Warren Buffet, who used to be the second richest man in the world, ran an experiment in his office. He asked his staff to check which fraction of their income they paid in taxes. Surprisingly, he pays a much lesser fraction in taxes than his staff does. This is a great quote:
“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
How can this be, when the majority of the people are much poorer than Warren and thus, ought to tax Warren a lot. No, Warren says he does not even do tax planning: he pays whatever he is being asked to pay.
This is explained away by the fact the poors tend to vote for more tax breaks for the rich. I couldn’t find a quote, but I think it is a well known fact that the poors tend to mistrust the governments to redistribute the wealth.
“People can’t do elementary mathematics” is another explanation. I don’t like this explanation, but that is what it comes down to. In Quebec, we used to have a child care system where poors got lots of money in tax deduction whereas the rich got very little. Then the government created child care programs so that everyone pays the same and gets more or less the same. The problem with this is that it is a measure that benefits the wealthy only, but gives the illusion of wealth distribution because everyone is suddenly apparently equal (except that the rich pay less taxes than they used to).
I’m often amazed at how uneducated about money people are. Take “tax returns”. A tax return is the government sending you back the extra money you paid. This is not an income. Having a large tax return is also a bad thing: this means that you gave the government a large interest-free loan. Yet, time after time, I see people who consider tax returns an income. Heck! The government could probably start taxing tax returns and many would agree!!!
Another one I like is how many people in Canada think that the goods are cheaper in the USA. For example, if you see a $30 printer in the USA, is it cheaper than the corresponding $40 printer in Canada? Depends on the exchange rate, doesn’t it? You’d be amazed how many people do not get that part for the simple reason that they never understood rules of 3.
Repeat after me: income-neutral costs favor the rich. All you need to understand are basic fractions here. The rich should pay more for government services whenever a cost is involved.
(Why am I writing about politics these days? Must be a reaction to Dion’s coming to power.)