More is less


iconCNN/Money gets it wrong again. Discussing the notion of a retail sales tax, Money comes up with this gem:

What's more, a simple sales tax would punish people at the lower end of the income scale, who tend to consume almost all of their income in order to stay afloat. That means they'd be taxed at the 30-percent rate on their full income, while the wealthy would be taxed only on whatever part of their income they spend.

If somebody making $500,000 spends $250,000, for example, they'd be taxed 30 percent of what they spend, or $75,000, which amounts to just 15 percent of their total income. That's called a "regressive" tax -- the higher your income, the less tax you pay -- and it is not a politically popular idea.

So if a person makes $50,000 a year and spends $50,000 a year, their tax would be $15,000. For some reason the math geniuses over at Money magazine think that $75,000 is less than $15,000. But then they are the ones who take financial advice from Billy Joel.

This "regressive tax" notion is old hat. They've been shoveling it for so many years that people just assume that you should pay tax on your income rather than on your consumption of government services. Whats more they think that the more you earn the higher percentage you should pay, just as a penalty for earning so much money. An individual such as myself with no dependents and who uses very few government services ends up paying twice as much as a family of four with the same income level. I'm supposed to pay more taxes on less services because they "need" the money more than me. Karl Marx would be proud.

Without resorting to the communist philosophy, "from each according to their ability, to each according to their need", there is no way you can look at the equation and conclude that $75,000 is less than $15,000.


Category:  Blaming the Media
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Comments

"...Money magazine think that $15,000 is less than $75,000..."

Me too...

Posted by: David at August 12, 2004 9:40 AM

Oops.. Typoo... corrected.

Posted by: Ravenwood at August 12, 2004 10:19 AM

Steve, when I get into politics, in any way whatsoever, you are at the top of my list as a financial advisor.

Posted by: Rhett at August 12, 2004 9:42 PM

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