The rhetoric from Sen Sanders and others …

about taxes, who pays what and what is fair is dangerously misleading. The idea that the tax code is designed to benefit only the wealthy is not true.

In many respects the tax code and other federal laws are designed to benefit average Americans and to limit the benefits for higher income Americans. Here are a few examples.

  • The tax- free growth and payment for life insurance policies
  • Pension plans have caps that limit compensation that can be counted for benefits and funding
  • 401k plans and IRAs and other retirement vehicles have limits on contributions based on pay and provide tax-deferred or tax free benefits to workers
  • Employers can use IRC Section 125 plans to make employee premium contributions tax free
  • The standard income tax deduction
  • Refundable tax credits for child care
  • Tax free income from employers who contribute toward health (and other) benefits
  • Health savings accounts, flexible spending accounts, health reimbursement accounts all lowering taxes or generating tax free income
  • The formula for Social Security benefits favors lower income earners
  • Income based subsidies under Obamacare and other programs.
  • IRMAA Medicare premiums require higher income earners to pay much higher share of the cost
  • The $250,000/$500,000 exclusion on the profit from home sale
  • The bottom 50% of income earners pay only 3% of all income taxes

The Trump tax cuts continue to be maligned as a gift to the wealthy, but if that were true, why doesn’t Congress simply repeal those changes in their entirety? The answer is many of the changes benefit average Americans…as ill conceived as the cuts were.

9 comments

  1. “ Income inequality. Not wealth.”

    Either way, one leads to another. Income isn’t a zero sum game either.

    “There is a problem when the lowest ten percent income group has a ten year shorter lifespan than those in the highest ten percent, among other things.”

    As Quinn pointed out, that isn’t necessarily due to income. Smoking for instance is much more prevalent in the lower income cohort.

    “Let them eat cake?”

    To a certain extent, yes. I don’t begrudge helping someone in a situation not of their own making, but someone who has made poor life choices (drugs, drop outs, etc) and multi-generational welfare families need to start taking care of themselves (or, eat cake).

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  2. “Sen. Manchin talked today about not wanting to see our country become an entitlement society. I’m not exactly sure what he means by that,” Sanders said. “Is protecting working families and cutting childhood poverty an entitlement?”

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  3. And yet, the U.S. has among the greatest income inequality of all the OECD countries. Even after taxes and transfers.
    We benefit greatly from the labors of many of the lowest paid workers. It would serve us well to ensure that they are healthy and reasonably happy. For enlightened self interest, if nothing else.

    Even ‘dumb farmers’ have figured that out.

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    1. “ And yet, the U.S. has among the greatest income inequality of all the OECD countries.”

      So what? Wealth is not a zero sum game, and there is nothing inherently wrong with wealth inequality. If you were complains about the ultra-wealthy using their wealth to drive the political process, I would agree that it needs to be addressed.

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      1. Income inequality. Not wealth. There is a problem when the lowest ten percent income group has a ten year shorter lifespan than those in the highest ten percent, among other things.

        Let them eat cake?

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      2. But don’t you think that has to do with factors beyond income given the many assistance programs aimed at helping low income people? Factors like crime, education, obesity, life choices like pregnancies.

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  4. Up until this year, earned income and child tax credits were not for the wealthy either. Who expanded those to the wealthy again?

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