Plucking the Goose

The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers, with the smallest possible amount of hissing. — Jean-Baptiste Colbert, Minister of Finances of France from 1665 to 1683 under the rule of King Louis XIV.

 

During the Presidential “debate” (aka food fight) on September 26th, a concrete policy proposal inadvertently slipped through.  Secretary Clinton said that she would take the high ground and tax the rich who were not paying their “fair share.”  She then postulated that the primary reason Donald Trump would not release his tax returns was that he had not paid any Federal income tax.

 

Cue the Political Correctness police to break out their riot truncheons. People should pay taxes just because the government needs the money. 

 

Donald Trump, on the other hand, said that he would lower both corporate and individual income taxes to get the economy growing and to create jobs.  As far as he was concerned, the fact that he paid no income taxes was “smart” because, among other things, the government wastes too much money.

 

As to the question of “fair share”:

 

The IRS has just begun releasing the preliminary data for taxes collected by various cross tabs for 2014.  However, the data for 2013 is complete.  The Nation Taxpayers Union published the following table for 2013: 

 

 

AGI (Adjusted Gross Income) is the bottom line on the first page of Form 1040 that most taxpayers file.  Think of it broadly as “cash in” from all sources.

 

The Top 5% of all individual taxpayers paid about 58.6% of all individual income taxes.  The Middle 45% (Top 50% minus the Top 5%) paid 97.2%. 97.2% (Middle 45%) minus 58.6% (Top 5%) = 38.7%. 58.6% (Top 50%) divided by 38.7% is 51.4%. That is the Top 5% paid 51.4% more in taxes than the Middle 45%. The rich are not paying their “fair share”?  I don’t think so.


“Fair” really is a unit of emotional measure which the Political Correctness police reinforce at every turn. Like all Politically Correct arguments, the argument sounds good but “where’s the beef?”  If significant increases in tax revenues are to be had, the Middle 45% will have to share in the heist because significant tax increases on the “rich” will be too detrimental to long-term savings and investment.  

 

As for Donald Trump commenting that paying no taxes was “smart”:

 

Consider one of the basic early tenants of income tax as set forth in 1947 by US Court Appeals Justice Learned Hand:  “Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” And that from a Harvard guy no less.

 

I wish I could help my tax clients pay no taxes. If I could, they would certainly call me “smart.” My tax clients don’t come to me for ways to pay more taxes. No one thanks me when I tell them how much they have to pay.  When Oliver Twist cried plaintively, “More, sir? May I have some more, sir?” he was not talking about taxes. 

 

If Trump paid no taxes after taking a billion dollar write off: a) he had to lose a billion dollars in cold hard cash to get that write-off, and b) it is perfectly legal.  Large but legal.  Hillary famously took a charitable deduction for donating Bill Clinton’s underwear.  Small but legal. It would seem that paying the least amount of taxes is an attitude which infects us all. 

 

As for Trump’s plan for reducing taxes to promote growth:

 

John Kennedy did it. Ronald Reagan did it. George W. Bush did it. The British did it. Every student who studies the supply and demand curves of microeconomics can demonstrate this simple truth:  taxes raise the price which thus reduces the demand for everything.   Why is the economy growing so slowly?  Could it be taxes on everything are slowing things down like barnacles on a ship hull? Want the ship to go faster? Clean off the barnacles.

 

The election is Tuesday, November 8th.  If nothing else, you honor our veterans by voting - Colin Kaepernick notwithstanding.

 

Who to vote for?  

 

As I suggested in my September newsletter, there are really only two candidates: Trump and Clinton. To not vote, to vote for a third party candidate, or to leave the presidential choice blank is to vote for Trump or Clinton – whoever wins.

 

Ignore the peccadillos of both candidates.  There are too many to list. For every tit, there is a tat. 

 

As for me, I am voting for the candidate who will hurt me the least.
 

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