With tax day behind us, you may be discomforted to know that, according to the Treasury Department, approximately 1,500 people will have made over $1 million in 2011, and pay no federal income tax. That's no, as in NOTHING. Indeed, it's possible to make a $100 million in a year and pay no federal or state income taxes. Legally.
Who are these people who make huge sums and pay nothing? They are known only to their accountants and the IRS. I'm sure, however, they all wear American flag lapel pins and support the troops.
Where is Julian Assange when we need him?
Money From Labor vs Money From Money
The Federal Income Tax Code treats people who make money from labor (teachers, cops, truck drivers, waitresses) with thinly-veiled contempt. People who make money from money are, on the other hand, treated with worshipful deference. The tax code even gives the ultra-wealthy an invitation to pay nothing at all by exempting from taxation income received from certain investments like municipal bonds. Pick the right ones, and you're also exempt from state income tax. These clever patriots who love their country and their state can wear a state flag pin on their other lapel.
President Obama is trying to chip away at this imbalance between those who make money from labor and those who make money from money. He's asking those who make over $1 million per year to pay a little more on that part of their income over $1 million. According to Obama, it's about shared sacrifice.
The Republican counter-argument is that the rich are the job creators. Add a couple of percentage points to their taxes, and they'll stop creating jobs. Furthermore, asking the rich to pay more is class warfare. It's divisive and unpatriotic.
I have a couple of thoughts on the Republican position. First, imagine a broke Steve Jobs a couple of decades ago, tinkering with technology and trying to figure out how he's going to fulfill his dream and be a part of this new industry. Someone says to him, "Hey Steve, when you start making over $1 million a year, you're going to have to pay 2 percentage points more in taxes." You really think his response will be to close up shop, chuck his passion, and go get a job in the sock department of JC Penney?
Second, imagine a senior career military officer on duty in Afghanistan. He's on his fourth tour. Most days, he gets shot at. He makes a good, but not great, salary and pays an effective tax rate of 20%, seven percentage points higher than Mitt Romney and infinitely higher than those "patriots" that make over $1 million per year and pay nothing.
The Republican position is ridiculous and indefensible. The problem is, the outrage among the exploited has not yet reached a level sufficient to end the exploitation. It brings to mind Oscar Wilde's view of democracy: "Democracy simply means the bludgeoning of the people by the people for the people."
The people getting bludgeoned have to decide they've had enough. Until they make that decision, they can expect more of the same.