When I was growing up my mother always said there were three things that were certain in life: death, taxes, and your mother loves you. Lately it seems there is a segment of our American society that feels entitled to be exempt from that second item.
And taxes look to be the big election year topic on the political agenda. Congressional Republicans and the White House have made their long term budget deficit slaying plans and they roughly agree on the amount ($5–6 trillion) and how long to plan for it (ten years). What they don’t agree on is what is to be affected. House Republicans want to extend the Bush Tax cuts and balance the budget on middle class entitlement programs, essentially privatizing Medicare. The White House looks to be planning to belatedly keep its promise to let the Bush Tax cuts expire and increase revenue largely by allowing tax rates to return to Clinton era rates.
But Jon Stewart explains this far more eloquently than I do. Stewart counters Ryan’s graphs showing what effect his budget cuts would have over the long term with his own graph demonstrating the effect letting the Bush Tax cuts expire would have. The end results are the same.
America has had one form of taxation or another based on the trade of things of value since its inception. This country was arguably founded on a tax revolt as Tea Partiers are so fond of reminding anyone withing earshot. It’s mentioned in the Constitution but up until the need to finance the Civil War the country relied mostly on tariffs. The war between the states 150 years ago brought about the first income tax. These days it seems we tax so many things that Americans have become numb to the amount of our money we spend on taxes. Cigarettes, alcohol, gas, estate taxes, gift taxes, local, state, and federal taxes, income and sales taxes. If it’s worth a dollar to someone, Uncle Sam gets a slice of the pie.
The chart on the left illustrates the rank of American income tax revenue compared to other countries. We actually rank fairly low as far as first world countries go.
But not everyone pays taxes. Yesterday on one of the Sunday talk shows a pundit from CNBC estimated that 47% of people and corporations do not pay taxes at all to the tune of $300 billion in lost revenues per year. And everyone has probably heard of the GE story where the corporate colossus earned $14.3 billion in profit yet paid no taxes at all. In fact, they got a $3.6 million credit from the government.
Here is a historical perspective of tax rates of the past century in America. Notice the precipitous drop in the late seventies. Ronald Reagan would sign one of the biggest tax cut bills in history during his two terms.
Corporations have taken to moving their headquarters to places like Switzerland in order to take advantage of their more competitive tax structure. In the below interview on 60 Minutes, the CEO makes a compelling argument for lowering the corporate tax rate to be competitive with these countries where American companies are offshoring.
Many believe that reform of the tax code is long over due. That would allow the corporate rate to be dropped while closing many of the loopholes that corporations take advantage of today allowing companies to re-invest in American jobs while being competitive in the world market. Additionally it would clean up a great deal of the inequity of tax burden on regular citizens. Meanwhile, it becomes less clear that there is any reason at all to extend the Bush Tax cuts for the wealthiest people and corporations in our country.
Usually it is political suicide to suggest a tax increase (even though it would technically be the lapse of a ten year tax holiday) right before an election. I rather think the Republicans have gone way out to the fringe in pushing the permanent extension of the tax cuts during hard times. The idea that giving tax cuts to the wealthy to create jobs has worn a little thin with much of the public and it appears that during this election year, we are going to have that conversation.
- Greenspan Says U.S. Should Let Bush-Era Tax Cuts Expire (businessweek.com)
- Obama First To Put Tax Increases On Budget Table (huffingtonpost.com)
- If the GOP won’t negotiate over taxes, then let the Bush tax cuts expire (dailykos.com)
- Jon Stewart’s must-see takedown of Paul Ryan (dailykos.com)
- Tax Facts (krugman.blogs.nytimes.com)
- Ryan, Geithner at Odds Over Republican Support for Debt Increase (businessweek.com)
- “Top Ten Tax Charts” (economistsview.typepad.com)