22obama-600 President Obama has made the rich a popular target in his rhetoric ever since he began his campaign for the presidency in 2008. He plays on the desires of the poor and the middle class for fairness and argues that they already pay enough. It is the rich who should carry more of the burden for the rest of us. So, how will the proposed federal health care program be paid for? We need to know. The president tells us we can have great health care and pay absolutely nothing.

Basic Armstrong Premise: Anyone who tells me that I can have something great and pay nothing, at least if they represent the government, is not telling me the whole truth and nothing but the truth. There is more here than meets the eye. The rich 1.2% will pay for the rest of us! In Obama's own words, “I think the best way to fund (health care) is for people like myself who have been very lucky, to pay a little bit more.” But a “little bit more” is the problem Where does it stop? Will Congress curtail spending? You know the answer. Neither party has shown such commitment to this end at all.

Scales for Health There is one huge oversight in Obama’s flowery rhetoric. President Bush did cut the tax rate for the rich but he also cut the tax rates for the middle class and the poor. (Most of the poor pay no federal taxes at all so we need to be really honest about this!) Federal taxes are at a 30-year low. It seems clear now that no matter what happens with health care this is all about to change and change rather significantly. Time will tell if the economy suffers further damage from these decisions but everything in my experience says that a huge federal expenditure will not only harm economic recovery but create monster programs that will be poorly and inefficiently administered by a government work force that is already too big. The private sector is still where real growth must come in any healthy national economy.

This problem of the federal income tax only scratches the surface of our problem. In Illinois the governor wants to more than double our state income tax. In addition, almost everything that we purchase is taxed; especially gasoline, automobiles, appliances, books, computers, etc. The president can tell us that the middle class is not impacted by this plan but most of us know better. Our government cannot spend the money that it spent in the last twelve months and not raise income taxes to pay the debt. By the way, all our communities are suffering too. We spend less, thus there is less revenue from sales tax, and our real estate taxes are declining in the next year or two which will have a trickle-down impact on local services and education. The problem is rather simple—we are not raising new income levels while congress votes to spend huge amounts of money on new programs that we are constantly assured will be paid for by the rich! (We can supposedly feel good about this answer since we feel like we are getting what belongs to us and not to the rich!) Most of us have this very uneasy feeling about this kind of class rhetoric. If it sounds like smoke and mirrors that is because it is smoke and mirrors. This is why Joe the Plumber’s words became an issue in the last presidential election. Instinctively we know Joe is right. We’ve been here before and this script is one that we know too well.

Income-tax-tom If we wanted a truly fair and revolutionary approach to taxes we would either adopt the “flat tax” or the “fair tax” approach. (Illinois is one of five states that had a flat tax in 2008.) Either the flat tax or the fair tax would change the whole ball game and give us a system that was genuinely fair. I expect no Democrat in Congress will ever pursue this idea. Governor Jerry Brown (D.-CA) actually did agree with the flat tax, as do Republicans like Trent Lott (R.-Miss) and Sam Brownback (R.-Kan.) in the Senate. Steve Forbes, a thoughtful champion of tax ideas that really make sense, championed the idea in the 1996 and 2000 elections. The appeal of the flat tax is in its simplicity and fairness. You fill out one or two simple forms and that’s it. Flat tax ideas leave the wealthy with more money to invest, which in turn generates a healthier economy. They also create a sense of fairness which is fundamental in our society.

Russia, and other nations in Eastern Europe, adopted a flat tax in order to slow corruption and tax evasion. Liberal Western politicians see this as proof that we do not need this idea in the West. But the day will come, at least in my view, when we may reap the whirlwind of these massive new programs we are now creating. Someday the ordinary American will likely become engaged in a grass roots tax payer’s revolt and only then will we likely see serious change.

I am increasingly persuaded that the younger generation will lead this revolt. Why? They are the very ones with the massive college bills. They are also the ones with the bad jobs or with no job at all. And every day they face more government interference in their lives in terms of taxes and crushing burdens. When they realize this, and see how big the tax burden they bear is in terms of millions of baby boomers who took advantage of this bad system, I think we will then see positive change. It could be too late but I think this nation is pretty resilient. I think we are very likely to find a way to correct the major mistakes of the past generation once we realize we have no choice.

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  1. Chris Criminger July 25, 2009 at 8:58 am

    Hi John,
    Well, I think like you do on most of these issues and as someone who is closer to fifty than forty anymore, it seems to me that the younger generation thinks differently as of now on many of these issues.
    There may be a younger generation revolt someday but I don’t see it as this younger generation of today but maybe I am wrong?
    I have said this before but there is a growing number of people (maybe even the new majority?) that think’s it is the responsibility of the government to solve all our problems and even take care of us if needed.
    Capitalism is evil and socialism is either held conscously or unconsciously (ie–people subscribe to it but disavow the term).
    To make matters worse, it seems from history that a flat tax has never worked for very long. Almost as soon as it is in place the government starts tinkering with it and flat and fair (equal) are usually an illusion.
    I suspect that the American economy will continue to lose jobs that produce anything as we become almost an entirely service industry nation(and the largest growing job segment is working for the government in some way).
    I don’t know about today but I know in the past that the rich were wealthy enough to hire expensive lawyers to get them out of most of their taxes. I remember one senior citizen in our church who was irrate that Ronald Reagan for example payed less taxes than she did and she was a typical middle class worker.
    In the end, I agree that class warfare is not the answer but there always seems to be people on both sides that play the rich over the poor or the poor over the rich . . . .
    The sad truth (and I hope I am wrong) but conservative economics and politics seems to this observer to have lost the battle (maybe even the war?).
    Big spending, bigger government control, and bigger taxes will be the future nor do I believe the American people will revolt against this but passively accept it like they do with so many other things already current in our modern society.
    I would love the future and history some day to prove me wrong but here I am just like my Dad, pretty cynical as a voter and feeling marginalized by the politics of our day (neither side represents me and I was under an illusion when I thought one side did represent me).
    If I sound like a cranky forty soumething, I guess it’s because I am one . . .

  2. Steve Scott July 25, 2009 at 10:02 pm

    “I think the best way to fund (health care) is for people like myself who have been very lucky, to pay a little bit more.”
    I find this typical of liberal thinking, and quite hypocritical. People who believe this should be called into account for “that little bit more” that they have NOT already been paying. They claim to have compassion for the poor, yet are not already contributing extra to them. Then, their lack of compassion is taken out on others in their position, who just might already be helping out of their own pockets. So the people who are already compassionate are forced to go further to cover those who are not. This is fair?

  3. Nick Morgan July 26, 2009 at 2:22 pm

    Good post John! Sad, scary, but true.

  4. Bernie Matoff July 26, 2009 at 7:09 pm

    “Just because we are rich doesn’t mean we owe anything to society.
    We all are born with the ability to make it to the top.
    The fact that some never get there is their own doing”
    Bernie Matoff

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