Thursday, January 31, 2013

Tyranny of the Majority ... Taxes and Paying Our Fair Share ... The Phil Mickelson Example

Individual freedoms are the inviolable rights of minorities in a democracy, assuming the majority of its citizens allow them to remain so. In other words, the tyranny of the majority occurs and wreaks havoc in a self governing society when the rights of its minorities are trampled in the name of majority rule.

Protecting individual rights from government is one big reason why our U.S. Constitution embodies the first ten amendments known as the Bill of Rights.

Democracy and individual freedoms are not equivalents. For example, at this time in history a democratic Egypt, Iraq or other middle east countries dominated by radical Islamists most likely won't be good for those individual Egyptians or Iraqis thinking and acting outside the views followed by radical Islamists.

The tyranny of the majority is a clear and present danger to the safety and security of its citizens who aren't part of that majority. That's why protecting the rights of minorities is so important.

But let's move on to the problems with majority rule and progressive taxation in our own society. Hopefully, you'll bear with me and thoroughly think this through as I believe it's an important element potentialy weakening our self governing society of equals. So at the risk of being called a greedy fat cat sympathizer, here goes.

Tyranny of the majority is one of the risks when a progressive versus proportional tax system, such as ours, is adopted by a country's citizens. If the majority decides through its elected representatives to tax fat cats at a higher tax rate than it imposes on itself, that's harmful to society as a whole. It makes that society weaker and it tends to encourage growth in wasteful government spending. Even more harmful, its "middle class" citizens inevitably will become more dependent on government programs in the future. At least that's my view.

In the interest of truth telling, at least as I see that truth, let's continue. The idea of defending the few fat cats from the majority will likely offend most of those in the Obama defined "middle class," representing about 98% of the U.S. population. So be it.

So let's talk about taxing the rich more than the middle class is willing to tax itself. Does it make sense to protect the rights of the high earning minority from the overwhelmingly majority of "middle class" voters (98% as defined by President Obama)? That's the topic du jour.

Golfer Phil Mickelson pays lots of federal income taxes. Of course, he makes lots of money, too.

And because he lives in California, he pays lots of state income taxes as well. But let's stay with the feds herein.

How much higher, if any, should his tax rate be than what "middle class" taxpayers pay as a percentage of their income? How much is enough? Is a progressive tax system a "fair" tax system?

I say the progressive tax system is a crock. And I also say that a democracy which has the majority of its citizens voting to raise taxes on a minority of its citizens to a much higher rate than the average member of the majority pays is a crock as well.

So why doesn't Phil Mickelson CONTINUE to just say so? Mickelson and the Sports Star Tax Migration puts it this way:

"America's top-grossing golfer Phil Mickelson drove himself into a bunker on Jan. 20 when he said that federal and California state tax hikes had made him contemplate making "drastic changes" in his life—including, it was widely assumed, moving to a no-income-tax state such as Texas or Florida. But he was only stating publicly what many professional athletes are mulling privately.
No doubt they'll keep their thoughts private, too, given the uproar that ensued. The golfer known as Lefty outraged lefties by noting that a tax burden of more than 60% seemed excessive. Didn't he know that athletes—unlike Hollywood celebrities—are supposed to keep their politics to themselves?

Mr. Mickelson quickly apologized for teeing off his critics. "Finances and taxes are a personal matter," he said. In any event, Mr. Mickelson certainly wouldn't be the first athlete to consider relocating for tax purposes.

Last week, Lefty's rival, Tiger Woods, acknowledged that he left California for Florida in 1996 when he turned pro because of the difference in state tax. . . .

In November, voters in California approved a ballot measure raising the top rate on income over $1 million to 13.3% (the increase applies retroactively to last year). . . .

"The day California passed the tax increase, I received three calls from concerned athletes," accountant Steve Piascik, president of Piascik & Associates, told me. His firm is one of the largest representatives of professional athletes in the country. . . .

For instance, Serena and Venus Williams grew up in Compton, Calif., but moved with their father to Florida in the early 1990s. Many of the top teaching pros in tennis set up shop in Florida. Note also that parents can afford to pay more for their children's training in states without income tax, since the parents keep more of their earnings.

The Williams sisters currently reside in Palm Beach Gardens, Fla., not far from 23-year-old pro golfer Michelle Wie. Upon graduating from Stanford University last year, Ms. Wie moved with her parents from Palo Alto, Calif., to Jupiter, Fla. . . .

Federal tax rates on income above $400,000 jumped this year to 39.6% from 35%. Meanwhile, ObamaCare levies a new 3.8% surtax on investment income and raises the Medicare tax by 0.9% on wages over $200,000. Limits on itemized deductions for high earners have also been reinstated, which will raise many athletes' marginal rates by one to two percentage points.

Mr. Mickelson was merely reading the wind when he floated the idea of making "drastic changes." PGA Tour Commissioner Tim Finchem, a former adviser to President Jimmy Carter, noted during the Mickelson brouhaha that "there are businesses relocating out of California because they can operate better in states that have lower tax rates." He also noted: "Generally, people making decisions based on the tax rates in California, on top of the federal tax rates, is not a unique thing."

No kidding. About 3.5 million Californians have migrated to other states over the past two decades. Almost anywhere they chose to go would allow them to enjoy greater returns on their labor. Is it really surprising that athletes like Mr. Mickelson might be keeping an eye on the leaderboard?"

Summing Up

A proportional tax system is the only appropriate way to avoid what amounts to redistribution from the highest earners to middle income earners otherwise willing to tax the highest earners more than they are willing to tax themselves.

The tyranny of the majority is alive and well when it comes to our tax system. Anytime a majority of the population decides to tax a minority at a higher rate than the majority is willing to pay itself, genuine unfairness is the result and our individual freedoms and our entire society both suffer.

And when the politicians do this in the name of fairness, what they are doing is soliciting votes for the next election from the majority of voters. It's politics at its worst, but it works.

And it's one big reason why we're becoming more and more dependent on government. The 'middle class' the politicians is trying so hard to save is granted special tax treatment by the government it elects. And that growing government dependency makes that middle class weaker and not safer.

And that goes for our nation as a whole as well. Weaker and not safer.

And now fat cats like golfer Phil Mickelson are becoming afraid to say anything about it, for fear of being called out by the politicians and even the middle class majority as ungrateful greedy fat cats who are unwilling to play "fair."

What a crock.

Thanks. Bob.

1 comment:

  1. A progressive income tax system is a must...
    according to Karl Marx and Friedrich Engels anyway. (The Communist Manifesto)