I’ll have a cheeseburger and a double tax….
by Amanda RominePresident George Bush states that "it's unfair to tax money twice." This statement is actually an example of normative economics and only describes an opinion. It cannot be proven because the term "unfair" is relative to different people; however, not many people would dare to disagree. Especially if the double tax was not aimed only at the large corporations or the richest 10% of the nation but at every hardworking American who brings home a paycheck. Even worse, many of these Americans do not even realize the "double tax," and sometimes even "triple tax," that is imposed on them. Currently, large corporations are required to be taxed a certain percentage of all of their profits. This includes the money from which dividends are derived. When stock holders obtain the dividends from these corporations, the government counts this as individual income and is taxed once again. Six percent of the population would benefit from abolishment of this "double tax."
However, the largest part of the income that is taxed twice is the income from the worker's paycheck. Opposed to the 6 percent of dividend holders, this affects every working American. The income is first taxed as a whole and then Social Security and Medicare tax is also deducted. The money that was for Medicare and Social Security is never seen but is counted as if the individual had an opportunity to spend it. What is worse is much of the Social Security money is received from retirees who are again taxed on the income, creating a "triple tax." For Social Security recipients, there is a fixed amount of income allowed to go untaxed but is taxed once exceeded. However, these base amounts do not change with inflation which creates more and more people who are "unfairly" taxed. Also, this "triple tax" is paid all by the same person whereas the dividend tax is shared by both corporations and stockholders. This double tax is imposed on far more people who make much less money than the dividend holders. The Social Security tax on a worker's paycheck can only be implemented on a certain amount of income, creating a maximum base amount. This base amount does rise with inflation. Therefore, as income increases, the Social Security tax actually decreases. Those who make less money pay a larger percentage of their income to the government through the Social Security tax than the wealthy class does.
As the marginal tax rates increase, the incentive to work and undertake business projects are greatly reduced. People will realize that it is actually cheaper to stay home than to spend money on the resources required for work. Individuals will see that spending money on gas and buying clothes for work costs more than the money received in actual income. Businesses will see that their profit margins become slowly thinner. The Laffer curve illustrates that if the government's taxing is beyond a certain point, it will begin losing money because the rates will be so high, the opportunity cost of going to work is actually greater than that of simply staying out of the working class altogether. Why go to work if most of the income is going back to the government? As the amounts of the working class continue to be depleted, the lower incomes will cause consumers to buy less of a product at all possible prices depending on the elasticity. Elasticity is how greatly the demand for a product is affected by price. Normally, at a higher price, the individual will not buy the product which creates a consumer demand curve that slopes downward. The lower income will generally shift the consumer demand curve to the left, causing a reduction in economic growth.
As one can see, this 6 percent is not a very significant part of this country. Most of the people that make up this 6 percent do not even have large quantities of shares. Many of the middle class people would only benefit a few dollars off of their taxes, not enough to make a large, significant influence on their income. Therefore, many of the stockholders do not care if the legislation is passed. If this is true, why is double taxing even an issue in the White House? The government would operate at a deficit of 20 billion dollars if only the dividend tax was repealed. However, due to the shortsightedness effect and the special interest effect, it is highly pushed for anyway. Because the immediate advantages are seen more clearly than the long-term disadvantages, the shortsightedness effect begins to form. Because the advantages are so appealing both to one's political career and to one's pocket, the legislature is heavily pushed for by selfish lobbyists who try to persuade the government to agree with the new policy. Therefore, the abolishment of this "double tax" wouldn't really benefit America as a whole, but a select, more wealthy, few. These few, however, are driven to heavily support this legislator because of the special interest effect. These people will gain more from the new policies than anyone else, and therefore, this makes them eager to try and persuade politicians to agree. Because they are more organized than the disorganized working tax payers who receive double taxes, the politicians, even if retarding economic growth, will agree to the legislature. Most of these people were included in Forbe's "400 richest Americans" list. People such as Maurice Greenberg, who is the chairman of the AIG, Philip Knight, founder of Nike, and even the CEO of Walt Disney, Michelle Eisner, become rent seekers who try to gain as much as possible from legislature such as this, opposed to eliminating the far more inequitable double tax on workers' paychecks.
If President George Bush is worried about how Americans define the word "unfair," then he had better rethink which "double tax" should be eliminated. Though it does appear to be selfish of the government to tax the dividends twice and rob corporations and stockholders of their money, it appears that robbing Social Security benefactors of their income, creating a "triple tax," is far more immoral. Dividend holders, being some of the most wealthy of the entire nation, do not appear to need the extra money as much as the average working American struggling to maintain a middle class standing. But then again, it is up to the individual, because opinion is only normative economics and cannot be proven.
