Dividing By Twelve

One of the issues that we're facing here in the United States is the perception that our system of taxes is unequal.  One talking head states that taxing the rich will hurt the economy; the other says that the problem with the economy is that the rich aren't being taxed enough.

I have a very simple solution to this entire debate.

Let's stop talking about annual salaries.

How many of us work with a yearly household budget?  I never have and can't imagine a scenario where I ever will.  Talking about income as an annual amount is like referring to the amount you're charged for milk in a year.  "Can you believe I spent $120 on milk last year?"  No one in their right mind would spend $120 for milk, yet it's a reasonable annual amount for a household of four when you spread it out over a twelve month period.  Annual amounts don't mean anything.  We don't live in an annual world when it comes to finances.  It's simply outside of our normal perspective.

Instead, let's talk about taxes as it pertains to our monthly salaries.

The median annual income in the United States (according to 2009 numbers from the US Census Bureau) was $49,777.  That doesn't seem like all that much.

If you divide by twelve it comes out to $4,148 and change per month.  For many of us, that represents a comfortable (or substantial) raise; for others, a bit of belt-tightening.

The poverty threshold for a family of four in 2009 was $21,954 - which seems potentially do-able until you divide by twelve.  That's $1,829 a month to support four people.  Imagine trying to pay rent, utilities, transportation costs, and buy groceries for a family of four on $1,829 a month.

Yeah, right.  Like that's even possible.

That amount doesn't take into consideration clothing, toiletries, or gifts for the holidays.  It doesn't accommodate car repairs or emergencies.  It doesn't even cover a trip to the doctor - even for those with insurance who only have to pay a co-pay.

And yet 39.8 million Americans were at or below that threshold last year.

To put that number in perspective - 39.8 million people - if you gathered all of the impoverished Americans together and tried to house them in one place, you couldn't do it.  Comparing impoverished people versus current urban populations, you'd need the thirty-two most populated cities in the United States to house the current number of impoverished in our country:  New York City (8.2 million), Los Angeles (3.8 million), Chicago (2.7 million), Houston (2.1 million), Philadelphia (1.5 million), Phoenix (1.4 million), San Antonio (1.3 million), San Diego (1.3 million), Dallas (1.2 million), and San Jose, Jacksonville, Indianapolis, San Francisco, Austin, Columbus, Fort Worth, Charlotte, Detroit, El Paso, Memphis, Baltimore, Boston, Seattle, Washington (DC), Nashville, Denver, Louisville, Milwaukee, Portland, Las Vegas, Oklahoma City, and Albuquerque.  That's the amount of urban landscape needed to house 39.8 million people.  That's the number of people who are living on less than  $1,829 a month for a family of four.

I think we have a problem.

Senator Orin Hatch, who is the Ranking Member of the Congressional Finance Committee and part of the Joint Committee on Taxation agrees.  In an interview with CBS News on Tuesday, Senator Hatch said, "The fact of the matter is that you raise those taxes, and see what you're going to get. You let them go up, like the Democrats (want to) let them go up, and we'll more quickly become a second rate nation."

Ask 39.8 million impoverished Americans if they feel they're living in a first rate nation.

In 1955, the tax burden for the top 400 wealthiest tax payers was 51.2%.  For the median family?  7.4%.  As of 2007, the tax burden for the top 400 wealthiest tax payers dropped to 16.6% while the median family's tax burden climbed to 13.6%.  Let's recap.  Wealthy?  Your taxes went from 51.2% to 16.6%.  Everyone else? Your taxes went from 7.4% to 13.6%.  Based on these numbers, how is increasing the taxes for the rich clearly the wrong choice?

NPR ran a story earlier this week about a group that wants to raise the taxes on those making more than $1 million a year.

Sure, $1 million a year seems like a lot.  Who wouldn't want that amount?

But let's put it in perspective and divide by twelve.

One million dollars a year is a bit over $83,000 a month.

If you would be willing to be paid $83,000 each and every month but pay higher taxes than those who make less than you, please raise your hand.

I would.  In a heartbeat.

We hear these numbers flying around, but they don't frame the issue with any accuracy.  Take $120,000 a year.  That seems like a comfortable salary.  It breaks down to $10,000 a month.  I'm not sure I know what to do with $10,000 a month.  After a house, a car, maybe an extra car... then what?  And yet the money keeps rolling in.  At what point is the line crossed where I become comfortable saying, "Hey!  You nearly 40 million fellow Americans!  Yes, I'm talking to you.  I know you don't have enough to eat, but all of this extra money is mine." How do you do that and still sleep well at night?  Is that line drawn at $10,000 a month?  $83,000 a month?  What has to take place inside a person to know that others are starving and you have so much money that you don't know what to do with all of it?  That simply returning to what your tax bracket used to pay in taxes could assist the impoverished, but you need to hold onto every tax break you've received since 1955?

There are enough impoverished Americans to fill our thirty-two most populated cities, the rich are paying less in taxes than at any point in history, and the solution is to cut spending?  Yes, we need to be fiscally responsible.  Certainly there is a great deal of waste that needs to be cut.  But it isn't a numbers game.  39.8 million seems like a lot of people to be living in poverty.  It seems like a whole lot more if you're one of them.  Ask the family of four who is living on $1,829 where that line should be drawn.  When people like Senator Hatch say that we will have a second rate country if we raise taxes for the rich, they aren't talking about you and me.  They're talking about the rich.  The wealthy have it better than they have at any point in modern American history and they want to keep it that way.

The next time you hear something about taxes on the news, or this dollar amount or that dollar amount is tossed around, divide it by twelve.  Once you've done that, compare it to your monthly budget and ask if the position the person is holding is reasonable or if they need a heavy dose of reality.  This country has vast piles of wealth, so much that there is no reason for anyone to go hungry because their cupboards are bare.  And yet millions of Americans do just that, each and every day - enough to fill a substantial list of American cities to the brim.