As we near an end of another Minnesota summer weekend big talks continue at the State Capitol and in Washington D.C. over how best to deal with budget shortfalls and increasing deficit spending. Nearly every one of us has had to tighten the belt strap over the past few years for one reason or another. Now it our governments turn. Yes, we need to pay the debts that we have incurred but is it the wisest move to just raise the debt ceiling to do so? Can we not pay our debts owed without raising it? President Obama is looking to strike a deal that is a "balanced approach"; one that increases taxes on the richest of Americans while curtailing spending over the next ten years. Both of these ideas are a joke. First, next year Congress or even in five years can change the plan thus wiping out any spending cuts that are agreed to today. Secondly, a balanced approach may need an increase in taxes but how about looking at everyone.
I get chided a lot on Facebook because my push for a flat tax or for equally out the tax burden as me forgetting my Middle Class roots and wanted to "kiss the butt" of the rich. Nothing can be further from truth. If the number is accurate that 47% of Americans pay no effective taxes on their income then that is where we need to start our focus on. I am not a big government guy nor am I am one to look to raise taxes but our tax code needs reform in a bad way. For far too long we have used tax credits, deductions and nominal interest rate changes to influence society while trying to raise enough revenue to keep the government running. The trouble is that if one has the means to hire the right person they can pay an effective rate that is much lower than the nominal rate. Since that is the case, why not institute a flat tax that has no tax credits or deductions?
This way our government would know, within a degree of error, on what our revenue will be from year to year and in order to increase that revenue we need real growth in the economy. Instead we'd rather kick the can down the road by increasing the debt ceiling every time we near maxing out the credit card. Does that work for your household? I hope the Republicans continue to stick to their no taxes pledge and force President Obama and Governor Dayton to face realities that we cannot spend like we have for the past thirty years.
47% pay no income tax because they don't have enough income to exceed the income standards we, as a society, deem necessary to maintain a reasonable standard of living. As a result, we choose not to tax them because the alternative is pushing them into poverty.
ReplyDeleteBut they do pay tax, in fact, as a % of income they pay more tax. Sales tax and fuel tax are two examples. And since they are fixed rates regardless of income, the tax that a poor person pays is a much higher % of total income.
So let's be honest here about them not paying taxes. Saying that is VERY disingenuous.
Don't get me wrong, I think the tax code needs HEAVY modification. The breaks that corporations and the rich get should also be gutted. Ethanol manufacturers DO NOT need subsidies when their product is mandated for consumption. Oil producers don't need subsidies when their product is selling for >$100 a barrel. Farmers don't need subsidies when corn is >$8 a bushel (a record high).
We subsidize these so politicians can get re-elected. But I never knew that it was my tax dollars job to get my elected officials re-elected. That seems like an abuse of power.
But sticking to a no-tax pledge means that we have no flexibility to compromise short term. It means we have absolutist positions and that means gridlock which is worse than doing something partially.
Taxation is at it's lowest rate in 50+ years yet we have spending at it's highest rate in 50+ years. How can that make any sense? And moreover, how can leaving taxes off the table make any sense?
Supply side economics (trick down), which I know you subscribe to, is wealth concentration in the top 1% in the hopes that the bottom will get scraps left over. The problem is that this recession of the last 3 years is a demand crisis, not supply. Corporations have restrained production because demand doesn't exist. It's why they're sitting on trillions in cash. When demand increases, so will production which means jobs.
Giving more money to the rich doesn't equate to more jobs, only more investment overseas where growth is occuring.
So how is that going to help us here? How does that do anything but make the rich, richer?
Viper, don't get me wrong, I'm all for changes. But I don't think absolutist positions are the right conclusion any more than I think putting some fix in place that will finally tax that bottom 47%.
ReplyDeleteTaxing those people means less spending in the economy since they spend all their income on maintaining some form of lifestyle. That means less demand which means less production which means less jobs.
All so that we can shift the tax burden downward somewhat? Does that make any sense?
Demand decreases & unemployment increases. It's a direct positive correlation between those two data points.
That seems to be counter to what this country needs. But that's what supply side economics would have you believe we need to do.
And it would be true if we needed more capital for investments to create more supply. But we need more demand and the rich don't create demand - the middle class does.
Truman
ReplyDeleteThe 47% that pay no taxes are not doing so because their income level is below the lowest nominal income bracket. According to the CBO only 10% of those 47% pay no taxes because their income doesn't reach the lowest tax bracket. The rest of those that pay no taxes is due to tax credits - many of which come from "the stimulus programs of the last two years - the first one signed by President George W Bus, the second and larger one by President Obama - have increased the number of households that receive enough of a tax credit to wipe out their federal income tax liability." (http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html)
The taxes that our government relies heavily on and the one we are talking about is income tax.
Truman
ReplyDeleteWe don't have a revenue problem. I have stated this before many times, backed by the CBO, that the United States has averaged tax revenue of 16-18% of GDP and we are currently at 18%. After all the spending over the past two years we have increase our overall spending to 22% of GDP. So if historical data is correct - we have two options.
A) Increase GDP by increasing taxes to maintain percentages; or
B) Decrease spending by 6% so we can use the extra 2% for deficit reduction.
With all the concern of an American default because of not raising the debt ceiling will not translate into a default on our debts. Instead it will require that the United States slash 44% of the current budget to ensure we are able to pay our debts and keep the vital aspects of government going. So that means not more money to Iraq,Afghanistan, Libya, etc countries. That would also mean no more money given to NATO or the United Nations. Also, we'd need to remove the tax credits for ethanol, oil, and many other industries.
SSN, Medicare, Medicaid, vital Military parts nor Debt obligations would be in danger. So why is everyone enlisting chicken little?