Thursday, March 26, 2009

Get Serious About Taxes

E.J. Dionne suggests that the best way to cut the deficit is to raise our taxes.

Every budget analyst knows this, and every politician knows that it’s far easier to bemoan deficits in the abstract than to risk spending cuts or tax increases that hurt sizable groups of voters. “There are no more low-hanging fruit,” says Tom Kahn, the staff director for the House Budget Committee. “The low-hanging fruit have already been picked. Any tax increase or spending cut is going to trigger opposition from somewhere.”

In an ideal world, Obama would come right out and say we’ll need broad-based tax increases. But that would be suicidal right now. Witness the reaction to his effort to put a 28 percent ceiling on deductions. His proposal would affect only 1.2 percent of taxpayers, yet even that idea seems to be dying in Congress.

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The task of those who genuinely care about deficits is to make the world safe for tax increases. Under current conditions, it’s a whole lot easier for politicians to talk a lot about deficits, and then just let them grow.

The Republicans love to make a big show about how they are the party of fiscal responsibility and cutting taxes and the Democrats are the ones who promote tax-and-spend. Never mind that the largest tax increases in the last generation came from Ronald Reagan in 1983 and that the biggest tax cut so far proposed has been in the budget sent up by Barack Obama; they will have their talking points. They also try to get mileage out of the faux-populism of “it’s our money; why send it to Washington?” It’s as if the government was some alien occupying force that collects taxes and we never get a dime back from “them.” Ironically, the Republicans who complain the most about taxes are, by and large, from states like Alabama and Mississippi, which get the most money back from the government in the form of Medicare, welfare, and other government programs that fill in the gaps that the state can’t pay for.

The Republicans’ rant about President Obama’s plan to let the Bush tax cuts come to an end and raise taxes on those who make more than $250,000 makes it sound as if the world will come crashing down on the “small businesses” who will then have to lay off their entire work force just to pay the IRS. Either they are painfully ignorant of the tax code or they are willfully misleading their listeners. The tax hikes would hit only those who have a net income over $250,000, and it would not be on the entire amount, just the portion over $250,000. As for small businesses, anyone who has even a passing knowledge of how business works would know that the taxes are only on earnings over $250,000, not on the gross income. For a business to make over $250,000 a year, they would have to gross somewhere in the neighborhood of $4 million. That may be a small business to some people, but that’s not doing too badly. Besides, anyone who runs a multi-million dollar company but can’t hire a tax attorney or an hourly employee at H & R Block, for that matter, to find ways to get every deduction entitled to them doesn’t deserve to get a break.

Then there’s the old canard about the government being full of waste, fraud and abuse, and they hold up examples of the Pentagon paying $500 for a toilet seat or some such apocryphal tale. However, the latest examples of waste, fraud, and abuse are coming from the government entities of Bank of America, Citibank, and A.I.G. And when they talk about the red tape and inefficiencies of the government, they like to say something along the lines of “Would you like your health care run by the government?” Well, considering the fact that Medicare has administrative costs that run to about 3% of their annual expenditures as compared to an HMO, which typically spends upwards of 15% if not more, then, yes, I’d like the government to run the health care system, at least as far as efficiency is concerned. The fall-back is to hold up the Post Office as another example of inefficiency. Really? When I can send a birthday card door-to-door to my Mom in Ohio in two days for under fifty cents via UPS or Fed Ex, let me know.

Sure, paying taxes is not everyone’s favorite duty, and a lot of people would like pay as little as possible — so would I. I would also like to fly first class for free, not pay rent on my house, and, while you’re at it, have the physique of Michael Phelps. It ain’t gonna happen (especially the last part). But if we’re going to have the services we’ve come to expect — indeed, become entitled to — such as decent roads, a strong defense, safe airways, secure financial institutions, clean water, good and productive schools, and help for those who can’t help themselves, then we have to pay for them. The government, be it state, local, or federal, has to get the money from somewhere, and if it’s not in the form of taxes, we have to borrow it from somewhere else. Lately it’s been from the Chinese. Not to go all xenophobic, but I would rather have the money come from us rather than be in hock to a country that doesn’t have the same outlook on basic forms of human rights that we do — or at least aspire to.

To quote Oliver Wendell Holmes, Jr., “taxes are the price we pay for a civilized society.”