Wednesday, March 16, 2016
Attacks on Tax
Nobody like to pay tax. Nobody. Some folks don’t earn enough to pay tax, others opt for public service and pay lower taxes because they make less. And there are discriminatory tax rates and tons of loopholes that favor those with the ability to take advantage of them.
Looking at where federal taxes are deployed (above), you can see that the interest we have to pay on our national debt absorbs over ten percent of our total federal budget. After all, we owe over $19 trillion since balancing our budget has eluded us since the “W” Bush administration determined that we should wage war (Iraq and Afghanistan) while cutting taxes for the wealthy. It was something my economics professors always said governments should never do – the old “guns or butter” argument. Fight a war? Need to raise taxes to pay for it. We didn’t. We borrowed instead.
Next, move down to the largest carve out – defense and related spending – and note that it is way over a third of the budget. We actually spend as much on defense as the next eight highest military expenditure nations combined, but we haven’t won a significant war since WWII. So we have to pay our interest on what we borrowed, and we are hearing from all of the three remaining viable GOP presidential candidates that they want to increase our defense spending.
They are even considering a massive step-up in our combat presence against ISIS holdings. Given our rather abysmal record in the Middle East and how quickly Americans tire of sustained war, that is a most interesting posture, particularly given their rather clear anti-Muslim rhetoric and the unenthusiastic response of regional Sunni powers to join the fight at the level we deem appropriate.
The big far “red zone” above is all about entitlements, but it is not all just “helping the poor and unemployed” but governmental subsidies and corporate incentives (accelerated write-offs, tax credits, etc.). Look also at that .77% allocation for responses to natural disasters, and ask yourself if you expect that number to stay the same or rise rapidly as the impacts of global warming wreak havoc with our weather patterns and water levels.
What this basically tells us is that over half of our federal budget – based on past expenditures – falls within unchangeable variables (interest on our national debt) or elements we consider sacrosanct (defense spending). But each of the GOP candidates are calling for either a flat tax or a tax system with fewer levels of rates, and each of such candidates’ proposals clearly benefits those who are the highest income earners disproportionately to the rest of the population.
The February 22nd New York Times reproduced the expert assessments from various analytical sources based on the tax plans of the leading candidates, focusing on the range of revenue reduction for each of such candidates’ plans over a decade:
Ted Cruz: The Tax Foundation (conservative): $3.7 trillion. Urban-Brookings Tax Policy Center (Centrist): $8.6 trillion. Citizen for Tax Justice (Liberal): $16.2 trillion.
Donald Trump: The Tax Foundation: $12 trillion. Urban-Brookings Tax Policy Center: $9.5 trillion. Citizen for Tax Justice: $12 trillion.
Marco Rubio: The Tax Foundation: $6.1 trillion. Urban-Brookings Tax Policy Center: $6.8 trillion. Citizen for Tax Justice: $11.8 trillion.
Looking at these cuts from an historical perspective: “‘The 2016 primary contenders make [Presidents Bush, Reagan and Kennedy, who each introduced tax cuts] look like pikers,’ said the economist Leonard Burman, the director of the nonpartisan Tax Policy Center in Washington and a Treasury official in the Reagan and Clinton administrations.
“The center, using historical data from the Treasury Department, put the Kennedy tax cuts at 1.6 percent of gross domestic product, the net Reagan reductions at 2.1 percent and the Bush cuts at 1.4 percent. Mr. Rubio’s tax cuts would equal 2.6 percent of the total economy, according to the Tax Policy Center, while those of Senator Ted Cruz of Texas would be 3.6 percent and the tax cuts proposed by Donald J. Trump would be 4 percent…
“The tax plans of the Republican presidential candidates would cut federal revenues as much as $12 trillion over a decade, a post-World War II record eclipsing the deep tax cuts of George W. Bush, Ronald Reagan and John F. Kennedy. And they would come just as America faces the costs of its aging baby-boom generation.
“The combination of the tax cuts’ size and timing has many tax and budget policy analysts questioning their viability. The Republican rivals routinely denounce the current $14 trillion debt [higher at noted above], but none has said how he would offset the revenues lost to his tax cuts, beyond unspecified cuts to domestic programs and repeals of some existing tax breaks.” NY Times.
What we are repeatedly hearing is a litany of proposals, covering some of the most complex issues of our time, with glib promises that provide great soundbites, but without the slightest indication as to how such programs remotely are going to be implemented, how we are going to reduce our national debt while lowering taxes, and exactly which Americans will be the sacrificial lambs in this struggle between tax revenues and expenses. Hint: it won’t be the wealthiest segment of our population if any of these proposals replace our current tax code.
I’m Peter Dekom, and I never cease to be amazed by how many Americans prefer magical incantations over hard, verifiable facts… and how shameless politicians are able to capitalize on this shameful proclivity.