Our Leaders Can't
Make
Tough Choices
Gary Gerard,
dumbhoosier.com
Our venerable leaders in Washington are starting to barely
nibble
around the edges of talking about the deficit woes facing
our nation.
I say that because what I am hearing is so ridiculous I
can’t believe
they stand at the podium straight-faced when they
pontificate about
“getting the deficit under control.”
One of the things President Obama likes to demagogue is the
notion that
rich people aren’t taxed enough.
Fine.
I will concede that point to the president. Rich people
aren’t taxed
enough.
In order to fix that, he says, we need to return to the
Clinton-era tax
rates on people who make $200,000 or more per year.
Fine.
Again, point conceded. So let’s take a look at that.
The Clinton-era tax rate on those folks was 39 percent.
Right now, it’s
35 percent.
But, of course, with myriad IRS rules and accounting
gimmicks, those
rates aren’t close to what those people actually pay.
According to the most recent statistics from the IRS. The
effective tax
rate on the 400 most wealthy Americans is 18.1 percent. On
those
earning $500,000 to $1,000,000, the effective rate is 24.1
percent and
those who made $200,000 to $500,000 paid 19.6 percent.
So the average effective tax rate for people earning
$200,000 or more
is somewhere around 20 percent. And if we returned the top
rate to 39
percent from the current 35 percent, the effective rate
would rise a
couple of percent, to around 22 or 23.
In the most recent data, from 2008, there were around 4.5
million
people in the U.S. who made $200,000 or more. They earned
approximately
$2.8 trillion and paid $610 billion in taxes.
So another 2 percent bump in the effective tax rate on top
of that $610
billion would net the U.S. treasury an additional $12
billion.
But the budget this year is $3.6 trillion. The revenue is
$2.2 trillion
and there is a $1.4 trillion deficit. Heck, if you ran the
effective
tax rate on the wealthy folks to 50 percent – which would
require a
marginal tax rate of at least 70 percent – that would only
raise $1.4
trillion.
That’s barely enough to erase this year’s budget deficit.
Politicians on both sides of the argument want to fix the
problem
without causing any pain. One side doesn’t want to raise
taxes. The
other side doesn’t want to cut programs.
It’s a classic standoff and nothing gets done. The problem
is, they’ve
been at a standoff on these issues for so long our economic
system is
at a tipping point. We can’t keep raising the debt limit,
printing
dollars and selling treasury bills to cover our bets.
Politicians and voters alike have to realize our way of life
is at
stake here. There will have to be tax increases and there
will have to
be deep cuts in government programs if we’re ever going to
get this
budget under control.
I was talking about this stuff with a good friend. She
thinks the U.S.
– and it’s government – has simply become too big. She said
she doubts
if our leaders in Washington are capable of agreeing on much
of
anything. And certainly not on the tough steps necessary to
solve the
budget and deficit crises.
I sincerely hope she’s wrong, but I have a strong suspicion
she may be
right.
Archives
|
