Corporate tax strategy & planning

Even the Poor Must Pay Taxes

One of my friends just brought an interesting article to my attention. It's a Wall Street Journal opinion piece written by Ari Fleischer (former White House Press Secretary) entitled "The Taxpaying Minority." From the title you can guess he states the usual stats: top 40% of the population pays 99% of taxes, top 10% pay 71%, and the bottom 40% payNOTHING!

With the Earned Income Tax Credit many of these patriots even receive handouts by the federal government, taken from the rest of the chumps who pay taxes. When a large percentage of the population has no vested interest in the fiscal solvency of the state, they are prone to demand increasingly irresponsible programs until a crisis forces change. The Romans called the crisis "civil war" after which a dictatorship was established.

If 60% of the voting public can force 40% to pay the bills, what's to stop 90% of people in a democracy from making 10% pay it all? Or why not let 99% of the country off the hook, as long as the remaining 1% picks up the tab?

Civilizations seem to have a fairly well-defined lifecycle. From initial growth there follows a period of properity up until citizens realize they can vote themselves gifts from the public treasury. British historian, Alexander Tyler, says "the majority will always vote for the candidates who promise the most benefits...with the result that every democracy will finally collapse due to loose fiscal policy."

A basic rule of economics is that when something is free there is no incentive to curb consumption. When you don't pay taxes there is no reason for you to favor conservative fiscal policy. Starting a war or launching a fiscally-destructive social program lacks meaning unless you are directly responsible for the ensuing consequences.

Everyone derives benefit from having a stable government. Whether you are middle class, rich, or extremely poor, there is relative advantage to living in our society. Each person must be required to pay his or her proportionate share. This will ultimately mean the wealthy will pay most of the bills - that is fine, they derive the most benefit from secured property rights - but even the poorest of us must be required to contribute something. The idea of being exempt from taxation and to actually get a paycheck at the end of the year for simply existing is absurd and potentially disastrous.

Rob Viglione is a writer, investment fund manager, and real property broker. A former military officer, he is passionate about promoting political and economic freedom. You can see more of his writing on The Freedom Factory.