I have a third option — the one floated in yesterday's Post: extend them across-the-board for a year or two and then let them expire for everyone. Now before you slam me for being an a populist — or an elitist — hear me out. There is simply no way to get out of the financial hole we are in without increasing taxes. We cannot cut our way out, nor can we simply grow our way out. That is painfully obvious to everyone by now— even Ayn Rand aficionado Alan Greenspan.
This nation's finances and its political climate are a hideous mess. We will never agree on what to cut, at least not to the extent that we can cover years of out-of-control spending and insufficient revenues. That leaves us with the option of cutting around the margins and finding new sources of revenues to cover an estimated $13.5 trillion debt.
And the most likely place to turn is the federal income tax -- the largest source of revenue in the budget. Now, even if you let the Bush tax cuts expire for everyone, the income tax structure would still be progressive with higher rates on higher incomes.
Indeed, all the shopworn outcry over the rich getting away with murder while those in the lower brackets get screwed is nonsense, according to data assembled below by the National Taxpayers Union via the IRS. Indeed, as of 2007, the bottom 40% paid no federal income tax at all — and would continue to avoid doing so if the Bush tax cuts expire:
Who Pays Income Taxes and how much?
Tax Year 2007
Percentiles Ranked by AGI | AGI Threshold on Percentiles | Percentage of Federal Personal Income Tax Paid |
Top 1% | $410,096 | 40.42 |
Top 5% | $160,041 | 60.63 |
Top 10% | $113,018 | 71.22 |
Top 25% | $66,532 | 86.59 |
Top 50% | $32,879 | 97.11 |
Bottom 50% | <$32,879 | 2.89 |
Note: AGI is Adjusted Gross Income Source: Internal Revenue Service | ||
According to The Post article, if the Bush tax cuts stayed in place for everyone, about $4 trillion would be added to the deficit over the next decade. If they expired for the wealthy alone, it would add only $2 trillion. If they expire for everyone — along with modest cuts in spending, then the budget deficit is pretty much eliminated.
My household income is under $250,000, so I am advocating against my own self-interest. But I don't want my children to be stuck paying my generation's debt. As Dick Nixon said on Laugh In, "Sock it to ... me?" Well, maybe just a little bit?
A friend responded to this post on Facebook:
ReplyDeleteOK here's a novel approach...How bout we tax the large % of Americans that escape Federal taxes entirely...Just a thought that everyone should pay admission for this ride...
To which I replied:
The 40% who pay nothing should join the club, even if it's only a small amount. After all, it's easy to call for higher taxes and more spending if someone else is paying the bill. I believe Maggie Thatcher said something to that effect.
The richest 5% hold something like 90% of the wealth. I don't swear to that exact figure, but it's close enough to get the point. Wealth is absurdly skewed in America. Standars of living have eroded over several decades for the vast majority of the population, while the richest 5% have 5 homes, a private jet, and all the rest.
ReplyDeleteAnd, lest we forget, they did it largely with taxpayers' money! Quite a feat, that.
Tax the rich.
So what do you consider wealthy? More than $250k? According to the above chart, the top 5% AGI threshold was $160,041 in 2007. I don't know many people earning that amount who have five homes or a jet.
ReplyDeleteSounds like you want to increase taxes on anyone who makes more than you do.
There are those who should pull thier heads out of the sand and realize that MOST of the people in this country live on incomes of $ 40,000 or less ... and I MEAN LIVE ...
ReplyDeleteLiving is not base on all of your material assets ... Life is full of many things that have NOTHING to do with money, althought it helps.
Having said that ... My father has said this to me many times ...
I have never known a poor man to give a poor man a job!
It may be the rich that save us from the socialistic policies that the current administration is preaching ...
We need to let them have their money and invest it to 'pump up' their accounts since they are the ones that eventually 'pump up' our accounts.
When those who are 'more blessed' at the bank than we are suffering, WE suffer MORE!
In all the "soak the rich" comments, it sometimes gets lost that the top 1% of people in this country pay 40% of all taxes or more in taxes than the bottom 95% combined. This compares to their 23.5% share of income so I would say that the system is pretty progressive. In fact the OECD agrees - according to the OECD, in the mid 2000s the US was second only to Ireland in terms of the share of taxes paid by the top 10% relative to their income (yes, higher than France, Sweden, et al).
ReplyDeleteThat said, let's say we double the tax rates for the top 1% and revenues double (hah!). That will bring in another $450 billion based on 2007 numbers. The 2010 deficit is $1.2 trillion so we would still have a deficit of $750 billion. Non defense discretionary spending is $704 billion. So we would have to completely shut down the ENTIRE Federal government ex-defense - DOT, State, the VA, Homeland Security, HUD, President, Congress, etc...
I doubt we will do that.
So we will either go bust, inflate our way out of debt, or have to raise taxes and tackle the two biggest parts of the budget - entitlements (Social Security & Medicare) and defense. We can argue all we like but the numbers don't add up any other way.
(Jake)
ReplyDeleteIf you really want to see everyone get rich, go with a flat tax of 15%, no deductions, no carve outs for politically connected. It has worked fabulously everywhere it has been tried. Just one example. Hong Kong went from a back water port to a global finance center in forty years. Hihger taxes lower revenues to the government. How many times to we have to see that before it sinks in?