I’ve been reading a book called “Perfectly Legal”. It’s a great book. The only problem is with how mad I get while I’m reading it.

Check this:

We all pay Social Security tax. It’s supposed to be for our retirement. For some reason, it’s in trouble and the government needs to either cut benefits or raise the tax *again* (same scare happened in 1980). Right now, the tax is over 6% and really over 12% since your employer has to pay half (mmm, I wonder if I would make more money if my employer didn’t have to pay that 6%?). If I’m paying into a fund then why wouldn’t my money be there when I’m ready to retire?

Okay, the government uses the Social Security money for things other than Social Security. Also, if the government doesn’t invest that money it will stay stagnant in time. Say I pay $2000 in SS taxes in 2000. Not invested that $2000 is still $2000 but it’s even less because in 2040 $2000 is only $400 in 2040 dollars. So, somehow because of inflation and poor investments Social Security is in trouble . . . so, we should get to keep it and invest it ourselves. Remind me about the Global Crossing story and see if that “invest in the company . . . you could be rich . . . pensions are for chumps” story reminds you of George’s “invest it yourself” story.

I was off track. So, we all get taxed about 6% (or 12%) for SS. Oh, and, after $85,000 of income, there is no 6% tax. So, someone who makes $90,000 per year (living large) pays a little more than $5000 in SS tax. Guess how much Bill Gates pays in SS tax? Yep, A little more than $5000 (maybe less if his tax people can show his income is less than $85,000 . . . and that probably wouldn’t trigger an audit).

You say that SS is to support us later on and blah blah blah. I say it’s a tax. I don’t get to choose how much I get back or when so I say it’s a tax like every other tax. Except that, really, it’s a tax break for the rich. $5000 to a guy who make a million a year is nothing. Now, 6% of a million *is* something just like 6% of $50,000 is something. The guy making $50,000 may be in the 25% income tax bracket and Bill Gates may be in the 35% tax bracket but keep in mind the little tax break Bill gets for all that money past $85,000.

Okay, some of my numbers are off but you get the point. Check out Wikipedia:

http://en.wikipedia.org/wiki/Income_tax
http://en.wikipedia.org/wiki/JGTRRA

Sheldon

If I ever complain about taxes to people, they always say something like, “yeah well, I think there should be a flat sales tax”. The first problem is, up until that flat tax is initiated, people will buy a bunch of new stuff and won’t buy anything else again for years. That will be a problem. Okay, ignore that. What about poor people? Are we going to tax them too? Right now they pay nothing or very little and presumably they’ll be paying more with a flat tax than they do now. Maybe that’s good? The middle class didn’t have to pay income tax at first and now, 70 something years later the middle class is paying almost half of all taxes (I made the “half” part up but it’s true that the middle class didn’t pay much 70 years ago). Maybe it’s only fair for “poor” people to start paying for the freedom we all enjoy (I say “poor” because a lot of poor people have two car garages, more than a few kids and big screen TV’s . . . there’s a difference between poor in the US and really poor).

Okay you say, lets not burden poor people with the tax they can’t pay in the first place. So, what is “poor”? Is that defined by, I don’t know, income? OH NO!!! Can’t be by income because then the flat tax wouldn’t be so flat anymore. So, in this flat sales tax system, how to we avoid taxing the poor?

I think a flat tax would make poor people poorer and rich people richer (about the same way it works now). Did I mention that with a flat tax you wouldn’t be taxed on investments . . . you know, property and stock? Those sound familiar? Poor people know all about owning property.

What am I missing?

Sheldon