Apr 28

Neither Side is being Reasonable on Taxes

Ryan - ObamaAs the election draws near and the competing interpretations of deficit bean counting becomes louder and louder, taxes, specifically income taxes, will be occupying a more pronounced amount of the political space. On the one side, Republicans, who oppose raising taxes on anyone for any reason, and who have been so dreadfully frightened by Grover Norquist and his ridiculous tax pledge that its reasonable members don’t dare speak honestly. On the other side–because we only have two sides after all–are the Democrats, who oppose raising taxes on anyone making less than $250,000. How the Democrats arrived at that number has been the subject of debate, but the party has sufficiently pigeon-holed itself on that number, so it is just as if Moses himself carried it down the Capitol steps and announced it as God’s will. Neither side is correct, and neither side is moving.

The Republican position is uniquely barbaric. Assuming no legislative change from status-quo, the top wage earners in the United States in 2012 will pay a top rate of 35% on incomes over $388,350 and 33% on incomes roughly over $218,000. Comparatively, most European nations carry a top tax rate of over 40%, and significant sales taxes and luxury taxes. Germany has a top income tax rate of 42%, and is currently the only thing standing between Europe and total economic destruction, rightly or wrongly. The Republicans are demanding not only that the top tax rate not be raised, but rather that it and other taxes affecting top earners be lowered dramatically, to 25%. Each of the lower marginal tax brackets would be lowered to 10%. They offer no compromise on this position.

Democrats on the other hand are standing pat on the position that taxes should be raised to pre-Bush levels for top earners of as high as 39.6%, and proposing that marginal tax rates for lower income earners not be changed from current levels for families earning less than $250,000 and individuals earning less that $200,000. There is also a surtax on unearned income at the higher income levels of 3.8%. Further, any individual earning more than $1 million would pay a minimum income tax rate of 30%.

Setting aside any debate concerning the United States’ arcane corporate tax code, neither party is being reasonable. First, the Republican plan leaves the government $6.2 trillion short on revenues and would necessarily lead to drastic cuts in discretionary spending, be it from programs boosted by Democrats, or from Defense. Second, the Democratic proposal, although much more equitable, also leaves in place the irresponsible Bush tax cuts for lower wage earners. It isn’t smart economics or smart politics to propose tax changes that affect only a small group of taxpayers. Moreover, Obama and the Democrats had their chance to avoid this fight altogether in late 2010. With the Bush tax cuts set to expire, they instead chose to negotiate with the Congress for a two-year extension. That decision was neither politically smart or economically responsible. With deficts almost certainly to be a more resounding issue during the 2012 campaign than tax rates, the Democrats, primarily out of fear, intentionally exacerbated the deficit by signing the 2010 agreement, playing directly into the Republicans’ wheelhouse. Allowing the Bush tax cuts to expire for everyone would have been a much easier political sell for the President and Democrats if they had painted the Republicans as unreasonable and focused on the shared sacrifice inherent in allowing a return to Clinton era rates. Instead, Democrats must fight the battle battle again during an election year. Continue reading

Apr 11

Tax Day 2012

The good folks over at the National Priorities Project have published their 2011 report detailing where your tax dollars were spent last year. The federal government had in the past issued its own report each year to the public in which in included the identical information. However, George W. Bush determined in 2002 that the people did not need to know where their tax dollars went.

As you can see from a quick view of the report, our tax dollars are clearly not being allocated in such a way as to reflect the priorities of the majority of Americans. For example, nearly 32% of each tax dollar funds the military and military benefits, while 1% funds science, and 2.5% funds education. The so-called “bloated” government of Republicans and the recently scared-straight Democrats sucks up an earth shattering 4.5% of each tax dollar.

The site is well designed and includes a host of interactive and educational features, including an application that allows anyone to see precisely where their tax dollars were spent based on individual taxes paid. It includes an interesting application in which you can design your own budget. The organization also maintains staggering amounts of data that you can search through and customize. There are also several articles on the subject of taxes, revenues, and our national priorities. I recommend that you check it out.

On April 10, 2012 Ian Masters talked to Mattea Kramer, a senior research analyst at the National Priorities Project. His interview is below.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.