In the United States of America, the very founding of our nation was precipitated on freedom from excessive taxation. The original idea of America was that the government was supposed to be very small and non-intrusive. Taxation was only going to be for the most necessary things to support the "Common Welfare" of the citizens. In fact, not until 1913 did the Federal Government begin to permanently collect income taxes. Before that, roads, schools, hospitals and all the other things that clamor for our tax dollars fended for themselves via other means.
You will be surprised if not shocked how little of $1 dollar you actually get to keep.
In 2016 this was the marginal tax rate bracket.
|Marginal Tax Rates and Income Brackets for 2016|
|Marginal Tax Rate||Single Taxable Income||Married Filing Jointly or Qualified Widow(er) Taxable Income||Married Filing Separately Taxable Income||Head of Household Taxable Income|
|10%||$0 - $9,275||$0 - $18,550||$0 - $9,275||$0 - $13,250|
|15%||$9,276 - $37,650||$18,551 - $75,300||$9,276 - $37,650||$13,251 - $50,400|
|25%||$37,651 - $91,150||$75,301 - $151,900||$37,651 - $75,950||$50,401 - $130,150|
|28%||$91,151 - $190,150||$151,901 - $231,450||$75,951 - $115,725||$130,151 - $210,800|
|33%||$190,151 - $413,350||$231,451 - $413,350||$115,726 - $206,675||$210,801 - $413,350|
|35%||$413,351 - $415,050||$413,351 - $466,950||$206,676 - $233,475||$413,351 - $441,000|
A large majority of Americans were in the 25% bracket. Understand that this is taking 25 cents from every dollar you make. Next, add State and local taxes. at 1-4% Then 8% for Social Security. This puts the average amount you have after taxes, to be 63 cents!!! Now, you have to buy stuff with that 63 cents and guess what? MORE TAXES! The following are the percentages of taxes on the dollar you often pay AFTER you get paid.
Now you're down to about 51 cents left over to pay bills and buy necessities like food.
GET A RAISE
So what's the solution to all this taxation? More money? NOPE! because the marginal tax bracketing will simply take more of your money. Raising the minimum wage devalues the worth of every dollar. For example if you are making $15.30 an hour and minimum wage is raised to $15.00 do you think you will get the $7.75 increase on your $15.30? Will you now make $23.05? NOPE! So all the time and labor you spent working toward your $15.30 is instantly devalued. Further, the minimum wage is often used as a baseline. Roughly divided by 8; the typical workday gives us the base value of something that we think of as affordable. At $7.25, a basic incremental affordable amount to charge is 0.91 cents. Think for a moment why industries often advertise things for "ONLY .99cents!". Because in your mind this is about the increment of the lowest base wage divided by the 8 hours it takes to earn. 0.99 cents is a bargain! But if the new base is $15 divided by the 8 hours to earn, then eventually the new psychological "deal" will be $1.87 which will more than likely be rounded up to $1.99. What a deal!!! That's nothing; after all you're making $15 and hour now right?? See how raising the minimum wage won't help? This is a form of inflation where the dollar can't buy as much as it did before. Think about a basic bottle or can of soda pop. In that past it may have cost 0.05 to 0.35 cents to purchase. How much did it cost to produce the product and bottle and can? Surely the production methods today are more efficient. Then why does a can or bottle cost anywhere from 0.50 cents to several dollars?
What needs to happen is we need to increase the value of the dollar, not devalue it by artificially inflating it via some notion of "cost of living". The cost of living is also an artificial construct that will never decrease as long as we keep believing it as true. Certainly one thing that has changed is that money is no longer backed by any tangible asset such as gold or silver. U.S. dollars actually used to have a note on them that said: "...silver payable to the bearer on demand" You could take a dollar to the bank and actually exchange it for a dollar's worth of silver. Now, every type of U.S. money is a promise note that is backed by nothing. It is like person A promises to pay person B and person B promises to pay person C and on and on and no one ever gets actual tangible exchange. And oddly enough, we're okay with that because people keep passing the promise to the next person.
An immediate way to RE-value our money is to return to a gold and silver standard where every dollar MUST have that equal amount within some mint somewhere in the United States so that at any point a person could exchange it for real value instead of merely a promissory note; an IOU debt really. But this is unlikely to happen.
Another, virtual way is that each dollar is calculated on the amount of labor, skill or talent it takes to produce it. This has been the natural replacement for the gold and silver standard. This becomes the "natural value" of the dollar. It is sort of an unspoken universal agreement we have among each other. This gets us back to the 0.99 cents psychology. We weigh our time and effort to produce $1 against the product or service offered. If it takes you 8 hours to make $100 then $6.25 might be okay for lunch because it is about equal to the 30 minutes you might be getting paid to eat it. But after that it starts to become "expensive", at least in your mind. This is the reason that whenever politicians talk about raising the minimum wage, they will actually be doing grave damage to the natural value of the dollar.
To increase the value of the dollar, prices need to fall and for prices to decrease, the manufacture of the goods or services need to become less expensive. Think again about the soda pop. At what point will a person making $12.50 an hour not buy a 12 ounce container of soda pop? This is the reason why various commodities cannot be raised beyond a certain price point. The consumer will pay what they consider fair and affordable. We might pay $2-4 dollars a gallon for gas but after that we begin to seek other methods; smaller cars, car-pooling and such which eventually causes the gas station to lose money. So, again price gouging can't really occur for long in a free, capitalistic model. But whenever artificial increases to the natural value of the dollar occur, then the base "affordability" of everything undergoes change. Inflation!!!
Oddly enough, this symbiosis between the lowest paid employee and the market is needed. Since most people are constantly improving their income, there would logically be an ever increasing adjustment to the natural value of the dollar EXCEPT, we have had a constantly occurring entrance of people into the workforce/income model at the lowest level; a "starter job" if you will. This has determined our natural value of the dollar. If we radically change this entry level pay into the workforce/income model, we do not increase the buying power of those at the lower levels but rather we decrease the natural value and buying power of the dollar for EVERYONE. We need a static, predictable base wage. The key is to help the entry level person acquire skills to move to the next level and the next and the next. At some point they reach what is considered "middle class".
This almost arbitrary group of income earning is called middle class. It is not really about how much money a person has and more about what that money can sustain. Middle class typically involves the sustaining of:
- A dwelling for a small family = Husband, wife, a couple of children
- Feeding and clothing the family
- One or two modest vehicles
- A family pet or more
- Basic education for the children
- Some amount of leisure for the family
- Enough for an amount of retirement funding for the the parents
Whatever amount of pay can finance these things and perhaps have a little left over is considered "middle class" income. This is another way of determining the natural value of the dollar. This middle class is also sometimes called the "American Dream". It is not a flamboyant lifestyle but a happy and satisfying lifestyle. It is not to say that everyone must attempt to use their income in this way, but it is a very typical indicator of the natural value of money. This is also the reason you see politicians attempting to appeal to the middle class. They realize that this is the medium point of value for the economic system of America, and perhaps the world. Humans gravitate toward this position of comfort and whatever amount of money it takes to achieve it in whatever country the person lives; this becomes the natural value of the currency.