Paying Taxes

One problem most people have is they get too focused on one aspect of a problem and don't step back and look at the whole. In 1984 I went to a clinic about Centered Riding. A remarkable lady named Sally Swift was teaching it. It was a weekend event and the first session was an amazing epiphany for me. She had us do an exercise called hard eyes-soft eyes.

The first step in the exercise was to select an object at a distance and stare at it as hard as we could. We were told to focus all our attention on that object. As we did someone would walk up beside us and we were supposed to hold our hand up when we first spotted that person. Even those of us with excellent peripheral vision didn't spot the person until she was well past our shoulder.

The second part of the exercise was to look at the object but instead of focusing on it keep our eyes "soft." Rather than focus on the object just be aware of it, but also let ourselves be aware of the rest of our surroundings. Again we were to hold our hand up when the person came into view.

Well, that made an amazing difference! In some cases the person was well behind the shoulder when hands started going up. In all cases the person was spotted significantly earlier.

What, you are asking, does this have to do with paying taxes? Quite a lot really. We get so busy staring at an extra three cents on the dollar we can't see the whole of our income and tax situation. If we only focus on the act of paying taxes then we become resentful of paying them and make decisions that ultimately are not in our own best interest. Stay with me here.

The very wealthy, both individuals and companies have been getting extraordinary tax breaks for over a decade now. The theory is that this would benefit all of the economy. It also seems as if it would be a good thing for them. But, is it? No, is the answer if you look at what has happened these past two or three years. The results of those tax breaks have proven to be bad for the rich, worse for the rest of us which, ultimately, makes them a disaster for the wealthy.

Here we need to make a distinction between the merely rich, and people like Warren Buffet or Bill Gates. There comes a time when some are so wealthy that no fluctuations in income will affect them at all. Sam Walton made this clear in 1987 when he told the press that the crash would not change his life style at all. It was only paper losses. The press focused on how simple his life style was rather than the fact, that even if Sam Walton had an extremely luxurious lifestyle, it would remain the same.

For most of the wealthy the ups and downs of the economy will affect them somewhat, especially those who are in the lower ranges. If a person makes $150,000 a year they are much better off than someone who is making fifty thousand dollars a year, which is close to the average income for a family with both adults working. The person making the first amount is better off than 90% of the wage earners in the United States at this time. Ah yes, the lowest income for someone working full time will be less than $11,000 per year before taxes. Not much room here for nonessential spending.

Why would paying higher taxes benefit most people in the upper ten percent? Because, the less income people have, the more money they spend. People must spend money for necessities and the less money they have the more of their total income they have to spend on the essentials of food, shelter and clothing. Once the basics are purchased then, and only then, if they have anything left over, they will buy something that isn't absolutely necessary.

This is where those rich people paying more taxes will earn more income. If there is something left over for the individual or family that is in the lower brackets they will spend some or all of it on non-essential items. They will buy the products that the upper ten percent are selling. It may be something as simple as going to a restaurant to eat instead of eating at home, but the expenditures will benefit the owner of the restaurant AND all her employees AND her suppliers AND in turn their suppliers and so on.

I know and understand this in the most fundamental way. The small business I owned and operated, a stable that boarded horses and gave lessons, was ALL about disposable income. In a way this was always an advantage because as soon as my families began cutting back on lessons or asking if I wanted to buy their horse I knew the economy was taking a downturn.

When this started happening I would cut back on my expenses which in turn affected other people such as, my feed dealer, my vet, my farrier, my tack store owner and any competitions I usually took my students too. This in turn affected the local gas station and so on down the line. All the people named in this paragraph are small business owners.

Many of these small business owners have a gross income of more than $250,000 a year, but once they have deducted their expenses and figured in depreciations their taxable income is well below this. When their customers begin cutting back on expenses they are making less money and in turn have to cut their expenses. This begins to impinge on the people who have a real net income of $250,000 or more, cutting into their income.

The only ones not affected economically by all this are those who can afford to have so many houses and cars that they aren't sure how many that they have. But, it certainly affects the person who wants to buy one house or car.

Anyone who owns a small business should be clamoring for tax increases for those in upper income brackets because the more money people in lower brackets keep the more money they will spend and business absolutely depend on their customers for income. Even plumbers do better in time when people have more money to spend. In hard times a plumber is only going to be called it his services are absolutely necessary. In good times he'll get "unnecessary" jobs that require extra money to indulge in, such as a new bathroom or an irrigation system for the lawn.

This isn't socialism; this is the free market system at its finest. This is what free markets are all about, the flow of money. The lower income groups keep more money in circulation than the upper income groups do. Even if they save part of their money they do so in a way that keeps the money in circulation. The very wealthy will have investments that will lock money away for a long time. They buy estates that freeze the money spent for years or even centuries. The person saving ten percent of fifty thousand will have it in a money market account or mutual fund or maybe stock in a company on the Dow Jones Industrial board, all of which will keep that money flowing around, making the whole of our economy work.

In affect, by raising taxes 3% for those making $250,000 or more, which only kicks in after deductions and depreciations, the government creates an environment where more money can be made, even more money than the taxes take in the first place.

Think about it carefully. If you are paying an extra $.03 on the dollar and this allows more customers to avail themselves of the product or service you are offering aren't you actually better off by paying that extra three cents?

In my business as a stable owner one extra customer would more than make up the difference. In my new small business as a free lance writer these economic facts still apply. I can sell more of my writing if publishers have more to spend. And guess what? Books and magazine are things that, like horses, fall in the luxury category. People are going to cut back on buying them if they don't have extra money to spend, so PLEASE, raise my taxes. I much prefer paying more taxes to not having money to spend at all.