Thursday, March 11, 2004

Hey, why work?

Labor taxed at 45% vs. 15% for capital

For a household comprised of one or more wage-payroll or salaried employees (say, those earning between $40,000 and $87,000), total Federal payroll taxes will amount to approximately 45%. That would include: 1) Federal Income Tax at 27%; 2) the employee's contribution to Social Security and Medicare of 7.65%; 3) the empoyer's Social Security and Medicare "match" of 7.65%; and 4) the employer's contribution to Unemployment and Workmen's Comp of approximately 2.35%.

If--like George W Bush, Dick Cheney, John Snow or Don Rumsfeld, for example--you were fortunate enough to be able to derive that sort of household income entirely from qualified dividends and long-term capital gains on a substantial investment portfolio, you would be most grateful for a tax rate that is now approximately 15% on THOSE sources of income. Yes, it IS true that for the the minimum wage employee this combined federal payroll tax will be "only" about 33% in total. So these most poorly paid workers will be paying "only" about 120% MORE tax(rather than 200%!) on income from wage payroll than their much more fortunate counterparts living in the wealthiest of American households.  

Yes indeed, this IS as good as it gets for those who truly are already in the investor class. But it is a horrible deceit and a cruel joke to suggest that we are all in that class, or that even any substantial number of households do have that $1 or $2 Million in investment assets that it takes to replace the need for convential earned income.

This is macabre: yet with the Bush Administration's almost unprecedented failure at net job growth for our economy,  the dismal fact of 2.2 million jobs lost in little more than 3 years, clear prospect of more outsourcing as well as declining hourly wages and benefits for those who are still employed, the primary job stimulous I see (in the slashing of taxes on investment income for our wealthiest households) is in the business of selling multi-million dollar life insurance policies. Certainly, for the average American household, it is becoming a lot more difficult to earn enough disposible income for savings and investment, for that "nest egg" for the security of your own family, or for that modest "leg-up" that you would hope to pass on to the next generation. Certainly, it will not be done in that most old fashioned American way--"by earning it."

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