Senator Obama wants the rich to pay their fair share of taxes!

Senator Obama wants the rich to pay their fair share of taxes and, if elected, intends to make sure that they do. Given the likelihood of increased Democratic majorities in both the House of Representatives and the Senate, we should expect some serious tax increases if he becomes President.

I, too, think that the rich (I am not one of them although I am "comfortable") should pay their fair share. By any standards, except the Orwellian beliefs of those who believe that citizens work for the government rather than the government deriving its [limited] powers from the consent of the people, that fair share is considerably less than they are paying now.

The first problem with Senator Obama's plan is his definition of rich. A couple making $250,000 per year (or a single person making $200,000) can be very comfortable in Arkansas or North Dakota, but may be quite stretched - particularly with kids of College age - in the New York, San Francisco, Los Angeles, or Washington DC metropolitan areas.

The second problem is the corruption of language: the term rich, at least to someone like myself who is of a certain age, refers to assets not income. A person or family with $10 million in assets could reasonably be considered "rich" but below that is somewhere between well off and poor.

These first two problems are, however, irrelevant except to point out the intellectual dishonesty of the argument being made by Senator Obama.

The real issue is the definition of fair share. Certainly it sounds reasonable, but we have a tax system that is manifestly unfair. To say "the more you make, the more you pay" is fair but "the more you make, the higher the percentage of your income that you pay" doesn't seem to meet any reasonable test of fairness.

Then, to further consider "fair share", we must look at income distribution and the payment of income taxes.

According to a study by the Cato Institute http://www.cato.org the top 1% received 16% of all income in 2004. They paid, however, nearly 40% of all income taxes -- the highest level in 40 years. The top 10% of income earners pay 71 % of the taxes. Somewhere there is a gross inequity that will only be exacerbated by Senator Obama's plans. That 90% of the population only pays 29% of all income taxes can not be equitable either.

It is also worth noting that the total tax burden imposed by the Federal Government comes to a little under 18% of the National Income but the top rate of income tax is 35%. Those numbers clearly indicate that someone is paying far more than his fair share!

Senator OBama believes that the top rate of income tax should be raised to 39.6% as it was during the Clinton Administration. His attitude reminds me of a very ugly remark by Denis Healy (British Chancellor of the Exchequer in the Labor Government) in 1978: "It will squeeze the rich until the pips squeak".

Is it what he thinks he can get away with cramming down our throats? Is it the politics of jealousy which used to be so rare in America? Senator Obama, with his message of hope, should do much better.

If we are to have a true democracy, the burden of paying for our government must be fairly - that means much more evenly - spread. A single rate of income tax is fair ("the more you make the more you pay") with no deductions for favored groups. The only acceptable exception to a true flat tax might be an exemption equal to the poverty line income.

Admittedly the Charitable and Mortgage Interest deductions can not be abolished overnight: they will have to be phased out to avoid major economic disruptions but, with some political courage, that can be achieved. It is likely, however, that it will be necessary to create the political will through swift kicks, administered by the people, to the rear ends of recalcitrant politicians.

Ayn Rand - a ferociously right wing and Libertarian author - writing in her most famous novel Atlas Shrugged, described what happened when the leaders of industry effectively went on strike. The consequences were an economic meltdown - and it could happen in real life. It certainly did in England - an economic basket case in the 1960s and 1970s where no senior managers bothered to work hard and few entrepreneurs existed - because the top tax rate, on even the not very highly paid, was 83% on earned income with an additional 15% surcharge on investment income.

The difference between those rates and confiscation is hard to distinguish. George Harrison of The Beatles put it well in the song Taxman:

Let me tell you how it will be;
There's one for you, nineteen for me.
'Cause I’m the taxman,
Yeah, I’m the taxman.

Should five per cent appear too small,
Be thankful I don't take it all.
'Cause I’m the taxman,
Yeah, I’m the taxman.

We haven't got there yet but we could: the famous Kennedy tax cut reduced the top marginal rate of income tax to only (only?) 70%!

One of the major causes of the American Revolution was the perceived unfairness of taxes levied on the 13 colonies - and their citizens - by an autocratic and uncontrollable government, located 3,000 miles away and not in the slightest answerable to the people. Our government, in Washington DC, is equally isolated from the real world for much of the year, and certainly appears uncontrollable and verging on autocratic.

We don't have to start a new American Revolution, but we should reject all politicians who believe that success - even the modest success of Senator Obama's so-called rich - should be punished.