Ever ask someone how much they pay in taxes and hear "I don't pay taxes, I got a refund!" How about those promises to raise taxes on the rich? Here are some Tax Facts to set the record straight:
1. If the government sends you a refund, this is an admission that they have overcharged you for taxes during the previous 12 months. This amounts to an interest-free loan to the government. They do not ask you if they can have a loan, they simply confiscate as much as they choose and then send you a refund for your year's worth of overpayment. Worse, most of us are happy when we get that refund, instead of being angry that we were short all of that money throughout the year. Even if your excess money had simply sat in a checking account you would have earned something on it. Of course that would have been taxed as well...
2. Corporations don't pay taxes, they pass them to the consumer: Us. This may take the form of fewer jobs, lower worker pay, higher prices, lower quality, or even less availability.
3. It is estimated that 22-23 cents on every dollar you spend on an item is paying for what are known as 'embedded taxes'. This is the amount the sellers build into the price of their product to compensate for the cost of all the taxes at every stage of production accumulating. For an example of how this works and how it affects the poorest among us, here is a clipping from Roanoke.com:
One cannot buy a loaf of bread without paying the income taxes of the baker. The price of that loaf of bread contains the cost of the flour, and the income of the baker, but it also contains the taxes the baker pays. After all, the baker does not have a money tree from which to pluck dollars to pay his taxes, he must get those funds from his customers, like any other business.
Further, the price of that loaf of bread contains the taxes of the miller, the farmer, the trucker and the grocer and those of all their employees. Those income and payroll taxes cascade through the production process and eventually make up more of the cost of that loaf of bread than the profits of any of those who worked to produce that bread.
Those many layers of taxes on productive work make up the embedded tax component of the price of bread or any other goods or services we buy. On average, that embedded tax component is 22.4 percent of the price of everything we buy, from a loaf of bread to brain surgery. So, the true tax burden on the working poor is 28.4 percent, (their FICA tax of 7.65 plus 22.4 percent of their remaining take-home pay, which goes to pay the embedded taxes hidden in the price of everything they buy).
4. The United States have the second highest taxes on business in the developed world.
5. When tax rates on business are raised higher, the amount of money the government actually receives goes down, not up. The number of new jobs and the amount of compensation paid to workers also goes down.
6. When tax rates on business are lowered, the amount of money the government actually receives goes up, business owners hire more people and they pay them better.
7. The States in the U.S. with the highest income tax rates are also those with the highest unemployment and the lowest economic growth. The reverse is true as well.
8. When the Constitution was crafted, taxation of income in this manner was not permitted. In the Federalist Papers, a series of letters encouraging the States to ratify the document, it was argued that the Federal Government would fund itself almost exclusively by what we would now call a 'sales' tax, and that any direct taxation of the people that was required would likely be done by their respective States in order to avoid the very Federal tyranny we see today.
9. In 1913, the lowest effective tax rate was 1% of income and it applied to no person making less than $17,000.00 per year. In today's terms that would mean if you made $362,599.99 and were single with no dependents, you would pay ZERO income tax. If you made $362,601.00 you paid 1% of your net income in taxes.
10. In 1913, in order to be paying the taxes at the HIGHEST end of the spectrum, you had to have an income of $500,000.00 per year or more. That is over TEN AND A HALF MILLION DOLLARS PER YEAR in today's dollars; and your tax burden would be an astronomical 7%.
11. In order to strengthen their economy and attract businesses to their country, Russia switched over to a flat tax rate of just 13%. The U.S. has an effective tax rate on business owners of approximately 40%. Where would you rather run your business from?
It is our hope that these Tax Facts will get you asking some important questions when you hear promises from politicians: Can they do what they say, and what will it cost really. Why do they need so much of our money and is what they are doing with it better than what we would do ourselves? It is time we let our representatives in Washington know that we are wise to their game: The outrageous taxes we suffer are a bit in our mouths to steer us where they choose us to go. Do they want us to buy hybrids? They'll reward us with some of our own money back in the form of a 'Tax Credit'. Do they want us to switch to solar power? They'll burden industries they don't like with punitive taxes that will fall on the citizens. They steal the fruits of our labor then add insult to injury, using those very fruits to bludgeon us into submission. We must take a stand now, to stop this abuse.
For further understanding of the destructive tax code we bear today, we recommend the following books:
The End of Prosperity, by Stephen Moore
Economic Facts and Fallacies, by Thomas Sowell
The Fair Tax Book, by Neal Boortz
And see the wisdom of those who have gone before us on our Wise Words page.
