Wednesday, April 20, 2011

Thoughts on Taxes and Deficits

Some thoughts from a discussion over at Darren's blog -

Of course, higher taxes won't end our debt in a year or two, and no one is proposing it could. And no one is proposing 100% confiscation, which is absurd. Of course, marginal rates of 89% existed during the country's exceptional economic boom from 1945-1965. Not that I'm arguing higher rates solve the problem - just that they don't necessarily cause more problems. The economy is about far more than marginal tax rates.

However, had rates not dropped to historic lows over the past decade, the debt would be far, far less. Extrapolate the lost revenue over twenty years and the case is obvious for allowing rates to rise for the wealthiest. If, for the past thirty years, capital gains and dividends had just been taxed as income, as uber-rich people like Buffett and Gates have proposed, and FICA was not capped, this current debt crisis would hardly exist. So, raising taxes on the rich - over the next decade or so - will do wonders in paying down the debt. And the garbage about "killing jobs" by "punishing the job creators" is exactly that, garbage. Supply and demand doesn't work that way - and no effective business owner turns down a good investment or refuses to expand his business simply because he might pay 19%, rather than 15%. A good deal is a good deal and business investments are made on timeliness first.

Budget criticisms about foreign and PBS/NEA/NPR are political not fiscal, and they don't have much relevance to the debt/deficit concern. As are comments on Ponzi schemes and socialism. Social insurance is a good investment for any society - just look at the economies of Singapore and Germany - and the debt problems are essentially solved through means testing and allowing the government to negotiate with providers. Just look at prescription costs for veterans if you disagree. And we've actually been "printing money" since the 1970s and the boat is afloat.

Taxes are the revenue the state uses to fund state business. The greatest percentage of revenue will come from its greatest concentration of it. The wealthy can simply afford to pay more for the functioning of the state, and they have clearly gleaned as much from a society that has been stable enough - because of said government/society - to create such wealth.
No wealthy business owner amasses wealth in a vacuum - it accrues from all contributers along the supply/demand line. And the infrastructure that allows that to occur and flourish is maintained by a government of representative democracy.

Limit/end corporate welfare (agree with you there), means test the safety net and allow for negotiations and cuts without hysterical "killing grandma" cries, cut back the military/security behemoth, don't cut taxes to "spur growth," plan to pay for wars while fighting them, and have a nice day.

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