Now that the election is over, the Fiscal Cliff has become the big topic of discussion and controversy. It would seem that Obama and Boehner, if left to their own devices, would be able to hack something out that would, at the very least, get us past the dreaded time frame and move the nuts and bolts problems onto the new congress. If we manage to get all the political rhetoric out of the way, it’s really not so difficult for men of good will to see where the problems lie and what accommodations have to be made to reach a solution.
The problem, of course, is to get the men of bad will out of the way. I watched This Week With Whoever Shows Up, last Sunday and was appalled by the guests, all members of congress, and their positions. It seems that despite all the carrying on we did during the election over the lack of truthfulness displayed by both candidates but especially Romney, no one in congress was listening.
Yes, Medicaid and Medicare and all of the healthcare system is a problem that almost defies solution but still must be solved, but Social Security is not an entitlement and has nothing to do with the problems of the medical entitlements. Social Security is no danger to the deficit and is in no danger of going bankrupt as long as we keep the governments illegal hands off it. It is a federal offense to take money from the SS account for any purpose other than SS payments and yet almost every president in memory has borrowed (read stolen) from it and none of them have paid it back. So every uninformed or lying politician who talks about SS being an entitlement and part of the deficit problem should be beheaded. (It will only take one to stop the whole thing)
More important is that everyone has got to understand that neither party has the whole answer. The Tea Party, which isn’t a real party but simply an accumulation of nuts, has, of course, no clue, but let’s not get into that now.
The mathematicians, the only guys everyone should listen to, have established that it will take a number of accommodations to solve that problem, that no single cut or addition will be sufficient to solve the problem, so why not look at a few and see what can be done.
The first and most publicized item is 1% tax cuts. Nobody wants a tax increase but the fact remains that the top 1% of our citizens have done much better during the last forty years than the rest of us. Their median income has increased over 250% while that of the middle class has remained stagnant and considering inflation has actually gone down. Why is this? Well, there are a number of reasons, including lack of business regulation, expanding tax loopholes for management, and decreasing unionization along with amazing advances in the use of technology that has eliminated jobs.
Right now the top 1% is paying a top rate of about 35%, which is lower than it did under Clinton and far below what it paid following WWII, both periods of expanding economic health for the country. The concept that lower taxes on the rich will result in savings leading to the kind of investment that will create jobs is hogwash and anyone who has read anything about economics and history knows that it’s nothing but a lie,. Taxes saved by the rich go into savings accounts, stock market investment and yachts and anyone who tells you otherwise, is flat out lying.
But tax rate increases for the rich, can’t do the whole job. We also need to simplify our tax code and close all the special interest loopholes that exist in it. To their credit, the Republicans have talked continually about closing tax loopholes. Unfortunately they haven’t spoken much about which ones. It seems that when they do get down to specifics, the ones they favor closing most are charitable deductions and mortgage interest. Warms your heart, doesn’t it? Once again, let’s sock it to the poor and middle class.
But let’s look at a few other tax code loopholes that might be just a little fairer. Sure, cut mortgage deductions, but only on second homes or on first homes above a certain line like three hundred thousand or half a million. Sure put a cap on charitable deductions but make it high enough that the good work of charities still gets done and make sure that only real charities are able to give the deduction, not the phony political charities that are now using it.
Then, how about going after the tax perks that oil, gas, coal, big farming and the like get. These industries already make huge profits. They don’t need our tax money and it is unfair to give it to them. Next and most important, we must close down the ability of huge corporations to hide money overseas so that they do not have to pay taxes on it. Right now there are trillions of untaxed US dollars hiding in tax havens from the Canary Islands, to Switzerland to the Caribbean.
Of course there are those who will immediately ague that if we do that, these American corporations will move overseas and take their jobs with them. This is pure unadulterated bullshit. Those companies are based in the United States because we are still the safest place in the world to do business. Lower wage scales and lower corporate taxes already exist in most of the world but so do governments that will nationalize your company and police forces that will snatch up your employees. There’s a reason why these companies maintain American residency. It’s safe. That will not change in the foreseeable future. So make them pay for their safety. Not a premium, just what other, smaller businesses currently pay. That’s fair.
Then there’s the huge tax break on capital gains, currently 15%. Why should money earned through our labor be taxed at a higher rate than money gambled on investment? It doesn’t make sense and it just isn’t fair. Sure, we’ve all heard the old chestnut, from the rich who live by cutting coupons, that this lower rate makes investment possible, that people invest because of the lower rate on capital gains. This is ridiculous. What are they going to do with their money if they don’t invest? Bank rates are so low that after inflation, you lose money on a savings account, and besides, those people are too greedy to just take a normal investment rate on their money. No, investment wouldn’t even slow down if the rates on capital gains went up to the regular income rate and it would be a huge boost.
There are any number of other tax loopholes that should be addressed, including estate tax law, state and local deductions, acceptable business deductions, etc., etc., etc.
We should also institute a tax on stock trades, especially those conducted on the super fast computer networks. A couple of cents on each trade and a couple of more cents on each high-speed trade would ad a couple of billion to the treasury and really cause no pain. But, enough on how to add income; it’s time to look at the other side of the coin, cuts to entitlements. We’ll do that in the next installment.