Dear Spencerian Editors:
I'm not really fond of political issues, but I have one question that I was wondering if you might be able to answer. So here goes... Will Congress and the President engage in the politically risky endeavor of increasing tax rates to stop the growing national debt? If so, or if not, how can this be justified?
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Thank you so much for the question, Brian. It has been too long since we've had a question here, so I appreciate the opportunity to try and answer this one. Let me start by pointing out -- in case it wasn't obvious -- that I am not a tax policy expert nor am I an expert on the issue of the national debt. On the other hand, I know a little bit about politics, so why don't we start there.
Let me offer my best guess on this before we go to some facts and figures. I notice you don't refer to either Obama or Romney by name as the President who will have to work with Congress while engaging in politically risky behavior. Although my assumption is that Obama will be re-elected, I think this answer would apply to either man occupying the White House: yes. They have little choice but to raise taxes -- in combination with other things -- in order to tackle the growing debt.
To be fair to President Obama, he comes right out and says so:
Cut more than $4 trillion from the deficit while asking millionaires to pay their fair share in taxes.
The campaign site linked there also helpfully points out why policies that would be enacted by a President Romney would actually increase the debt:
Slash funding for education, research and technology while cutting taxes for millionaires
No plan to pay for $5 trillion in new tax cuts, which could add to the deficitIncrease defense spending significantly, raising the deficit by trillions of dollars
Now, the other night at the debate Mitt Romney made a big deal about how he'd never said he was going to cut taxes for millionaires like himself. He said that he would "close loopholes" in the tax code that benefited millionaires -- a notion that was readily and easily debunked as recently as this past Tuesday. In fact, most folks have said that Romney's tax plan simply doesn't add up. Key pieces of that plan, by the way, are to "cut the corporate rate to 25 percent," and "eliminate the death tax," which is also called the estate tax; it's the tax rich people pay when they leave their estate to their heirs after they die.
One one side, I've heard President Obama offer the same prescription for the national debt since this campaign started.
On the other, it really is no exaggeration to say Mitt Romney has held two very different positions with respect to who is paying taxes and who is not:
I don't want to beat a dead horse, Brian, on who would do what with respect to taxes, but you really need to know this. Romney's proposed budget would essentially cut everything but the Department of Defense -- where he'd spend a ton more. This cutting -- including deep cuts in Social Security and Medicare, and, has been pointed out minute things like PBS's Sesame Street and, thus, Big Bird -- would be worse than the cuts proposed by his running mate, Paul Ryan, who everybody thought put forward pretty much the most draconian proposal imaginable.
To get a little more serious about it, Robert Bixby, the head of the budget watchdog group the Concord Coalitoin, said today on NPR that Romney's increase in defense spending and domestic spending cuts just won't work to get the debt down.
"If we're going to get serious about bringing the debt under control, we have to take serious measures, and focusing on the nondefense discretionary side of the budget is probably the least serious type of measure we can take," he says.
So under a second Obama Administration, you get modest tax increases for the wealthy. Under a Romney Administration, you get draconian cuts in governmental services we all rely on, and (probably?) tax cuts for the wealthy (despite what he says at a debate dog and pony show).
Let's move along a bit towards the debt, Brian. Here's a good question, backed up by Snopes:
Yeah, look, it's simple: you increase the debt when you fight two wars -- one of choice, based on lies -- and simultaneously cut taxes for the wealthy. And, it must be noted, balloon the size of government. Hey, there's a reason George W. Bush was persona non grata at the Republican Convention.
Let's narrow it down even more.
You know, for a "Grand" Old Party that actually had an un-ironic "We Built It" debt counter at their Convention here in Tampa, it is that very party that had the most to do with running up our current debt.
We've established who is willing to raise taxes to address not just the issue of the national debt, which really is a long-term problem, but to fund critical government services. And we have established who, given historical precedent and the discombobulated nature of their own plan, would almost assuredly either increase the national debt exponentially thanks to tax cuts for the wealthy and increased defense spending, or tank the economy once more.
You asked how tax increases can be justified. Here's how. That link is from the Tax Policy Center, and it is a bit of history with respect to the highest marginal income tax rates. You'll notice that it was a paltry 7% in 1913.
But look at it around the time of the New Deal, when Social Security was first created (1935). The wealthiest Americans were paying 63%. Check it out around the time of the Great Society -- when Medicare and Medicaid were created (the 1960s). The wealthy were paying 70-something percent, which was actually down from the 90-something percent of the previous decade or so.
You can see what it is today.
I'm not suggesting the wealthy today pay what they paid in the 1950s. I wouldn't even lay a larger -- more fair -- tax burden entirely at the feet of the wealthy. Look at the major corporations that paid nothing -- zero -- in taxes some for many years [PDF].
Pepco? Boeing? GE? Three years of paying no taxes. And these are multi-billion dollar a year companies, Brian.
Worse, it's not just that many of these major corporations are paying no taxes on profits they make in America, us taxpayers are actually subsidizing them!
For three years, the government paid 280 companies a breathtaking total of $222.7 billion. Think about that. What if we not only taxed corporations -- made them pay anything at all in taxes -- but stopped writing them checks out of the U.S. Treasury as well. That's a significant dent in the national debt right there.
I don't know about you, Brian, but I would feel pretty good about that tax scenario with respect to paying down the national debt.
Tell you what, though: I'd feel even better about it as a way for wealthy Americans and the giant corporations that sell us our stuff to participate in the better parts of American society. Retiring Baby Boomers are about to have a significant impact on the Social Security system. Is the answer to cut Social Security benefits because of the national debt? Is the answer to cut things like Medicare and Medicaid because of... the national debt?
Forget Baby Boomers -- what about scholarships for young people to go to college? What about other social safety nets -- the ones, frayed though they may be, that nonetheless make America great.
Over at the Barack Obama campaign site, they have a tax calculator. You can see how, if you're middle income (like I am), then under the Obama Administration, you're likely to have your taxes go down. (Under Romney they would almost assuredly go up, because he has to subsidize his tax cut for the wealthy and the DoD spending from somewhere.)
To be honest with you, Brian, even I would be willing to pay just a bit more. And not just to help drive down the debt. But because debt or no debt, I'm hoping my kids will have the same kind of America I have always had.
Thanks for the question.