4/3/2013 5:30 PM ET|
It's time to 'tax' the 'poor'
The bottom line on the nation's fiscal crisis is this: We need more people employed and paying taxes. We need the poor -- and the job creators -- to get to work.
The goodness of work, driven by a healthy ambition, is what makes America tick.
It's an idea deeply embedded in our national psyche. Waves of pilgrims and immigrants didn't cross the oceans to sign up for welfare checks; they came for the opportunity to earn a better life through blood and toil.
When that inner fire is extinguished, economies suffer. Innovation stalls. Vitality fades. In a modern context, budget deficits widen as tax revenues dwindle, benefit spending explodes, and the masses clamor for redistributive policies to keep the fiscal charade going. Debt accumulates. Panics strike. In other words, the situation being faced over in Europe as a culture of leisure mixes with a bloated welfare system and a "soak the rich" mentality to disastrous effect.
The United States is on the same dangerous path. Industrious upward mobility is being replaced by idleness funded by foreign bondholders and a narrowing group of wealthy taxpayers. Too few are feeling the sting of Uncle Sam's spendthrift ways. And too many are replacing private-sector wages with government handouts.
The only way out is to stop the coddling and "tax" the "poor." Here's what I mean, and why.
Paying their fair share
I'm playing with the definitions here, while trying to make two big points.
The first is that America is on an unsustainable fiscal course. The debt/deficit problem is acute. Each day, the national debt hits a new high. It stands at nearly $16.8 trillion, or more than $53,100 for every man, woman and child in this country.
Yet only the opposition party in Washington has set a goal of balancing the budget. And even then, the Republican House budget proposal doesn't balance for 10 years. Democrats, both in Congress and in the White House, don't believe even that is a priority. The proposal from Senate Democrats never balances and would run a deficit worth 2.1% of gross domestic product in 2023.
There are no easy fixes.
We need to cut spending on entitlement programs and reduce the cost of health care, neither of which is popular with voters. And we also need to face up to the reality that you can't close a deficit and control government spending when roughly half the country isn't paying federal income taxes.
Polls suggest Americans support only "solutions" such as eliminating foreign aid and raising taxes on the rich. That won't solve the problem. The tax hikes on the wealthy included in the fiscal cliff deal back in January will pull in only around $68 billion a year. The current annual budget deficit is more than $1 trillion.
An analysis by the Third Way policy group found that even if we hit the rich with every realistic tax hike, the national debt would still double over the next 30 years. Sorry folks, that math just doesn't work.
Moreover, even before January's tax hikes, the rich were carrying a greater and greater share of the burden. According to the Congressional Budget Office, in 2009 the top 20% of households by income paid 94.1% of all federal income tax liabilities -- up from 65% in 1979. Compare this with the declining share for the middle 20% (2.7% versus 10.7%) and the bottom 20% (-6.6% versus 0%, due to increased tax credits).
These trends outpace the divergence in wages over this time. In other words, the tax code has become increasingly progressive and redistributive.
The fact is, this may be a government by the people and for the people, but it it's being funded by fewer and fewer people. The data suggest a household can bring in around $60,000 without paying any federal income tax at all. (It would still pay Social Security and Medicare taxes.)
By the numbers, that's a middle-class income. But for income-tax purposes, it's too poor to pay.
The risk is that a tyranny of the majority will be tempted to tax even more wealth from top earners in response to the crummy economy, which will only make things worse for everyone.
Skin in the game
To close the deficit, spending will need to be cut (see my recent column "Why we need 'death panels'" for one idea). We'll also need to broaden the tax base so that even low-income households have some skin in the game. We had a more balanced distribution of the income tax burden when President Bill Clinton and the Republicans in Congress ran budget surpluses and the economy soared -- despite the fact that income shares between the rich and poor were more unequal then than they are now.
If we would have rolled back all the Bush tax-rate cuts for everyone in January -- instead of just the rich -- we would've bagged more than $100 billion a year in additional revenue. If we would've allowed all the then-scheduled tax hikes to hit, including higher estate taxes, it would've been worth a total of roughly $400 billion a year -- or 40% of the current deficit.
Ideally, if policymakers can get the economy going again, and regain the 6 million full-time jobs we've lost since 2007, the tax base will naturally to broaden as more people find better jobs, make more money, rise out of poverty and pay more taxes. (We actually need 11 million new jobs to make up for those and also account for the rise in the population.)
But stopping the relentless and ultimately self-defeating focus on making the rich "pay their fair share" would be a good first step -- since it only further damages business confidence, reduces investment and hiring, and decreases the incentives for entrepreneurs to take risks. When that happens, we all suffer.
VIDEO ON MSN MONEY
Tax everyone at the same rate. Right now half the country is paying NOTHING in income taxes!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Cut foodstamps and disability in half also, then we will back to levels before Obama, and his foodstamps for a vote program.
Can not believe that msn and the libtards that run it even allow this article from Anthony Mirhaydari to post this. I am pressed. It's about time someone understand that we all have to invest in our country, not just suck from it.
Excellent comments. I have been saying much of this for years.
But it will get no traction as both parties pander to the plebians as did the Roman government.
Besides, everyone wants those who make more than they do to pay higher taxes. The goal of any socialist is to be able to dig in somone elses pockets more than someone else digs into theirs. .
It is the piece of ****...give me a hand out illegal aliens! Work and get taxed..or leave!
Sounds like you got a pair! Okay, you got my vote, but you ain't gonna get any love from the left.
If you have a homeless program that is Federally Funded, then you will have homeless and it will never end. But if you have no homeless program the poor will migrate to another area that has a homeless program.
And so it goes with so many pet projects of Congress both Representatives and Senators. Many are deeply embedded and stretch back to Johnson's welfare payoffs to stop the riots in the Great Society.
Quality Jobs are needed. Massive change is needed but with a dedication to rebuilding our infrastructure. Imagine rebuilding bridges, Highways, Electric Grid, Railways, Gas, Electric and Water Systems. Imagine the nicely paid jobs working on those that would be created. And infrastructure creates jobs, Soup to Nuts, from the laborer, truck or equipment drivers and operators to the skilled: Carpenters, Electricians, Security, to the College Kids: Engineers, Architects, Accountants and probably even Lawyers.
All Quality Jobs.
Or stay on Welfare.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'