Tax Bamboozle

This is a post-tax reflection.


Why do the pols continue to blow smoke up the asses of the American people? The basic issue of taxes and how to raise revenue are not hard to understand, yet they are never discussed. The reason being that the top 1%-5% benefit from not clarifying what are really simple issues. Keep in mind who is in the top 1-5%.


1) There is a difference between the marginal tax rates (which the President wants to raise on the top 2%) and the effective tax rate which is never mentioned. The effective tax rate is the percentage of taxable income that is actually paid after deductions. So, if you cap deductions at a certain amount (e,g, $30,000) or eliminate deductions (like mortgage interest, contributions, state property taxes, etc.) without raising the marginal tax rates, the effective tax rates will go up and the government can raise more revenue.


2) Now why would the President, the politicians, and the rest of the high earners, who know the difference between effective and marginal rates, dwell on being for or against raising the marginal rates and resist eliminating deductions? If you eliminate deductions (individual and corporate) you will raise the effective tax rate. Could this debate over marginal rates be a big smoke screen to keep from discussing effective rates.


3) Could the silence on this matter be the fact that the Presidents effective tax rate was 26% while his marginal tax rate was 35% (or whatever the top bracket is). Could the answer be in the fact that probably every member of Congress, every major media owner/manager/anchor/etc. also have lower effective tax rates than their marginal rate, and thus do not want to eliminate or cap deductions at $30,000 and keep the marginal rates as is. Why doesn't the President tell Joe the Plumber the difference between effective and marginal tax rates. And by the way, we wonder where Warren Buffet is on this one; he is very concerned about his secretary's income but he is silent on deductions.


4) Our effective tax rate was higher than the Presidents, and probably higher that Romney, Buffet, or any member of Congress.


When we were kids we could always smell the horse manure because there were still horse-drawn vendors on the street. Today, the horses are gone but the smell is still there.