Thursday, February 3, 2011

The Tax Man Cometh

Ouch, I'm feelin' the burn! It seems that there has been a slight increase in Federal Income Tax Withholding for 2011.

Now, I try to stay out of the political arena, but when one takes money from me, I take notice.

I read many articles explaining this inherent increase and found that our federal income tax system has apparently remained unchanged for the new year. But, on December 31st, the "Making Work Pay" program ended, bringing our federal income tax liability back to (where it was before?)

This increase is partially offset by a decrease in Social Security taxes of two percent. Of course, that's only if you are currently paying these taxes-not collecting them.

Am I angry? Hell yes! It seems our current system is set up  to overtax those in the middle class, coddle those who cannot/will not work as productive members of society, and ignore those who represent wealth in our nation.

We have become a society of entitlement where services are freely offered to those choosing to partake; paid for by those choosing to produce.

Moreover, I, as most other retired service members recently experienced an increase in the taxes I pay on my retirement. (yes world, military retirees are even taxed on their retirement.) This of course comes with no new changes in the tax laws for 2011 (according to congress) and no cost of living increase.

I know what you want to say. "Congress has elected to NOT take their AUTOMATIC cost of living increase for the last two consecutive years. I commend them for their sacrifice, but have two reservations.

First, Why does congress, by law, receive an AUTOMATIC cost of living increase, and must vote to not receive it, while the cost of living increase on my military retired pay and social security benefits is NOT AUTOMATIC and must be voted on to be given?

Second, at $174,000 dollars annually, most congress members will not feel the pinch if they do not have an annual cost of living increase. (by the way, congress's cost of living increase, over the years they accepted it, was more than twice the cost of living increase for military retired pay and/or social security. Their annual salary increased by nearly $25,000 annually over the course of ten years. Can we say that about the increase in military retired pay or social security benefits? No.) Those of us who gave our very lives to our country or worked our entire lives in a real job most definitely feel it when the national cost of living increases by two percent and we (in our retired pay or social security) make, on average only eleven percent of the annual salary of our congress members. Keep in mind also, that the majority, if not all, of the members of congress bring in more then their annual congressional salary through previous/outside financial gains. In other words, they do not rely on their annual congressional salary as their only means of living. How many of you that spent your entire life working and are now suffering can say that?

Here's a novel idea: Why not devise a system where everyone pays a fair and equitable tax? As an example, institute a straight federal sales/consumption/value added/ retail tax that would be levied upon any citizen when they actually purchase something. Or, levied upon a business, domestic or foreign selling goods to anywhere in the united states. This way, everyone would be taxed according to what they spend.

In this system, if a wealthy person wanted to buy a luxury vehicle or some investment property, they would be liable for a set amount of tax on that purchase -- not at the end of the year, but right now! If that same person wants to avoid paying this tax, they could simply not purchase an expensive product. This tax would also be fair for those living in poverty. The benefit would be that they would not be taxed on the money they make, only the money they spend. This would entice those living on government sustenance to find meaningful employment and live within their means. Our current system actually rewards those not willing/able to gain employment and those having multiple children.

Oh, and by the way, this tax system would completely alleviate the need for an entire governmental agency dedicated to the collection of taxes. We would not need tax reform because everyone would be taxed fairly, and one time only on their purchases. I don't know. I'm just sayin'.

I'm no politician and I know my simple plan is full of holes, but It could be made into a fair system and, surely, as much as we pay congress, they could work out the kinks to make it a fair system for all. Hell, the government could even offer incentives or breaks for American companies under this system to encourage the manufacture and sale of American goods to Americans over foreign goods.

Ever wonder how Toyota is able to sell their cars so much cheaper than a comparable American car? First is lower labor costs, but second, and most important, is that our government actually gives them incentives or breaks on tariffs in order to manufacture and or sell their goods here. Do American-made products foster the same incentives for manufacture and sale overseas? Of course not.

But that's another post altogether.

Please send me your comments. What would you change? How would you make our tax system simple and fair?