But in the defense of the poor: they do pay 15.7% of their income (at least when reckoned as their cost to their employers) in social security taxes. Most discussions of this kind ignore SS taxes (as well as sales taxes, lottery “taxes”, cigarette taxes, gas taxes, etc) and only focus on income taxes.

But to villify the rich for the amount of tax they pay is riduculous in my opinion. It’s class warfare, which is so unhealthy for our country.

It’s also a key reason why I’m looking to diversify my income streams. My hope is that if one goes away, the others can step in and at least maintain some kind of minimum lifestyle.

I’m going to question the statistics as to the amount the wealthy pay in taxes as a percentage of their income.

If you are a wage earner (i.e.: employee) there is very little you can do to shield income from taxes. However, if you are wealthier, you are likely to have a much wider array of tools available to you for shielding your money in ways that keep it from being “income”. This is especially true if you begin wrapping your money-making endeavors inside of personal corporations.

According to a 1998 report by the Joint Economic Committee, 1998 saw 1467 filers with incomes over $200,000 per year who paid NO income taxes (in spite of the fact that this was what the AMT was meant to prevent).

When you look at the tax rates it does look as though the wealthy bear a very unfair burden. However, the ability to shield much of their wealth distorts this. It is not at all easy to determine what percentages the wealthy actually pay in taxes.

As to the continuing squeeze on the middle class – I do not see this trend changing anytime soon. What we are seeing is a very slow convergence between the cost (salary and benefits) that a person doing a job will earn in developed economies (such as the US) and emerging economies (such as India) which are able to provide much the same service (including, increasingly, quality) much cheaper. Put differently, there is an increasing supply of well qualified and very keen people who are willing to do the same job for a lot less money (where distance and technology permits) and will often work harder as well.

The other side is that employees are ultimately a cost to the firms that employee them. In a world where competition is increasingly global, firms are placed under a lot of pressure to keep costs as low as possible. Take the car industry as an example. The US car makers are stuck with enormous costs (pension benefits for retired employees in particular) that their overseas competitors do not have to deal with. Unless they cut those costs (and come up with some better cars) they will continue to lose market share and destroy shareholder value while their competitors continue to thrive.

Another way of looking at it is that the proportion of the working population that is able to exercise a degree of pricing power in connection with their employment is shrinking in response to shifts in both the supply of and demand for employees. The flip side is that those employees who are able to exercise a degree of pricing power have seen very significant gains in their incomes over the last decade or so.

It’s not a rosy picture for those of us who work for a living – making it all the more important for individuals to get their personal finances in order.