(Forgive the length of the post, but I found it all necessary to discuss the topic)
I've never liked this phrase. Perhaps, I will admit, because I don't like the political ideology that it is currently used to describe, but we'll get into that in a minute. As anyone who knows me is aware, I have been more and more disillusioned by the political landscape of late. Will has pointed out that he feels bad for me, as my side of the political spectrum over the last ten years has moved further from what I stand for, his has moved closer to what he stands for. But I guess thats what you get when you are a communist (Will, not me), but I digress.
I decided this last year, that it was wrong of me to sit on the sidelines and complain about this migration that the party most closely aligned with my beliefs is experiencing, and I should get active. So, as the time for political activity approached, I studied up on the various Republican candidates for Senate in Utah. I read everything I could find that the various candidates themselves said or printed. I then studied the various stances they espoused. I did everything that I could to prepare myself for the upcoming local meeting where we would pick a delegate. I had never before registered with a political party, and had never before attended one of their meetings, but being a spectator no longer seemed like an option, so I got ready and went to the local caucus. I would have loved to be a delegate, but didn't feel comfortable nominating myself, so I ended up being an alternate. To the credit of the delegates that represented our district, my voice and opinions were always very sincerely listened to, and sought after, though in the end my delegates and I did not at all see eye to eye, this is not a commentary on them, as I believe them to be sincere, and wonderful people as I know them personally. This is all back story, because the true point of this post is to point out the multitudinous problems with a phrase that became popular as it was championed by the likes of Mike Lee, and portions of the current political movement on the right. Skin in the Game.
Now, what is actually meant by this. As far as everything I can gather from reading and discussions with the proponents of this ideology, it means that we need to have everyone, every single adult, paying taxes. The basic theory is that if everyone, no matter how poor, paid taxes, they would be less likely to support candidates and legislation that spent more money. I don't find fault with the goal, to encourage the government and our representatives to be more fiscally responsible, I too would champion such an outcome. I will, however, through this post, lay out the reasons for my very strong opposition to this idea, and line of thinking.
Poor people don't pay taxes. Its an oft used phrase, one I have myself used. Though it is not wholely accurate. While it is true that up to a certain income, people don't pay income tax (by the way, its not just the poor, with my number of children and the amount of money I make, I don't pay federal income tax either), its not accurate to say that they don't pay any taxes. Property tax, sales tax, and the payroll taxes are not income discriminate. Anyone that lives in anything pays property tax, anyone that buys anything pays sales tax, and anyone that has a job pays payroll tax. So, to set the foundation for the discussion, lets just clarify. There is a segment of the populace, that pay no income tax. It is wide ranging, as I pointed out, in my current situation that includes me. However, even the poorest do already pay some taxes.
Taxes are, by their very nature, unfair. It was the first thing my Basic Income Tax professor told us the first day of that class in Law School. You can waste your time arguing it if you want, but I believe it to be indisputable. We (the government) are taking your money, and you get nothing assured in return. Now of course in practice there are a multitude of things that everyone gets in return from the taxes taken, but bear in mind that those aren't guaranteed, whoever happens to be in office decides how much of your stuff to take, and what to spend it on. People, I think, really need to understand that. There isn't a 'fair' level of taxation and an 'unfair' level of taxation. All taxation is unfair, but some taxes or kinds of taxes, or taxing paradigms may be more palatable to one person or another.
So, lets get to it. Skin in the game, the idea that everyone should pay taxes, or rather, the idea that everyone should pay taxes, the way Mike Lee (using Mike Lee as an archtype, as I know he stands for this, and I can't really say 'Republicans' or 'Tea Partiers' as I don't think all of any one group has this stance) thinks is the fairest. The most common proposal I have seen is for a 'fair tax' (I hate this term, but they came up with it, not me). This is usually denotes a complete repeal of income tax as it is now, and institution of a consumption or national sales tax, estimates I have seen put the national sales tax in the range of 26%. Lets talk about that for a second. You don't pay your income tax, but everything you purchase costs 26% more. To put that in real world situations.
When I was going to Law School, I didn't have a job, Alisa worked. We made very little money, had our first child 7 months into Law school, and lived frugally in the old married student housing at the U. For the first year, Alisa was also finishing her degree, to say we had little money is accurate. We didn't buy much, but there is, of course, a basic level of stuff that has to be purchased. Earned income credits, child tax credits, and college tuition credits were incredible blessings every February, I grew to love doing my taxes. Now, I imagine losing all of that money, and my expenses going up by 26%, and I don't think I could have done it. Our options would have been Alisa or I getting a second job, moving in with my parents, dropping out of Law School, or going into even more student debt than I did. Now, while all of those are things we could have done, what is the benefit? Bear that question in mind as I continue.
Someone who makes minimum wage grosses 1260 per month (believe me, I deal with incomes constantly in my job). Lets take a single mom with two kids. She works full time, but only makes minimum wage. She lives in a government subsidised apartment, so that rent is low, and she is on food stamps already. She is on medicaid, because of course her minimum wage doesn't have benefits. She pays no income tax, obviously, but of course she does pay payroll taxes, so after all her fixed expenses her take home from a minimum wage job is only a few hundred dollars. She has utilities, and a car payment, school supplies, clothes for her and her kids, cleaning supplies, basic household neccesities and any unforseen expenses. Maybe, if she is lucky, she has enough for some Christmas, and Birthday stuff, and an occasional fun activity or extra curricular for one of her kids. All in all, stuff is tight. Now, say we take away all the Earned income credits and child tax credits, and on top of that, we make everything she buys 26% more expensive. So, her buying power is now 26% less. She obviously can't buy as much stuff, so stores sell less stuff to her, her quality of life, and that of her kids goes down further. Lets say she spends 400 dollars a month on various things, 26% of that is 104 dollars. She doesn't just magically get that much money more per month, so she really only is able to purchase 296 dollars worth of stuff now, but still spends 400, 104 of that goes to the federal government. So, what is our benefit. We have made her have 'skin in the game'. She now pays 104 dollars per month in taxes to the government. We'll be out of debt before you know it. Sales drop by 26% to the segment of the society that have no extra disposable income in their monthly budgets. But we do get 104 dollars per month from a single mom who makes minimum wage. So surely, with all these new tax payers on the rolls, the budget problems will be more balanced, right? Well, bear in mind, you've also lost all the income tax of people who make more than 7.25 per hour.
You see, there is a finite amount of stuff that most people will purchase in a given month. Everyone needs a certain amount of stuff, now, some of us buy an amount more than we need, but at a given point, you can just only purchase and consume so much. So a national sales tax has a break off point. A person making minimum wage, 7.25 per hour, may spend 400 dollars per month and pay of that 104 dollars in taxes. Making their relative tax burden 8.25%. But in order for that to actually be 'fair' or even, a person making 120.19$ per hour, or 250k a year, would have to pay $1718.75per month in this national sales tax spending roughly 6610.57 every month on purchases. It strains credulity to claim that there is not a natural cut off on how much people actually spend each month, to believe that everyone that makes 250k per year will spend six and a half thousand dollars a month on taxable purchases, does not ring true to me.
Taking all of that into account, what is the benefit to the nation of taxing the minimum wage earner 26% on all purchases? Does it make them go get a degree, so they can earn more? Does it relieve the national budget burden, and bring in enough money to pay the bills? Does it force congress to spend less? I would say the answer to all of these questions is a resounding no.
There is only one thing that, in my opinon, this tax system would do, only one, and that is lower the tax burden exponentially the more money you make. Thats right, it would lower the taxes on people who make more money. I would ask anyone who cares to, to explain how raising the taxes on the poor, while lowering the taxes on the more well off solves any problem?
