I don’t know about you but I am godawful sick to death of the election. To hear both Hillary the Donald tell it, this election is all about the Middle Class of America and how the Middle Class is under attack. I call bullsh*t on both of them.
The fact is that both are in their own ways out to protect the wealthy and their friends, not the Middle Class. But of course, the middle class screws itself over constantly so they figure they can get away with it. After all, if the average middle class American doesn’t care enough to stop getting screwed over by the system then why should our presidential candidates care?
Taxes, Taxes and More Taxes
Here’s a scary thought: Just about half of all Americans don’t pay a dime in federal income taxes. That’s right – they get all the benefits of our great nation without contributing anything to the cost of keeping it going. How is that possible? Simple – there are two basic ways this happens:
Too Poor to Pay Taxes
The most obvious thing is that the government does offer quite a bit to those who are poor. Make too little money in this country and the government will pick up the tab for your health insurance – it’s called Medicaid and below a certain threshold every American qualifies to get it. You just have to prove what your income is and voila – free healthcare.
Regular readers of this blog will remember me talking about my crazy ex-wife. She was getting Medicaid when I met her – after all, she didn’t have a job and frankly was incapable of holding one down even if she wanted to get one, which she didn’t.
She sure was good at spending money though – she would get her Medicaid and her food stamps (back then, it was still food stamps, not the card they get today) and then her parents would cover the rent on her apartment and give her extra money to pay for food.
I admit it – I was stupid and taken in by a pretty face. The fact that she didn’t need to work and sponged off her parents and the government should have been red flags but I digress.
The point here is that Americans who are not very well off actually get quite a bit of help from our government. It’s not just Medicaid. There is also the Earned Income Tax Credit. In essence, this means that rather than paying taxes for having a job, if you make below a certain threshold, the government actually gives you money to supplement your income.
There are also lots of other federal benefits for the poor – Section 8 housing means the government picks up the tab for your rent on certain apartments and a whole host of different food programs provide free money for food for needy families. Having trouble paying the electric bill? There’s a program for that too. Not to mention the free phones for the needy.
Now I’m not saying that everyone who takes advantage of these programs is gaming the system. I know there are people who have legitimate needs who genuinely have need for those programs. However, when half of all Americans aren’t paying any federal income taxes and nearly a quarter of those are because they simply don’t make enough to do so, something is broken in our country.
Too Rich to Pay Taxes
Okay, to be fair, most rich Americans do pay at least some taxes. Even the Donald does pay a certain amount in taxes. However, for all too many of the wealthiest among us, there are tax programs they can take advantage of which the average Joe simply doesn’t have access to.
Capital Gains Vs Income
Currently, the highest marginal tax bracket is 39.6% (that means that any money you earn above a certain threshold, which changes every year based on inflation is taxed at 39.6%. It’s currently $413,201 for a single person as an example). However, that doesn’t really tell the whole story because the super-rich don’t make most of their money from regular income.
One of the cool ways for the super-rich to reduce their tax burden is through long term capital gains taxes. If you can say that your income increased through a long term investment, say buying another home for example, you can then pay just half the income tax rate and only shell out 20% instead of the usual 39.6%.
Investment income is another way that most Americans can’t really get ahead but where the wealthy do so with impunity. Investment income is taxed at less than half the amount that salaried income is taxed at and that means that the super-rich can keep more of their money because they often make their money from investments rather than from a salary.
Even more galling than that is the fact that the super-rich can take advantage of all kinds of other loopholes such as tax write offs where they deliberately lose money at a strategic time (say they sell off an asset which didn’t work out the way they’d hoped it would) so that they can claim a loss of their taxes.
Now lest you start screaming at Donald Trump for paying so little in taxes, I’ll remind you what he said during the debates – you should have changed the laws. It’s simple really – if you know that you can legally get away with paying less in taxes, wouldn’t you do so? Heck yeah – I’d do so in a heartbeat and virtually every American would ask “where do I sign?”
So Who Does Pay Taxes?
So who is paying for our great nation’s tax burden? You and me – that’s right – the middle class, the great shrinking middle class of America is covering the taxes because you don’t earn too little to take advantage of the federal programs which allow you to pay no taxes and even get benefits and you don’t earn enough to take advantage of the super-rich tax loopholes.
And the Candidates Don’t Care
Let’s be clear here – I honestly don’t believe that either Hillary or Donald really cares all that much about the middle class. They just don’t. Donald is mega-wealthy and certainly has some radical ideas but I don’t know that he has ideas to really bring back the middle class and Hillary just takes money from Wall Street like there’s no tomorrow.
Bottom line, you my friend, as a member of the middle class are screwed and you continue to allow yourself to be screwed for as long as you continue in the rat race, earning your nice steady paycheck each and every month.