Helping The Poor
 
Homepage
10 Tax Principles
President's Tax reform
Full Text
Q & A
More Detailed Explanation
TakeAction
Related Tax Proposals
Comparison to credit cards
Helping The Poor
Other Unrelated Tax Ideas
Economist 2006-0518
National Debt
Big Brother Watching
Tax created crimes
Taxes and the Constitution
Email Questions and Answers
An email I received
FairTax


The hoax of "Helping The Poor"

Helping the poor "NOT"
Helping the poor through favorarble tax treatment is an idea born from ignorance of economics or deliberate deceit by politicians with the intent to deceive poor people with promises that hold no substance in order to "buy votes" from them at election time.

The free market will adjust
The false promise is that lowering the tax burden on those with lower incomes will leave them in better economic circumstance when less tax money is taken from them. In reality the free enterprise system within a short time makes swift adjustments to the economy and leaves the poor in the same economic cirmumstance and often worse.

Labor is a commodity
What actually happens is that everything in the free market. including people's labor, is for sale at a price and that price is determined by the proverbial "Supply and Demand". People will try to "sell" their working hours at the best price they can get. The only money that is taken into account in their calculation is the "take home" amount.

"Take home" is all that matters
"Take home" is the amount that is left after all tax and all other deductions have been made. It therefore does not matter how much tax "the poor" pay because they will bargain their "take home" amount down to the lowest level they have to in order to get the job. They are always in competition for that job with people poorer than they are and in addition they are in competition with automated manufacturing and processes. As soon as there are fewer people that are poorer than they are, that is the time they will be in a position to bargain for more "take home" money because they need not compete that hard for a job any longer.

Tax breaks are a mistake
So, the point is that if the poor were to pay the same percentage of tax as everyone else they would not be worse off. Paying the same sales taxes as everyone else would actually mean that they pay a larger percentage of their "take home" income as "rich" persons will pay as a percentage of their income and even in that case it makes no difference lowering the total sales tax by making such things as food and medications tax free. The elimination of sales tax on food and medicines lowers the amount of "take home" pay needed and consequently will lower the "asking price" for wages of "the poor".

Short term good, longterm bad
The process of lowering taxes on the poor will bring short term benefits for the poor for only the few months right after the lowering of the taxes, but then the wages of the poor will drop relatively to the rest of the population. Most likely the wages of the rest of the population will go up, because their tax burden will be increased by the same total amount that the tax burden on "the poor" is lowered. This means that all the not so poor people will demand higher wages to get back to their same "take home" wage as before the taxes were lowered for "the poor" and before the taxes of the higher income people were increased. The self employed will increase the price of their goods and services to get even with the money they get taken away by higher taxes on them because of the lower taxes on "the poor". 

No advantage for the poor
There is no advantage for "the poor" by lowering taxes on the poor, but unfortunately there are additional bad side effects for the whole society and the economy as a whole. The bad side effects include the widening wage gap between "poor" and rich caused by the lowering of taxes on the poor, because of the relative lowering of the wages of "the poor" and the relative increase of the wages of "the middle class" and "the rich".

Buying votes
The very classification of people into seemingly distinctly definable groups of "the poor", "the middle class" and "the rich" is partly as a result of the politics of socialism with the lowering of taxes on "the poor" that is designed to "buy votes" from "the poor" during election campaigns.

Class strife
This division into economic income classes has the additional effect of creating class strife and the polarization of people that get fixated on the ideas presented to them by politicians of FAIRNESS in economic circumstance which convinces people that they indeed belong to a fixed disadvantaged group. The reality is that most people start out poor when they are young and are just entering the labor pool. They then gradually rise to higher economic levels and a few will eventually become quite rich and all others will stay at some lower level of economic wellbeing. Very few will stay poor for the rest of their life, but when people have been conditioned and classified by the politicians as "the poor" and they are given all manner of socialist promoted economic breaks and support, they tend to have a harder time to elevate themselves out of the lowest economic strata.

Universal Demand Law
Why socialism has this detrimental effect on people is better explained by www.UniversalDemandLaw.com . This Universal Demand Law explains why seemingly well-meaning socialistic legislation may have shortterm beneficial effects but will WITHOUT EXCEPTION have disappointing longterm outcomes.

Minimum wage laws
Minimumwage laws are just the same type of vote buying hoaxes perpetrated on "the poor". When employers are forced to pay mandatory higher wages to people. Employers will compensate forthe higher labor cost by creating more automation and reducing number of employees and of course they will be increasing the price of the goods or services they sell and thereby will pass the higher labor cost on to the consumer. The consumers in turn will demand higher wages to compensate for the higher cost of goods and services. That sets off a never ending inflationary spiral that will ultimately, in absolute terms, widen the gap between the incomes of poor and rich. The gap in terms of percentage will relatively stay about the same.  That widening of the income gap then becomes another lament for the socialists and it will be used as another battle cry to increase minimum wages additionally.