The Five Percent Solution: How the Top 10 Percent Can Do More

There is no doubt that the Democrats have the emotional issue of taxes on their side. They trumpet phrases like “moral obligation,” and “fair share” when it comes to discussing taxes. I am sure most Americans would say it’s okay to tax the wealthiest more than they are already taxed in this country, because after all, they have more than everybody else. But it’s not their money, so it’s easy to say, “Yeah, take more of that guy’s money.” I am not here to argue the moral component of taxes. I can say without a doubt this discussion is very, very complex and has many moving parts, dynamics, and aspects to it. What I don’t like is how the Democrats have ginned up the middle and lower class folks and have now created the “One Percent versus the 99 Percent.” Heck, you would think the one percent is in a war with the rest of us. Again, I am not here to go tit for tat when it comes to who should pay what. The system is what it is and until the system is changed, all of this is pure blather.

Don’t get me wrong, there are plenty of issues this country has to deal with, but I am not here to go bullet by bullet to talk about the many issues plaguing our country, and the amazing thing is, if you ask a liberal what plagues us they will have a completely different view than a conservative, and so I say, can there be a middle road? To liberals conservatives are stone age thinkers that cling to guns and religion, and to a conservative, liberals live in a fantasyland that is somewhat far-fetched or detached from reality, hence never the twain shall meet, or can we?

I have done a lot of research on this topic and before I continue let me say, I am not an economist, lawyer, tax expert, etc, but what I am is a common man who tries to stay in tune with all things social and political. I am certainly open to both sides, which is to say I seek the truth. My first concern is for America not a particular party. Do I agree with one more than the other, certainly, but I try to come at it from an independent viewpoint.

Taxes are always good political theater because taxes can be tremendously complex and confusing, and in some ways seems designed that way in order to create wedge issues for voters. One thing I cannot understand is that many politicians will talk about simplifying the tax code but nothing really gets done about it. Besides, a simpler tax code would put many lawyers, accountants, and much of the IRS out of business, and we can’t have that now can we?

Facts first, politicians love to use statistics or data, and oftentimes skew the statistics or data to fit their agenda; we know both sides do this. If you Google, Yahoo, or whatever, you can find a lot of material related to taxes and articles that lean left and right. There are so many different types of taxes it gets confusing if you are not a tax expert or accountant. That is why politicians play with those figures, percentages, etc. Again, I try to research the information that is more objective and draw conclusions from there. From my research, I discovered that both the Democrats and Republicans are right.

Below are a few articles that may help you better understand who pays what when it comes to taxes. I encourage you to read these articles. Some of them are long and that is why I can’t put all of them on here, but it will certainly be worth your time. I have several issues with some of the articles, but for the most part understand the data.

Here is a link:
Another:
Here is another link:
Hang in there:
And one final one: that basically reinforces this information because as one great English teacher told his students, don’t rely on just one source. I can’t recall who that English teacher was. 

So, welcome back after reading all that material. After reading all the information I cannot say whether I understand more, or am further confused. What I take from that is the whole tax, income equality, widening gap, etc is part data part perception. Someone making $100,000 in California is not the same as someone making $100,000 in Mississippi. There certainly is a lot to absorb.

I was going to include a lot of my own interpretation, opinion, and insight as to the merits of the articles, but three or four pages later you would be clicking on to another site, but I did want to say that some of the data you looked at was not about comparing apples to apples. For instance, in the Who Rules America article, you should have seen a chart that indicated the U.S. was 93rd out of 134 countries in terms of income equality; however, if you look at the top tier, countries like Sweden with its population around 9.4 million, Norway with 4.9 million can be much more easily managed, and the gap reduced moreso than a country with 300 million plus such as America. If you notice, Brazil was 125th with 200 million people. Only Germany with 81 million and placing 10th is a good example, and they are doing well (I looked over several sites relative to the German tax system. It’s rough, but like Germans, very efficient), perhaps we should look at them more closely and not Sweden or even Australia with just over 22 million. Anyhow, as I said, sometimes the data is slanted to fit the agenda of that researcher. I think a true measure must be examined on a more local basis. Again, income equality is very localized. Three states considered to have the worst income equality are: New York, Connecticut, and Massachusetts, and three with the least income inequality are: Utah, Alaska, and Wyoming. Source: Be that as it may, we need to address our problems here, so let’s get to it.
To reiterate, the Democrats feel that the richest should pay more in taxes with good reason, and the Republicans say that increasing taxes on the wealthy would affect small businesses and could possibly damage an already fragile economy. Therefore, the Democrats claim the Republicans are intransigent to higher taxes on the wealthy, meanwhile conservatives claim Democrats have never seen a tax they didn’t like. America is torn. They seem to be okay with taxing “millionaires” more, but they are tired of tax dollars being squandered, a dichotomy no doubt.

To me, both sides are right, so here is a proposal for something that might appeal to all sides, it’s what I call the 5% Solution.

The 5% Solution is an opportunity for the top 10% of the nation’s wealthiest to give back to America. The Supreme Court recently weighed in on the health care debate and made their decision, but now the question looms as to whether the individual mandate is a penalty or a tax, the 5% solution could be construed the same. I’m not sure if I just cornered myself there but just go with it.

Rather than raising taxes on the top 10%, the offer would be that they can take 5% of their total earned income, not just their adjusted gross income (AGI) and contribute that 5% to various non-profit entities with the caveat they have no ties to the non-profit organization other than to say they support its mission.

As an example, let’s say Joe America has a total earned income of five million dollars for 2011. He would take $250,000 and donate/contribute as part of the 5% Solution to whatever organizations he wants to. When he files his taxes, on a separate form we’ll conveniently call the 5% Form, he delineates all the names of the organizations he donated to. In turn, all those organizations who received money will, in accordance with federal guidelines on contribution reporting, report all financial and any other “gift” support.

Now, there may be certain laws for states, but regardless, if a non-profit organization has applied for and received tax-exempt status from the IRS, they will be required to file annual information returns with the IRS (IRS Form 990) just like for profit organizations. Any organization not reporting full disclosure, or that pays too much for “administrative costs” will be severely fined or have their exempt status revoked. I call this –excuse my language – the no bullshit solution. It has to be on the up and up.

This would be a simple law, in fact, most likely a one page law, how about that?

The other caveat would be the 5% Solution would not be tax deductible; the contribution is good will. If those wealthy individuals have their charities or organizations that they contribute to, they may do so, but separate of this 5%. With emphasis, the 5% Solution is all about giving back to a country that paved the way for their wealth. They would be seen as noble, charitable, and kind-hearted.

Now, there are those who will say, you can’t force the wealthy to dole out 5% of their income if it’s not a tax. So, call it a tax, call it whatever you want. Congress has the authority to levy taxes. If they don’t like the term 5% Solution, then call it the 5% American Investment Tax, whatever works.

Then each year after submitting their taxes, and with all the various businesses/charities/organizations and so on filing their paperwork, the IRS would simply go through a cross checking process to verify the contributions and the
receiver(s) of those contributions. I truly believe this is a win/win for America.

Some may argue, Scott just add 5% to their taxes for they can afford it. So they can’t buy a new yacht this year, boo hoo. I understand, but tell the yacht builder who employs many people. Again, we’re trying to win both sides of the aisle. You raise their taxes by 5% and suddenly federal programs begin to expand, or new programs are created. That is the distrust of the American people with government, squandering their dollars. This 5% Solution cuts out the middle man, the government. Also, if the wealthy see this as an opportunity to be viewed as more philanthropic everybody wins. They, in effect, are giving back, and wouldn’t everybody feel good about that? An incredible amount of money (possibly 10’s of millions) would go to worthy organizations each year, and perhaps the federal government would be able to reduce certain programs because of private funding taking over where federal spending existed.

Final point, I see the disparity of income in America, it’s fairly dramatic, but I do not believe in punishing prosperity. Any average Joe who suddenly becomes a 10% earner would certainly understand a new dynamic. Also, I believe that you cannot manufacture or create prosperity. As bad as this may sound someone has to be the janitor, the bus driver, the cook, and in my case, the teacher. I knew when I got into teaching that I wasn’t going to make that top 10% bracket, not for lack of trying, I’m still spinning the grindstone, but I chose my profession and understand my station in life. I have no qualms about people getting wealthy, that is the American way. The 5% Solution simply offers the wealthy an alternative to being taxed by government that is often seen as irresponsible with the taxpayer’s money. Let’s put the responsibility of distribution on those wealthy individuals who will look at the 5% Solution as a win/win situation for America. The idea of goodwill has always been a hallmark of America’s reputation, something that our founding faith instilled in us. The 5% Solution is a bridge, one that is certainly attainable and most likely bipartisan, and God knows, we could use some of that right now. God bless folks!