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CON: Penalizing only rich goes against American ideals

By Jennifer Lee Preyss
Jan. 6, 2013 at 9:04 p.m.
Updated Jan. 5, 2013 at 7:06 p.m.


The rich earn more and should therefore pay more in taxes. They, after all, have the money to do so, right?

Victoria Republican County Chairman Michael Cloud disagreed.

Reflecting on the bill signed into law by President Barack Obama last week, Cloud said the burden of resolving a national debt crisis should be equally shared by the people.

"It's easy for someone like me, not in the over $400,000 income category, to look at upper-income earners and say, 'Yes, they should pay more.' But when you go back to the original founders of the Constitution, it's not about the rich paying more. It's about protecting rights of the individual and not the majority," he said.

Cloud said the fiscal cliff negotiations were difficult because the government was attempting to reconcile more than two decades of poor government leadership.

And while he understands compromises must be made, the burden of substantial increases on the wealthy may be viewed by some as unfair.

"There's not going to be a pretty solution to this mess . and the wealthy are already carrying the brunt of tax increases," he said, mentioning he was doubly frustrated that the legislation didn't deal with government spending reductions.

"The terminology that's being thrown around is that the rich need to pay their fair share. But in an ideal world, you want to have a sound tax policy that treats everyone equally - not by color or socioeconomic status. It's meant to protect everyone equally."

Dave Sather, certified financial planner and president of Sather Financial Group in Victoria, said the American wealthy will be responsible for making up a large portion of the deficit shortfall but explained the new legislation may also have additional financial repercussions for a larger group of Americans.

Sather said the bill only addresses income taxes but does not address the hikes in dividends and capital gains for those earning less income. For example, the bill's residual effect will also drive a 3.8 percentage point increase on dividends and capital gains for people earning more than $200,000 annually and couples earning more than $250,000, raising it from 15 percent to 23.8 percent.

"That's a 57 percent increase on dividends and capital gains," he said. This legislation "has an effect of increasing taxes on a much broader group of Americans."

Sather explained that for every $1 the government proposed in spending cuts, it added $41 in new taxes, which will affect the middle class, specifically those earning less than $114,000 per year.

"They will see a payroll tax increase of two points," he said, mentioning the 4.2 percent increase to 6.2.

The payroll tax increase will affect those who don't pay income tax because they're separate taxes, he said.

Overall, more than 77 percent of American households will see some kind of spike in their taxes, Sather said, though the wealthier income earners will pay the majority of the increases.

"For the last 30 years, tax rates on the wealthy, middle-income and low-income people have been coming down. Everybody has been getting a better deal," Sather said. "At the same time, we've been demanding greater entitlements - Medicare, Medicaid, Social Security. We all want lower taxes, but we want more benefits. And there's just no way you can do that" without creating a financial conundrum.

Cloud also agreed that the government has a spending problem and hopes Congress will yet prioritize spending cuts and eliminate programs that aren't absolutely necessary.

He's also hopeful the government can find a more equitable method of resolving the national debt crisis without penalizing one group of Americans.

"The rich do have the money, but what about what's right and what's just and what's equitable?" he said. "It's not always about what practical, although that's important. But it's about the principles we were founded on. Rich people shouldn't be the scapegoat, and they shouldn't get a free pass. The government shouldn't treat them differently."

Related stories:

PRO: Wealthy should pay more taxes in new "fiscal cliff" deal

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