CORRUPTION WATCH-We all recognize the need for taxes to be paid by citizens in order for the government to properly function. This is not something new and is one of the three sure things in life. The burden of who taxes fall upon is one of the great questions the government and the citizens must face.
In almost every jurisdiction in California, including the City of Los Angeles, sales taxes have increased over the past 10 years. Some increases have amounted to as much as 20%. Sales taxes are known as regressive taxes. Simply put, regressive taxes are those with a higher burden upon the lower income than the higher income.
Local governments, including the city Los Angeles, continue to try to increase sales taxes in order to fulfill the basic functions of government. The increase in sales taxes is fundamentally taking money from lower income families in order to fulfill the political aspirations of those in office. In Los Angeles part of the taxes are used to provide hundreds of millions of dollars to billionaire real estate developers. Such excuses as the need to fix our streets and sidewalks are put forth as alleged justification for taxing those who do not even own cars.
Income tax is known as a progressive tax. That means that the burden of the tax is borne by the higher incomes at a higher level than the lower incomes. Any discussion of increasing the income tax on those with higher incomes is met with swift and vehement opposition from politicians who claim that even slight increases in the income tax would be detrimental to the overall economy. Generally those who make the loudest noise are those who received large contributions from high-income people.
While income taxes for the higher incomes have decreased dramatically over the past three decades, sales taxes over the same period of time have increased rapidly. With millions of the working poor being subjected to increased sales taxes, the increased taxation upon those in poverty is a travesty. The middle-income taxpayer pays the highest percentage of his income in taxes than any other group in the United States.
As you do your Christmas shopping this year look at your sales receipts and see the amount of sales taxes that you pay. The figure may shock you. If you spend $3000 this holiday season, you will pay approximately $300 in sales taxes alone. You will still pay income taxes in the spring based upon the income you made during the year. When these two taxes are added you will find that the rich pay less taxes as a percentage of income than the middle class. Does that seem fair to you? It does not seem fair to me.
The payment of real estate taxes is another example of the disproportionate taxation of the middle class. Those who own their properties longer pay less taxes than those who are purchasing the property now. Accordingly a mansion worth $10 million could be paying less taxes than a person who bought a home recently for $500,000. In California this is known as Proposition 13. The effects of Proposition 13 have their benefits also, such as restricting a person from being taxed out of their own home. This factor is important for those who retire on a fixed income and need to be protected from the outrageous actions of government in increasing taxes.
Warren Buffett, one of the richest men in America, has been outspoken in his criticism of a tax system that allows the rich to pay less property taxes than the poor. Let us not delude ourselves into believing that all persons who have higher incomes don't believe that they should pay slightly higher taxes.
As a CPA, I do not support substantially higher tax brackets for anyone in our society, including the superrich. They earn their money and they are entitled to keep the majority of it. While the government continues to spend a higher percentage of the gross national product each year, there is little justification that the average citizen is benefiting from this increased spending.
Government spending is out of control. It is out of control because no one puts limits on what is spent and there is no true competitive bidding for services the government provides. The cost of defense and incarceration of citizens are two areas that must be changed, since they are more discretionary than Social Security. Taxation by the government must be watched closely and balanced with its excessive spending.
(Clinton Galloway is the author of the fascinating book “Anatomy of a Hustle: Cable Comes to South Central LA”. This is another installment in an ongoing CityWatch series on power, influence and corruption in government … Corruption Watch. Galloway is a CityWatch contributor and can be reached here. Mr. Galloway’s views are his own.)
-cw
CityWatch
Vol 12 Issue 97
Pub: Dec 2, 2014
