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Len Penzo dot Com

The offbeat personal finance blog for responsible people.

The Middle Class Should Prepare for an Increasing Tax Burden

By Len Penzo

It’s time to dip into the mailbag again. I always love it when I get letters — especially the more, shall we say, interesting ones.

For example, I received one letter from someone who I can only assume is a card carrying member of a militant PETA splinter-group who apparently didn’t like my post on 10 Sure-Fire Tips for Minimizing Vet Bills. Specifically, Rose Jong castigated me for subjecting my dog, Major, to his recent lube, oil, filter procedure and suggested that I should suffer the same fate, saying “How could you be so cruel? If I could, I would happily pay the vet to perform the same service on you.”

Yeesh. Well, Rose, if it makes you feel any better, Major is fully recovered from his surgery. He is running around and is just as happy as he was before the surgery. Best of all his breath is absolutely odorless now and if you ask me, he really doesn’t seem to miss his “kibbles and bits” either. If he does, he sure hasn’t told me. 😉

Not all of my letters were so negative. I got two letters from folks who commented on my “24 (Financial) Things About Me…And One Confession Makes 25” post. BullDoG wrote in to say, “Now THAT was an interesting 25 Things submittal!…. By the way, I too have been robbed at gunpoint. It was the scariest moment of my entire life.”

I think that is understating the case just a bit, BullDoG, but I agree with you. In fact, believe it or not, about ten years later I was caught in another armed robbery when I was out with friends one night at a pizza place. In that robbery, shots were fired but nobody was hurt. I guess being robbed twice in one lifetime is my equivalent of being struck by lightning twice. Of course, those odds are still better than winning the lottery.

But most of the mail since my last mailbag review focused, both pro and con, on my continued rants against the United States’ new-found love affair with Socialism…

One of those letters comes from JMan360 in Mill Valley, California, who writes:

I am all in favor for the wealthiest 2% of the people (who control 70% of the wealth) contributing a little extra money so that the less fortunate can keep their houses out of foreclosure. What’s the big deal? I saw your net worth post, so it’s pretty obvious you aren’t in that top 2%. Or are you?

Thanks for writing, JMan. And you’re right. My income does not put me among the top 2% of wage earners.

I’ve already pointed out why I think it is wrong for taxpayers to come to the rescue of folks who are unable to stave off foreclosure.

But let me answer your question as to why it is a “big deal” when most of the taxes are paid by such a small percentage of the population.

To clarify your statistics, according to the Tax Foundation, in 2006 the top 1% of US wage earners paid 40% of the taxes. Going a bit further, in 2006 the top 5% (those who earned slightly more than $150,000) paid 60% of the taxes.

To me, the most troubling statistic is that the bottom 50% of wage earners in 2006 (defined as those who made less than $32,000) paid only 3% of the taxes. That disparity is a “big deal” to me because it means that a majority of voters have a real incentive to push for, and approve, costly Socialist policies on the small minority that would end up paying most of the bills.

Of course, over time as those bills rise to pay for these costly and inefficient government social programs, there will be little choice but to raise the tax burden on the middle class in order to make up the difference. Eventually, I don’t think it is unreasonable to expect that roughly 50% of the wage earners will be paying for the socialist programs being used by the other 50%.

I may not be among the rich, JMan, but I am a member of the middle class. If you think all of these neat socialist programs and corporate bailouts being pushed by our government are only going to affect the top 2% of wage earners, you better think again.

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March 24, 2009

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