What Happens When there is No More High Income Earners?

Posted by Ray on July 12, 2009 under Main, Politics | Be the First to Comment

We favor a public insurance plan simply because it is embarrassing for the most powerful country in the world, and the richest, supposedly, to have so many people go without health care. The numbers are skewed and the real uninsured number, for legal Americans, is somewhere in the area of 8 to 10 million people, perhaps as high as 15 million depending on who you listen to, but the ways our wonderful government are considering to fund it is just stupid.

They are considering another tax on the wealthiest of Americans to pay for this. This would be on top of the already promised tax increase Obama campaigned on. The problem that these idiots have not thought of is what happens when high income earners disappear or are substantially reduced? We know things are tough and we know or understand that many feel that the tax system does favor the rich, and it might to a certain degree, but we need the rich as much as they need us.

How about this, let’s just assume you make $250K a year and your tax rate increases to 40% not including state taxes. You will now be paying $100,000 to the government every year and if we add in state taxes you would be paying another 9% or another $23,500. That means you would be paying $135K a year in taxes and bringing home $116,500 a year.

Now if we use the same numbers but add another 5% tax to fund health care then the numbers really stink. In fact, you would be adding another $12,500 a year in taxes and we are not even including the AMT, alternative minimum tax, of 16%. Now include health insurance, retirement or 401k savings and other miscellaneous taxes and fees and you are bringing home next to nothing.

Where is there incentive to earn more money under this proposal? To be a good citizen and fund everyone else’s health insurance? Simply put, this is not fair and will cost jobs and reduce productivity.

Not only that, but what happens when inflation hits? When inflation first hits it is painful and in response we will then have wage inflation so people can live. This is typical during high inflationary times. Now, we will have much higher living costs and your income will increase, perhaps to as high as $250,000 a year and then you would be paying those taxes, does this sound fair now? Of course not.

If you think this could not happen you are wrong. It already happened in the late 70′s and has happened all around the world already. Your income will increase but its buying power is reduced to nothing during inflationary periods. This new tax or taxes do not take this into account.

Now, if inflation does not occur, which is unlikely, then people will not want to earn more money because there is no point. What would happen then? They would have to reduce the definition of “rich” down to a level where they can collect these taxes, perhaps to $150K a year or lower even. The unintended consequences is that many more people moving forward will have to pay more in taxes which is not good.

This is also something that cannot be undone as well. If you think the government can run insurance programs correctly, think again. I can point to Medicare and the National Flood Insurance program as 2 great examples of mismanagement, mis pricing and general stupidity.

Once they enact this, if they enact this, then how could they ever undo it? They can’t so you better be prepared to pay more in taxes and you should be careful what you wish for as you just might get it.

The great American ripoff is growing.