"Employed but feel unemployed?" (Commentary) (pay, taxes, rates)

[revelated]

So a lot of people have been commenting on the fact that they have recently lost their job, either via layoffs, company closures, offshoring, or some other involuntary measure that was taken by the company. There are some people who saw the quiet storm rolling in and changed industries, hoping to delay the inevitable for at least another year while they decide what to do. Still others were explicitly fired from their job, with either no reason given, or a reason that was omnipresent but never enforced, such as poor attendance.

As is well known, the impact of lost jobs has been felt in areas such as New York, California, and the southern states even more than central areas such as Colorado and Washington. Not to say that those areas are not impacted, because they are. It's just that the larger, more densely (some would say, too much so) populated areas where the so-called "boom" of the real estate industry hit the hardest are now feeling the pinch more than the other states. This then creates a ripple effect: The increase in asset-backed securities as a means to getting dirty money off of the books resulted in, as is so dearly referred to by the media, something analogous to a bubble popping. People stopped buying the notes, money stopped flowing in all directions, companies started losing the money they were using to sustain operations, employees become unemployed, homes are lost, which of course means less money for the banks that begin the circle.

But what about those who were fortunate enough to be employed in industries that either have not yet felt the impact (i.e. some forms of entertainment) or are virtually immune to its effects (i.e. healthcare)? Many of those still employed in these industries feel just as troubled as those without a job, if not more so. Why would that be? They're gainfully employed versus others who have no income to speak of. How is it possible these people can feel any worse?

The term is "cash poor". Our government is partially at fault, not intentionally mind you, but due to its ignorance about the way economy ideally should work.

Cash poor means that, although you receive income, you lose the majority of it to sustain your current quality of life, therefore unable to spend on any luxury items. You're not broke, you're not in any real debt, and you're not behind on any bills...but you can't enjoy the finer things in life. You've probably never gone on a real vacation, never traveled for personal reasons, and rarely buy a new car. It's a condition that many currently employed people are experiencing, even if they don't realize it. Some have been that way for so long it feels normal to them; they've never known a different lifestyle than one where they are cash poor.

So how could the government have any part in a country's citizens being in such a state? Because the law allows them to. Specifically: the tax code.

You may have heard the term "regressive" bandied about at one point or another, when someone has spoken to you about taxation. It effectively means the opposite of progressive - think back to your basic Latin - in that instead of advancing the economy and the citizens that sustain it, it unduly takes more than is necessary for any forward-thinking society to bear. In some cases, a person is subject to so much tax that it negates nearly half of their net present income: Federal income tax, State income tax, state sales tax, property tax, use tax, all based on percentages of the money you either spend or make. Above and beyond the multiple taxes being applied, the other point of regression resides in the application of said taxes.

You may not have known that the government expects you to overpay taxes to them, and then "wait" for a once-a-year bread crumb known as a refund to come back to you. Normally, someone sends you a bill for something you owe, you pay it over time (or at once, if such is the agreement), or if there is a prepayment plan, you are only charged that which you truly owe. The government doesn't think that way. In their mind, they will take whatever they feel like taking, and return your bread crumb to you when they feel like it.

I saw on the news the other day about the State of California being so broke that they were withholding refund payouts. So basically, they're delaying you from receiving your money. So why not just delay, or forego, the filing requirement altogether until the budget is sorted out? Because that would be too fair to the every day Californian to do such a drastic, pro-consumer thing. Better to stress folks out by forcing them to file a return which will not result in a timely refund. And oh by the way, if they don't file by April 15th, we'll make up what we think they owe, which of course is the maximum they might end up owing without any consideration for discounts, and then garnish their wages if they don't pay it or dispute it. Sounds like the mob if you ask me.

So we have: Federal government taxes, which take more than they are supposed to get on purpose. State government taxes which, even if you're entitled to a refund, the state has the right not to pay you in direct violation of the tax law itself, yet they won't give you a break on filing the return (that contains data they already have, BTW). But it gets better.

So let's say you get a refund from the Feds, and a refund from your state. Let's throw some numbers: Say your total refund is $2,000. You ended up paying well over $15,000. "Bread crumb" indeed, but you know what happens next, right? That money doesn't belong to you unless you throw it in an IRA or a CD or some other long-term savings. Why is that? Because if you spend it, even part of it, you'll end up paying sales tax...either to your state (if they have a sales tax), or to the Feds via the use tax (I'm sure you don't fill out that line of the return...but just FYI, you should be), or both in some cases. If you think that's double dipping, it is. In fact, it's more than double if you do the math:

1. Federal and State income taxes chopped out of paycheck before receipt.
2. Sales tax chopped out of whatever is left over that gets spent
3. If spent, more sales tax chopped out of refund
4. Property tax taken out if you own propery, of whatever is left over


Resulting in nearly 50% (in some cases) of your income gone, in some cases, to multiple government agencies, leaving you with just enough to pay your bills and feed your family (or yourself). What a wonderful world!

Is it right that they can just take taxes multiple times over? Why has nobody stepped up and demanded a single tax, applied one time, whether that's income at the current rates or sales tax at a fair rate? Why is it that we continue to suffer under the tax code, which becomes ever more regressive even in the current recession? It's because the government is ignorant. In their mind, the taxes are required to bolster the coffers. Without taxes our country will fall, so they say. What they don't realize is that the same ripple effect applies here as well. If people are forced to suffer under taxation, they are left with less money to spend. Less spending means less sales tax. Some people have even gone so far as to move to farms to avoid having income tax taken out. Desperate times call for desperate measures, and desperate measures are exactly counter to what the government is after.

Mr. President, the last thing you need is for the people who still have jobs to either stop paying taxes or be in a position where they can't spend to buy what they need (resulting in less taxes). You have to get a flat tax in place, where it's a single income tax charged at the current percentages with no separate state taxation, or a single consumption tax like the Fair Tax or Flat Tax that replaces all forms of income tax. One way or the other, taking tax burden off of the regular consumer will spur spending.

In the end, it's the best stimulus package of them all. And it won't cost you a dime.

[Ultrarunner]

An elderly Irish friend of mine says the goverment can never go broke... everytime a dollar changes hands 3 times the goverment gets it back.

Who knows... maybe now it only takes 2 times

[texdav]

There is no way that state and federal taxes will not be separate. But more and more local and state money is charged as fees;so its not noticed by most.The feda are just getting stated really on that. Anytime the budget is raised you can bet they shift some of the burden to all tax payers.People are cooned if they see that thier income tax was not raised.Ho0w do you think companies compenste for raised taxes and fees;rising prices.