Let Us Not Mince Words About Taxes, Tax Cuts and Tax Increases

The Minimum Wage Rate Increase Is An Illusion

Politicians in America are fond of minimum wage increases, as it buys votes from those who are poorest among us.

I was working at minimum wage in the early 1980's when Ronald Reagan increased the American minimum wage from $3.15 and hour to $4.25 an hour.

As a lowly dishwasher in a restaurant, I was happy to be able to take home more money for the amount of time I spent on a job. It seemed like a really good deal at the time. But, experience has taught me the fallacy of the minimum wage increase.

Sure, my wages went up, but so did my cost of groceries, cost of fuel, and cost of rent. It was a zero sum game.

Yes, that $1.10 increase in my wages resulted in another $2288 income for me in that next calendar year. But, my cost of living went up by an equally large amount.

I learned from that first minimum wage increase that as a minimum wage earner, "I" would not gain from a minimum wage increase, nor would those other million plus wage earners, who were currently earning minimum wage at that time.

When the next minimum wage increase came about during the Clinton years, I was confused why Congress would go through that exercise once again. It was said that it was a good idea, since the people at the bottom of our economy would benefit most from a minimum wage increase, BECAUSE the poor would see an increase in their spending power.

Yes, the spending power of the poor does increase for a period of about six months, up and until the retail prices of products and services catch up with the new real cost of producing those products and services.

The minimum wage increase will increase the costs of products and services for "all" consumers. So in effect what the minimum wage increase does is to lower the "real wages" of those earning more than minimum wage, and to trick minimum wage earners into thinking that the government gave them a step up in the world.

The Sly Truth Behind The Minimum Wage Increase

I was confused at why our Congress would be so intent on selling a new "zero sum game" to the American public. I was confused up until the point when an economist pointed out that the government collects a "set percentage" of a wage earners' income.

If the poorest members of our society were earning $4.25 an hour and paying an average of 20% of their wages to the Federal Government, then the government would be collecting $4.25 x 20%, or 85 cents on the hour from the poorest folks in our country.

But, if the poorest members of our society were able to see an increase in their base wages from $4.25 an hour to $5.15 an hour, then the government would be able to collect its 20% on $5.15 an hour, which means that at the higher minimum wage rate would bring the government's take to $1.03 per hour worked by our underclass.

When reviewed at the basic dollars and cents level, this increase to the governments' income does not seem that sizable. But, to view this in the terms of percentages, then this was a rather direct and distinct tax increase against those who are poorest in our communities. The 18 cent increase per working hour from our poorest citizens, from 85 cents to $1.03 per hour, is a mathematical increase in the governments' revenue collections from the poor by a rate of 21.2%.

I finally understood that the reason why Congress is so fond of minimum wage increases is two-fold. One, it endears Congress to minimum wage voters back home, because it sells them on the illusion that Congress is keeping the best interests of minimum wage earners in mind. And two, it enables Congress to extract more money from the very people that they are suggesting that they are going to help.

I hope this explanation clears some smoke and breaks some mirrors designed to hide the truth from you.

Smoke And Mirrors

In February of 2008, I found myself rooting for Barrack Obama. As a lifelong Republican, I was torn between Obama and the presumptive nominee of the Republican party, John McCain. Obama was an impressive guy and McCain was a lackluster candidate.

I was torn, because I was the first registered Republican in my family's history. It is a fact that I am descended from a previous Democratic Presidential candidate, William Jennings Bryan. Now in my early-40's, everyone in my family, with the exception of my sister has moved to the right in their politics.

I was torn, because after having helped lead my family members into the red column of American politics, I was thinking about voting left. Until the Democratic National Convention, I was holding myself to the right of center, but I was watching Obama with interest. The only area that I seemed to disagree with Obama was on his stance on Iraq.

But, my mind was firmly set against Obama on the last night of the Democratic National Convention. My mind was set in response to what was probably stated in a paragraph or two.

I was repulsed by Obama's tax plan. I was repulsed, because he was playing smoke and mirrors game with his tax plan, just as Congress has played smoke and mirrors several times before with the minimum wage increases of previous years.

In one sentence, Obama stated that he was going to reduce taxes for 95% of Americans. He immediately followed that statement with another statement that he intended to raise taxes on businesses.

Here is the trick of the words: Businesses will make a profit regardless of what our governments tax policy is or is not. So, if Obama is going to increase taxes on businesses, then those businesses are going to pass the cost of those new taxes on to their consumers.

A business tax increase will be passed to consumers in the form of higher prices for all products and services available in the marketplace, and all of us will be paying for those tax increases that are passed to businesses.

So while Obama promises a tax cut for 95% of the American citizenry, he is promising a tax increase for 100% of Americans through higher prices for products and services. It is another "zero sum game" from our government.

Obama is promising to put money into my front pocket with his right hand, while with his left hand, he is pulling money from my back pocket!

Now that I understand Obama's tax plan, I scream at the TV everytime Obama repeats his assertion that 95% of tax payers will see lower taxes... And while he may be right that my personal tax bill will be smaller, you and I and everyone else will be paying for his tax increases in the form of higher prices and a higher cost of living!

The Second Problem With Business Tax Increases

The United States already has the second highest business tax rates in the world.

For years, the American people have been complaining about how our jobs are being shipped overseas to lower-cost localities.

You know. The reason why companies have relocated to overseas locations en masse is not because wages are significantly smaller in those foreign countries.

As John McCain elegantly pointed out in the first Presidential Debate, companies can earn more money by moving to another country, simply by looking at their tax bills. The U.S. has the second highest business tax rate of 35%, and when measured against the 11% business tax rate for businesses in Ireland, one can easily see that a 24% reduction in taxes could easily translate into more net income, which easily translates into the ability of the business to hire more employees and to expand their businesses at a much quicker rate.

As more businesses see the light that their businesses can see faster business growth by moving overseas, more jobs will leave the United States, resulting in an even further decrease in U.S. tax revenues. As more jobs go overseas, there are fewer employees to tax in the form of income taxes.

Increased Business Taxes Undercut The Federal Government's Ability To Increase Revenue

Increased business taxes are not in your best interests or mine. It means more jobs will go overseas, which leaves a much smaller tax base from which the U.S. Federal Government can draw. You and I will pay for those increased business taxes in the form of lost jobs.

As the tax base shrinks, you and I will be asked to pay more taxes to offset government's revenue losses. Of course, in an Obama Presidency, business taxes will be increased to offset those losses. All the while, you and I will be paying higher prices for products and services, because you and I will be required to pay those new taxes which have been levied against businesses.

All of us will pay for Obama's tax plan. Those 95% of Americans who believe that Obama's tax plan will reduce our personal tax bill are only fooling themselves.

Your tax cut is under all three shells, and the business tax increases (higher product and service prices) are under all three shells as well. So, which one of those three shells are you going to pick?

Why I Am Angry?

I am angry with Obama. I am angry, because he entered this race claiming to be above the same old politics of yesteryear. But he is not. He is just like every other politician who has angered me in my life. He is running a shell game with our votes. He is being dishonest about his tax plan by claiming that 95% of us will see tax cuts under his plan, when the truth is that under his tax plan, 100% of us will pay more taxes.

His tax increase will not simply affect those people who earn $250,000 or more as he claims. Even if you only earn $10,000 per year, you will pay more taxes under Obama's tax plan.

When Obama says that "your" taxes will not be increased, and that "your" taxes will definitely be lowered or eliminated, he is lying to you!

Obama is lying to you, me and everyone else. And I am pissed about it, and perhaps you should be pissed too.


My name is Bill Platt from Stillwater, Oklahoma, and I approved this message.

Click here to read my rant about the banking industry meltdown.