our money.  Furthermore, because we have more money we will have more money to spend thereby increasing business revenues and encouraging them to hire more employees to meet demand.

No rational employer will hire additional employees because they received a tax cut, employers increase payrolls when they believe payroll expenses will be offset by additional revenues.  Employers lay people off when the current workforce is capable of producing product that exceeds demand.  Employers increase workforce when the current staffing levels can not produce a level of supply which meets demand.  If consumers have more money in their pocketbooks then their demand for products will increase thereby resulting in more employment opportunities and thereby increasing profits for business owners.  However, this is not a “transfer” of wealth, it is all about cutting taxes for one group and returning the taxes to another group to what existed prior to Bush's tax cuts.  It is about restoring government revenues to offset the budget deficits that have been brought upon us in the last eight years.

The problem with the republican policies is they cut taxes on the wealthiest and have financed those cuts with debt.  In effect they are cutting taxes for a select group today at the expense of additional taxes on future generations.  Someday, somehow this debt will need to be paid back, it is not going to magically evaporate.  That national debt is nothing but an instrument to transfer debt from future generations to today.  One would be hard pressed to even find socialists who would believe this was a justifiable redistribution of wealth!