Smart SpendingSmart Spending

Should we all pay more taxes?

Would it be wrong to expect the middle class to pay higher taxes to help reduce the federal debt?

By Karen Datko Jan 8, 2013 4:22PM

Image: Taxes (© Thinkstock/SuperStock)If I had a dollar for each time I've heard someone say that we're burdening our kids and grandkids with a huge federal debt -- Rick Santelli's recent rant about "all kids left behind" should count for a lot -- I'd happily give that money to the U.S. Treasury.

 

I'd be in good company. Last year righteous Americans donated a record $7.7 million -- over and above their tax bills -- to cut the nation's debt, CNN says

 

It could use some help. With the federal debt at $16.4 trillion, the Congress has racked up a big stack of IOUs, which means we all owe this. You may disagree about how essential it is to reduce this large amount immediately, but we can all agree that the interest on the debt -- $220 billion in 2012, says U.S. News & World Report -- could be better spent elsewhere.

 

For whatever reason -- lack of political will is at or near the top of the list -- the president and Congress decided as part of the so-called fiscal cliff pact to raise income and investment taxes only on those making more than $400,000. (I'm not counting the 2% increase for payroll taxes for Social Security, which nearly every worker will pay. It was generally understood that the payroll tax holiday was a temporary stimulus measure that would end.)

 

Now President Barack Obama is talking about closing tax loopholes that favor the wealthy, as the next phony crisis -- votes on raising the debt ceiling and automatic and drastic spending cuts put off by the fiscal cliff deal -- approaches. Others believe the solution should be drastically shrinking the size of government.

 

Now, if you read personal finance blogs, you know that reduced spending is only part of the solution for restoring fiscal sanity in a household overwhelmed by debt. The other half is raising revenue. And that's where all the rest of us come in. Wouldn't a modest tax increase on the middle class -- not just the wealthy -- help the country? Surely more households could be taxed a little more without triggering another recession.

 

The idea surfaces from time to time but is hardly heard above the din of so many complaining about their tax burden.

 

"But in fact, most Americans in 2010 paid far less in total taxes -- federal, state and local -- than they would have paid 30 years ago," reported The New York Times in late November. "According to an analysis by (the Times), the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980."

Since 1980, state and local taxes increased while federal income tax rates declined. If it doesn't feel that way to some old-timers, there's a reason. Adds The Times, "The average American in 2010 paid 30% more of income in payroll taxes (for Social Security and Medicare) than in 1980, even while paying 27% less in federal income taxes."

 

The Times says that those making more than $200,000 a year were the biggest beneficiaries of federal tax cuts over the years. But others with lower incomes also gained, so isn't it fair that more of us should pony up now?

 

Among those who agree are:

  • New York City Mayor Michael Bloomberg, who suggested in 2011 that the Bush tax cuts be allowed to expire across the board.
  • Former U.S. Senator (and NBA star) Bill Bradley, who said last summer on CNN, "The deficit is one problem (we face) -- and that requires taxes on a lot of people, not just the wealthy."
  • Wrote David Callahan, a senior fellow at Demos, at the end of November:

"Only 13% of voters earlier this month agreed that income taxes should go up for everyone, according to exit polls. And only 33% agreed that taxes should be raised to help tackle the deficit.

 

"Now, it would be one thing if all these Americans against higher taxes also wanted to see spending cuts. But, of course, that is not the case."

He proposed that all the Bush tax cuts be allowed to lapse on Dec. 31. Then Congress could vote to extend them for other than the rich only long enough to get through the economic recovery.

 

If the Bush tax cuts had been allowed to expire for everyone, that would have raised federal revenue by $4 trillion over 10 years. The last federal budget was $3.7 trillion, with a deficit of $1.1 trillion. Letting the Bush tax cuts die would have helped fill the gap that's now being paid for with borrowed money.

 

What do you think? Should middle-class taxpayers share more of the tax burden -- now or in the future, once the economy is more robust? Why shouldn't they be asked to pay a little more? I'm reminded of a comment I once read about how paying taxes used to be considered a duty, a responsibility -- a privilege, in fact.

 

More on MSN Money:

519Comments
Jan 16, 2013 6:25PM
avatar

Everyone is paying more taxes; although we were assured that there would not be a tax increase on the middle class. Anyone who received a paycheck after the first of the year will notice a tax increase. I don’t know about everyone else but one hundred dollars a month is an increase to me, I feel for families who have children to feed. The unfortunate thing is the dishonesty of the president he has proven time after time that you cannot count on his word.  When will the people in our government understand that honesty is the best policy? He will say whatever he is required to get what he wants, and has proven time and time again that he is dishonest and lack integrity.  

Jan 16, 2013 6:25PM
avatar
How about this idea ,.. on our tax form there is a check block to donate to the Presidential Campaign , what if we would have one to donate ,let's say $ 5 to a fund to pay off the debt , and only be used to pay off old debt ?  Surely every tax payer could give up $ 5 and then maybe it would slow down this raise taxes issue ??
Jan 16, 2013 6:24PM
avatar
If I thought things were equitable and we were all working together, I'd say yes like I used to. But it seems that more money goes out the window or to the needs of foreign influences than to developing our country. So no, not now. I cant trust the government anymore.
Jan 16, 2013 6:24PM
avatar
Stop giving the drug addict more free drugs!
Jan 16, 2013 6:23PM
avatar

Wouldn't be bad if thats the reason everybody is paying more taxes...

But thats NOT The Reason..

Taxes are going UP for Everybody, rich and poor...so oblamo can spend More money...

One of the things oblamo is good at..is SPENDING TAXPAYERS MONEY..

The guy hasn't passed a budget for the last 4 years..?

Jan 16, 2013 6:22PM
avatar
Liberals want someone else to pay for all of their great ideas.  Unfunded Federal obligations exceed $100 Trillion!  That is more than twice the net worth of this entire nation.  Think about that.  Take everything from everybody (not just talking income taxes here) and we only have half of what the liberal politicians have promised.  If you think this is merely an oversight, your are sorely mistaken. 
Jan 16, 2013 6:22PM
avatar
Our Government has lost their minds.  They are inefficient and wasteful because their job preformance isn't measured by their abiltiy to cut waste.  They want to use every dime allocated to them so that their budget does not get cut and so they can ask for more.  Teh exact opppsite of private business.  So, no one in govenment has any idea how to save money or be more efficient!  And the result is they always spend more than they take in.  They are a cost center that goes over budget every year and get raises and great benifits!  It's insane!
Jan 16, 2013 6:22PM
avatar
Simple answer? No. At least not until the Federal Government gets serious about getting spending under control.
Jan 16, 2013 6:21PM
avatar

I wouldn't mind paying a bit more in taxes to help reduce the deficit.

 

But not if Obama is going to spend it on one of his wasteful programs.

Jan 16, 2013 6:19PM
avatar
The demorat politicians spent so much of the debt buying votes, they should personally pay on the debt with their estate and apply their pensions toward the debt. Then tax the parasites, call it a 'worthless tax' , the longer on welfare, the higher the tax. Bring back King George and only a tax on tea.
Jan 16, 2013 6:18PM
avatar
ALL should pay federal taxes! Otherwise you don't vote. We have reached a point where the lazy and irresponsible have realized they can vote themselves handouts on the backs of future generations and those who actually work hard and pay federal taxes and they know which party will provide this. Maybe just maybe, if everyone had some "skin" in the game and realized that every time they wanted to increase taxes it would cost "them" for a change they might be a little more careful about how that money is spent...We as a nation have subsidized generations of breeders who otherwise would have starved and died out by there own hand or learned to pull themselves up and provide for themselves and then we could truly help those who are elderly or disabled. Instead we subsidize gas, food, phones, rent, ect. to many able bodied people... all so they will vote"D"
Jan 16, 2013 6:18PM
avatar

If Congress opens up the books and makes federal spending a public piece of knowledge, I would glady pay moer taxes, although I alredy feel as though I am taxed to death.

 

Another idea, introduce legislation that says no politician is eligible for re-election if during their term of service, the national deficit exceeded 3% of GDP.

Jan 16, 2013 6:16PM
avatar
How about we just start expected the 40+% that pay no Federal taxes to start paying (in addition to the sales tax, medi & ssi)
Jan 16, 2013 6:14PM
avatar
Did MSN get a memo to float this since tax rates have gone up?  My first bi-monthly check has an additional 7% in FICA and 2% in SSI compared to two weeks ago. 
Jan 16, 2013 6:14PM
avatar
we pay more than enough taxes as it is. how about backing the dollar with something of actual value.
Jan 16, 2013 12:29PM
avatar

I have a problem with your assumptions of just paying a 'little' more to help the government out.

 

How about the fact that 1st - middle class is a guess, no one really knows the number. We all assume that middle class is $50,000. But ask a struggling family of four who are buried in high prices, stagnated wages and oh, more taxes, what they would think.

 

Let us also not forget that throwing money after bad does not help the problem. First comes "cuts" then comes better management of funds .... then we can talk about asking the average hard working [often struggling] American to pay more in taxes.

Jan 10, 2013 1:04PM
avatar
Cut spending in absolute dollars to 2008 levels, then freeze for 5 years.  After that allow to rise by same percentage as gdp rise.  No more phoney baseline budgeting where you want 10% more, but will take 6% and cry that this is a 4% cut in spending.
Jan 9, 2013 10:10PM
avatar
Most of us would have no problem paying more in taxes IF THAT MONEY WERE PUT TO GOOD USE AND NOT WASTED.  First, our gov't needs to prove to the American people that it can be trusted with our money....then we can talk about giving the gov't more money.
Jan 9, 2013 9:11PM
avatar
WHILE THE MIDDLE CLASS SAW TAXES SHRINK FOR THEM THEY ALSO SAW THEIR WAGES STAGNATE ALSO WHILE THE RICH SAW THEIR PAY GO UP.
 UNDER CLINTON AMERICA WAS IN GOOD SHAPE. UNDER BUSH AND THE REPUBLICAN HOUSES SPENDING WENT OUT OF SITE. NOW IT IS TIME TO PAY THE PIPER. THE MONEY THAT WAS SPENT UNDER REPUBLICAN CONTROL IS BEING BLAMED ON DEMOCRATIC SPENDING. AMERICA NEEDS TO REMEMBER THAT THIS WAS BROUGHT ON BY 2 UNPAID WARS AND 2 UNFUNDED TAX CUTS.
 ALSO,THE MONEY TAKEN OUT OF THE SOCIAL SECURITY LOCK BOX SHOULD BE PUT BACK IN.PAY BACK THE MONEY.  RAISE THE AMOUNT OF PAY THAT CAN BE TAXED.
 LIKE SOME REPUBLICANS SAY,LET THE RICH PAY FOR THEIR HEALTHCARE.
YOU WANT TO DO MEANS TESTING? THEN DO IT TO SEE IF YOU CAN JUSTIFY GIVING MILLIONARES LARGE SS CHECKS.

Jan 9, 2013 8:46PM
avatar
a 1, 2, 3% Federal Sales tax on non-essential purchases would help greatly!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

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.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More