HINDRANCE: Taxes Suck for More Reasons than We Think

Written by Clearchus on January 14, 2015

My son showed up one evening with a fascinating little book in his backpack. He is a junior in high school and I found Nickel and Dimed fairly captivating and well written. The author, Barbara Ehrenreich, writes from her perspective as an undercover journalist. It sets out to investigate the impact of the 1996 Welfare Reform Act on the working poor in the United States. It uncovers many of the difficulties low wage workers face, including the hidden costs involved in such necessities as shelter (the poor often have to spend much more on daily hotel costs than they would pay to rent an apartment if they could afford the security deposit and first-and-last month fees) and food (e.g., the poor have to buy food that is both more expensive and less healthy than they would if they had access to refrigeration and appliances needed to cook). The events related in the book took place between spring 1998 and summer 2000.

Basically, our Government did Pharaoh’s rough equivalent of demanding more bricks without providing more straw.

Looking at the numbers, a hunky-dory but false little tale appears in the Social Security National Average Wage Index (AWI):


The true and more sinister tale appears in the IRS breakdown of income tax rates:


Since the end of World War II, American citizens received two large pay increases.

The first occurred under President Kennedy in 1964. He dropped the top tax bracket from a whopping 91% rate on incomes $400,000 and above in 1963 to 70% on $400,000 and above in 1964. The second occurred in 1982 under President Reagan. He dropped the top bracket from a Jimmie Carter 70% high on $250,000 and above in 1981 to 50% on $85,600 and above in 1982. In both instances, business zoomed, people earned higher salaries, more jobs were available, and the American economy roared with success.

Equally important, gross tax receipts collected by the Feds increased after each rate reduction because lower taxed Americans spent more on houses, cars, and invested, while maximizing opportunity with increased quantities of higher paying jobs. Interestingly, Kennedy learned this from Conrad Adenauer; first Chancellor of the Federal Republic of Germany after World War II. Reagan learned this from studying Kennedy’s tax reduction.

The problem with Clinton’s 1996 Welfare Reform Act is that Americans did not get a pay raise through tax rate reduction. “Zippeman Bill” was able to work Welfare Reform but his Liberal Socialist perspective could not take the next step of reducing taxes.

Foremost, in Nickel and Dimed, Ehrenreich attacks the notion that low-wage jobs require unskilled labor. The author, a journalist with a Ph.D. in cell biology, found manual labor taxing, uninteresting and degrading. She says that the work required incredible feats of stamina, focus, memory, quick thinking, and fast learning. Constant and repeated movement creates a risk of repetitive stress injury; pain must often be worked through to hold a job in a market with constant turnover; and the days are filled with degrading and uninteresting tasks (e.g. toilet-cleaning and mopping). She also details several individuals in management roles who served mainly to interfere with worker productivity, to force employees to undertake pointless tasks, and to make the entire low-wage work experience even more miserable.

Without a tax rate reduction and freeing of income, her micro conclusions make a lot of sense. Had the Welfare Reform Act accompanied substantial tax rate reduction, on the scale of Kennedy and Reagan, Americans would not have been nickel and dimed. Instead, higher paying jobs in larger quantities, more available income, and American economic success would have opened up opportunity to those same low wage earners… and all Americans.

Concluding my research, one of the sites I stumbled across had a large right hand column for 3D cube production printers for individual homes. Think everything from toys to pharmaceuticals to individual weapons. I think I can hear Fed sphincters tightening at this potential loss of power and control over the means of production. 3D production capability has the potential of returning innovative mass production to American citizens. Scaling this out, my Science Fiction brain envisions large 3D production factories on the moon using raw resources to produce product through additive processes (like matrix printers making color documents) as opposed to subtractive processes (drilling and cutting). My military brain and the U.S. Naval Proceedings Magazine envision 3D printer ships accompanying naval fleets in beach and fleet assault operations.

Continuing its 80 year old methods of extracting income from Americans through increasing tax rates (currently called Obamacare) is bringing our government into conflict with new, innovative means of production. One evening in El Paso, Texas, a Japanese man showed me a fist sized plastic toy with spheres within spheres. Its dance-like integrated internal movement was synchronized to turning the outside sphere. The toy was made in a single 3D printer pass in a factory in Northern Mexico. Americans’ next pay raise might arrive in the form of innovative production techniques the Feds will be unable to control or monitor.

It is past time for an American pay raise on the scale of the Kennedy and Reagan tax rate decreases. Our government should be a partner in what is coming, not a hindrance.

Image: http://fabiusmaximus.com/2013/12/03/deflation-qe-59570/


Clearchus is the author of three Science Fiction books: Sunigin, Insurgio and Certo (Available at Amazon) about the next Texas Revolution. He is a retired Army Field Artilleryman who was one of the last men in the U.S. Army to command an M110 8" Howitzer firing battery. He currently designs computer networks for commercial, non-profit, and government environments. Married for 32 years to the most gorgeous babe he knows, he and his wife have four kids. Their lives and perspectives straddle military assignments, combat tours, and mission trips across Europe, Asia, and the Horn of Africa.