I had an interesting chat with a friend the other day. He works in a technical field and makes about twice what I make a year–and that fact doesn’t bother me a bit. What I adore about being an educator is that I get lots of time “off” from the job, which means that I can read, study, and write. It’s what I’m called to do. Other people are called to other things and their salary, like mine, should be determined by the forces of the free market. What people want, they pay for.
Success doesn’t bother me. And since I’m not a greedy person, I don’t have hateful or covetous emotions when I see others doing well. That applies even when their income is more than mine.
Recently, a valued colleague at the college where I teach shared with me something from Martin Luther’s Large Catechism. I’d like to adopt it for my own and live by it. I encourage you to do likewise. Here is the quotation: “If our neighbor has property, we are to be glad about it, allow him to enjoy it, and promote and protect everything that may be of service to him.” An attitude such as this is certainly a far cry from what we’re hearing from the politicians in Washington, DC these days. While they pit citizens of differing economic strata against one another, the elected elite in that city of power and glory are making a darned fine living … far beyond what most Americans experience.
Anyway, my techno-friend shared with me the fact that, although his employer didn’t have as good a year as before the economic downturn, he still offered generous bonuses to his employees. My friend received a bonus of $1000.
Sounds nice, doesn’t it? After taxes, however, his actual income was $560. That’s right. State and federal taxes gobbled up 44% of this extra bounty.
Admittedly, my friend and his wife are “DINKS”; they’re a married working couple without children, “Dual Income and No KidS.” She works as an administrative assistant for a legal firm and together they make about $125,000 a year. Neither their home nor their lifestyle is extravagant. They are both good citizens, at least as far as I can tell. Above all, they’re productive.
In other words, they are exactly the type of people who probably deserve a financial reward from their employers. Yet when the primary wage earner in the family gets that reward, government (mostly federal government) steps in to take almost half before a single cent of it makes it into the wager earner’s pocket.
Perhaps you’re thinking that this is reasonable. After all, look at the benefits that this couple enjoys. Certainly, if you think this way, to a certain extent you are correct. But the fact is that taxation comes with a high price. It’s a price that is probably higher than you realize.
Imagine my friend to be in a situation where he can choose to earn that extra $1000 by doing more than usual. Rather than a bonus, imagine that the $1000 is offered to those in his company who want to put in an extra number of hours or complete a certain number of additional projects. Most would probably jump at the offer, except for one thing. If they know my friend’s story they might hesitate.
Why? Well, because in government terms $1000 isn’t $1000. For those in my friend’s tax bracket it’s only $560. So when they decide if it’s worth the trouble they have to decide not about the $1000 but about the 56% of $1000. And a certain percentage of those workers will simply decline the offer.
That’s right. They’ll decline the offer. For whatever reason, they’ll decide that the payoff isn’t worth the trouble or the worry or the extra time or the hours away from home. It doesn’t really matter why because time belongs to them. They get to decide how to use it.
Here’s the lesson, dear friends: taxation comes with a price. And not only that, but taxation is by its nature punitive and regressive. The more success you have, the more taxes you pay. For most of you, the more hours you put in and the more money you make, the more the government smiles as it banks on your determination and strenuous efforts. That hurts everybody. It cripples our economy. I suspect that all across this nation there are millions who are choosing to work less because the incentive to do more is lower than they’re willing to accept. I say that as a business owner in conversation with other business owners. And there is no reason to think that we’re unique.
Let’s add insult to injury as we remind you that the US Tax Code is supposedly “progressive.” That means that as you earn more, you not only pay more dollars in the same tax bracket, you actually move up into new brackets and the percentage of your income that goes to government becomes even higher.
Are you feeling good about your hard work yet? Are those extra hours paying off? Of course they are! Well, not for you … but for the politicians who take your money and use it to purchase votes. For them it’s a great investment. They get the big salary, the perks and benefits, and the parties and trips paid for by corporate backers: free trips for themselves and family, houses in the Caribbean, and a whole host of gifts that the average American taxpayer will never be able to afford. How many members of Congress became millionaires after being elected to the House or Senate? Sounds fishy to me.
If we go over “the fiscal cliff” on January 1st, the money going to DC will increase tremendously. And don’t be fooled by the rhetoric. Everyone will pay for it, not just the so-called “rich.”
Washington isn’t the “District of Columbia.” It’s the “District of Covetousness.”
Instead of punishing success, America needs a taxation system that rewards hard work. What if extra work was taxed at a lower rate? What if every hour after 35 in a week was taxed less rather than more? What would happen if the elected elite who decide our tax burden realized that incentive actually means something and that people work less when they believe the payoff isn’t worthwhile?
What if taxation were for the purpose of funding the constitutionally-mandated functions of government rather than placating particular voting constituencies and ensuring the re-election of incumbent politicians?
Such questions serve as the explanation for why I support term limits–drastic term limits. This nation needs men and women who serve to solve problems, not those who serve to advance personal or party agendas.
What if taxation encouraged rather than discouraged hard work and extra effort? We have smart cars and smart phones, so why not smart taxation?
What a novel idea.
The Liberty Professor 