2012-02-18: Tax Breaks For The Rich?
In the last couple of months, there has been a real push to repeal Bush-era tax cuts under the pretense that only the upper income benefitted from them. The funny thing is that I clearly remember that time. I was making about ten grand per year, which means that I ran out of money and food every pay period. Suddenly, the amount of money deducted from my paychecks changed. I could eat all month!
If you hear someone talking about "tax breaks for the rich", ignore them. They have just shown their ignorance of economic issues.
Does the US need to increase its tax revenue? Yes, certainly. But even more, we need to recognize that the continued expansion of federal agencies into areas that properly belong (via the plain meaning of the text in the Constitution) is the primary reason why state and local governments across the country are struggling to stave off bankruptcy (except in California and a few other big states, where a similar concentration of tax revenues and power is at the root of their troubles).
How would one raise taxes? There are some simple things that could be done to raise tax revenues.
Eliminate deductions and tax credits. Does anyone really believe that we should make people who are not married pay extra, so that married people can pay less? In a nation with a 50% divorce rate, do we really want people to marry for financial reasons, rather than for deeper reasons of personal commitment? Do we want people to have children or buy a home because they expect to receive a tax benefit? Because it seems pretty obvious to me that we want people to make most of their decisions without being tempted by tax benefits.
Make corporate loan repayments come out of their after-tax revenue. Currently, if a business want to raise funds to buy a piece of equipment, it has two main choices. It can raise equity, which means that the current owner have to contribute funds to the company or have their interest diluted by additional investors. Returns on equity are paid after taxes have been taken out. Or it can take on loans and pay interest. The interest is paid out of pre-tax income, meaning that the revenue used to pay interest on loans is deducted from the company's taxable income. Another way to describe this is taxpayers subsidize business loan repayment.
We should also institute a unary tax system for corporation-like entities. This is where the total pre-tax revenue of all of the company's affiliates & subsidiaries world-wide is used in calculating tax liability, based on the percentage of that revenue that is related to US activities. So that way, selling products to the US subsidiary at inflated prices will no longer result in lower US taxes.
But that is not nearly enough. The US was, until very recently, involved in three (3) wars. One of them, Afghanistan, was justifiable by the 9/11 terror attacks, but Iraq and Libya? Why are we sending our young to die in foreign lands where a sizable majority of the local citizenry was not already, prior to our arrival, engaged in fighting for their own freedom? Is it that we have too many young and wish to "cull" the ranks? Or is it that we wish to emulate the Soviet Union's model of imposing by force a system of government and politico-military alliance on nations too weak to protect themselves from us?
Secondly, we need to get the federal government out of K-12 schooling. Schools need to be funded and controlled as close to the local level as possible. Does it surprise anyone that the more we centralize funding and control of our schools, the less they are able to respond to the needs of the communities and the society they serve? Do you really believe that a pack of politicians and bureaucrats in Washington know more about what your kids should learn and how they should learn it and how much it should cost than local parents and teachers?
Thirdly, there are a number of other federal agencies that unnecessarily reproduce state-level functions exactly the way that the Department of Education does. We can trim such agencies. We have spent a lot of money on equipment to scan people's scrotums at airports in the name of security. We have spent a lot of money creating and publicizing the "rainbow of doom" terror alert level system and doing similar "security theater" activities. Isn't it time we stop wasting money on them?