First a flood, then a flood of red ink?
A few days ago, House speaker John Boehner announced that nothing was off the table in upcoming budget deficit talks in Washington…except tax increases.
He then announced that Republicans would push to cut “trillions” from Federal spending.
“We’re not talking about billions here. We should be talking about cuts in trillions,” Boehner said. “These should be actual cuts, real reforms to these programs and not broad deficit targets that punt the tough questions to the future.”
A week earlier, Democratic Governor Andrew Cuomo was in the North Country to talk about the massive clean-up that will be needed following the recent floods.
“These hard-hit communities need their roads and businesses open and a return to normalcy as quickly as possible,” he said.
Cuomo promised to find the money to help rebuild bridges and roads and other infrastructure, efforts that will certainly cost tens of millions of dollars.
But when asked repeatedly by reporters how Albany would pay to help rebuild, he refused to offer any specifics.
On the contrary. Cuomo, like Boehner, has taken state tax increases off the table.
He’s also pushing a 2% property tax cap that would limit the ability of local governments and school districts to raise their own revenues.
Both politicians are pushing policies that are deeply popular with the American people. We hate paying taxes.
But during last week’s floods, I didn’t find a single person with water lapping at their door who didn’t expect some help from the government.
On the contrary, it was widely accepted as a given that local, state and federal agencies should step in to help rebuild infrastructure and rescue private homeowners and businesses.
If anything, people were impatient that government wasn’t moving faster and doing more.
Similarly, polls show that the vast majority of Americans reject flatly the notion of deep cuts to the costliest Federal programs, ranging from Medicare to the US military.
But if we want to maintain government as a significant force in our lives — one that can respond in emergencies, help senior citizens and reduce poverty — we have to confront the dirty little secret in our society.
That secret is that many of us are probably undertaxed. We want a vast array of services, from modern highways and efficient border security to state police and healthcare — but we don’t want to pay for it.
An analysis released last week by USA Today found that Americans pay less in Federal taxes now than at any time since the 1950s.
Since the 1970s, we’ve paid on average around 27% of our income in taxes, a figure that has now dropped to roughly 23.6%. (Put another way, we pay on average about 15% less per person that we used to, a significant reduction.)
Thanks to loopholes in our Federal tax system, many of our biggest and most profitable corporations also avoid contributing to the Federal treasury in any meaningful way. This from Salon.
You’ll recall recent reports that although GE made profits last year of $5.1 billion in the United States and $14.2 billion worldwide they would pay not a penny of federal income tax…
It gets worse. In 2009, Exxon-Mobil didn’t pay any taxes either, and last year, they had worldwide profits of $30.46 billion. Neither did Bank of America or Chevron or Boeing.
And it’s not just fat cats who are getting off easy.
In 2009, more than half of all American workers paid no Federal income taxes, or actually received “a refund” — that’s free cash from Uncle Sam.
The good news in all this is that we’ve reached the point where the debate has to get real.
Unless we’re willing to raise taxes significantly, America will have to dismantle vast portions of the government — at the federal, state and local levels — that we’ve come to rely on for the last sixty years.
Many conservatives obviously think that’s a good thing: they’re convinced that we should be more self-reliant and look more to the private sector for our needs.
They will have the chance now to make that argument with rank and file voters. And they should speak honestly about what that will mean, say, for a community faced with a flooded downtown.
Put bluntly, unless a politician can say honestly where the money will come from, he probably shouldn’t make the feel-good promise that it will simply materialize.
Many on the left, meanwhile, will try to make the counter-argument that many of these government programs are worth saving.
They, too, should speak honestly about the tax hikes that would be required to do so sustainably. They should acknowledge that it’s not just about tapping rich people. We’ll all have to chip in more, probably a lot more.
So where do you come down? Do you think people should bail their own boat? Or did the spring flood of 2011 remind you that government may just be worth paying for?
Tags: politics
If we are paying less taxes than we have since the 50s… how do people – including people who comment on this website – get away with saying our current troubles are a product of over taxation?
Brian,
You can keep using this argument that this flood somehow justifies the fact that the government should raise revenue but it just doesn’t work.
The discussion over the debt ceiling is budgeting 101. If you or I were to try and solve a debt crisis we had by just trying to find a little more income to make a few more interest payments we would be considered crazy. A federal policy that does that without first addressing serious spending issues is just as crazy. For example a first step is to raise the retirement age for social security then we can talk about who’s taxes you want to raise. I am a forty something I can wait a few extra years to save the system.
It might help if we cut our seriously bloated military (we spend more on “defense” than the entire rest of the world combined) and save the money we’re spending invading, occupying and running foreign countries. Maybe this might push our country to develop a real rural development policy.
In1995, the richest 400 Americans paid 30% of their income in income taxes, in 2002 they paid 23%, in 2007 they paid 16.6*. Yet we complain about the 50% of Americans who do not make enough income to have to pay income taxes. I’m more than willing to do away with the Bush tax cuts (now Obama tax cuts) ….for everyone. But all the data I have seen shows that the wealthy have had a really good “run” over the last 25-30 years. The lower/middle class are still waiting for the “trickle down”.
Even the father of “trickle down”, David Stockman, says we can’t balance the budget and pay down the national debt without raising taxes. The notion that “deficits don’t matter” has been thoroughly trashed by our recent history. Yes, I know. “IF” the housing bubble hadn’t happened and “IF” the bad mortgages hadn’t been repackaged in derivatives, “IF”, “IF”, (blah, blah, blah). Your mother probably told you “If wishes were horses, beggars would ride”. Arguing that trickle down, Reaganomics, or whatever name you want to apply to that theory would have worked “IF” is baloney sliced thick.
Here’s reality: We have to pay more taxes to get out of this mess. Probably all of us. The people with the most money, those who benefited the most from the recent upward transfer of wealth (arguably the only ones who benefited) need to pay the most to get the economy back on track. And yes, we need to economize wherever possible while we’re at it. When you are in debt the money coming in has to exceed what’s going out or (thanks to compounding interest) it will never get better. It’s is a simple equation, money in has to equal or exceed money out. Any theory that holds otherwise is snake oil.
If you ended subsidies to the top 5 gas and oil companies… the ones who are bathing themselves in record profits right now… you would save $21 billion over 10 years.
Sounds like a good start, doesn’t it?
After all, a subsidy is financial assistance to a private company from public money.
Do mega corporations experiencing record profits strike you as something worthy of your money?
Guess which side of this debate doesn’t want to stop paying out those subsidies?
Federal taxes are almost certainly going to have to rise. I do think, however, that before it considers raising tax the federal government should do more to close the “tax gap” between owed revenues and actually collected revenues by increasing the IRS’s enforcement budget. The feds should also impose a carbon tax to reduce greenhouse gas emmissions. Many tax expenditures should be eliminated, perhaps most notably the egregious mortgage interest deduction. That deduction costs the treasury about 100 billion annually and taxpayers can deduct interest on the first million dollars of principal, which gives many wealthy individuals a massive windfall while providing renters- who tend to be lower income- no break at all.
Spending must also be cut, and cut deeply. The recent 39 billion dollar spending cut is nothing more than a tiny baby step in the right direction. Congress needs to make annual cust at least 10 times that amount to move towards fiscal discipline. I second calls for cuts in the bloated and out-of-control military budget. time to get out of the Middle East and close all overseas military bases.
It would be interesting to know what number of days that workers in NY work to cover their property tax burden? In 2011 we will spend 22 days working to pay our payroll taxes and social security taxes. Add in state income taxes here in NY and the many other taxes we pay and you can come up with a total number of days you will work before you come up with any income that you can bring home. What do folks here think is an acceptable number of days? Is 150 days a year working for taxes and not taking home any money still a number that will make it worth while? In NY we currently rank 3rd at 114 days. What should we raise that to as some suggest? Is 120 days a good number? That would still keep us a few days below number one Connecticut.
Unless we’re willing to raise taxes significantly, America will have to dismantle vast portions of the government
1) Lowering taxes raises tax revenue.
2) We should dismantle about 50% of our government.
lowering taxes reduces tax revenue.
if the purpose of this whole thing is to get rid of medicare and social security as we now know them (and that looks like what is happening), then lowering taxes and refusing to raise them back is a good strategy.
Brian – we could go back to the tax levels of 2000 (pre-Bush tax cut), get out of Afghanistan and Iraq, and many of our problems would be over. We would probably still need to tweak medicare and social security, but getting a hold on health care costs would solve most of the rest of our problems.
To me there isn’t much difference between Cuomo and Boehner. One is a Democrat and the other is a Republican. Both are full of themselves.
I would take all the politicians more seriously if when they talk about cutting spending, they would start by eliminating their own health and retirement benefits before they go after anyone else’s benefits.
They say all our problems can be solved if only fraud and waste are eliminated. But they are the fraudulent ones who literally waist my time when I have to listen to them pontificate about this, that and the other thing.
They play us and we let them play us when they talk about lowering taxes and lowering the budget. I should try lowering my income while I lower my expenses. Maybe I should stop eating and buying gas to do my job. That should work.
Federal taxes are almost certainly going to have to rise. I do think, however, that before it considers raising tax the federal government should do more to close the “tax gap” between owed revenues and actually collected revenues by increasing the IRS’s enforcement budget. The feds should also impose a carbon tax to reduce greenhouse gas emmissions. Many tax expenditures should be eliminated, perhaps most notably the egregious mortgage interest deduction. That deduction costs the treasury about 100 billion annually and taxpayers can deduct interest on the first million dollars of principal, which gives many wealthy individuals a massive windfall while providing renters- who tend to be lower income- no break at all.
Spending must also be cut, and cut deeply. The recent 39 billion dollar spending cut is nothing more than a tiny baby step in the right direction. Congress needs to make annual cust at least 10 times that amount to move towards fiscal discipline. I second calls for cuts in the bloated and out-of-control military budget. time to get out of the Middle East and close all overseas military bases.
There is no debt crisis. Our level of debt is something like 80% of GNP, I don’t remember the exact number. Even if it was 100% that is no crisis. People often say that individuals would never budget the way the government does but in fact most people take on many times the amount of debt the government does. Most people take out a mortgage of 4 or 5 times or more than their household income. Plus debt for a car or two.
We as a nation can handle the amount of debt we have and pay it down over time and still provide the services we need. The first thing to do is to stop scaring people into acting stupidly.
khl is exactly right.
the only thing i would add is that one has to be very careful when analogizing the federal government to a household. the economics of the two have a lot of important differences that are often greatly obscured by careless comparisons.
We may not have a debt crisis right now, but given how Medicare, Medicaid, Social Security, and debt service costs are projected to rise and the current ridiculously low levels of federal taxation, we will face one in a few years unless we act now. The longer action is delayed, the bigger and more intractable the problem becomes. The annual budget deficit is 10% of GDP. Just think how fast that can compound given rising expense.
What happens when people are no longer willing to loan money to the federal government or when interest rates skyrocket from the crowding out caused by excessive federal borrowing? Moreover, why should we leave such a large debt to future generations?
Analogizing a home mortgage or car loan to the federal deficit is faulty. The federal deficit is unsecured debt more analgous to credit card debt which rised every year than to debt secured by an asset like a home or car.
undeniably true. deficits and debt are a major, major problem in the medium term. so why wait to take action? because we have an employment crisis right now. one that more deficit spending could do a lot to ameliorate. and one that austerity will only make worse.
JDM, I can’t believe you’re still peddling the old “lowering taxes raises tax revenue” line! If that were true, why didn’t Regan and Bush II leave us with budget surpluses? As Jim Bullard pointed out, even David Stockman doesn’t buy that any more.
Raise taxes on corporations and on the wealthiest. If you are worried that raising taxes will kill jobs, then give a direct tax break to those who create jobs, on a job by job basis.
Then end the wars, and cut military spending sharply. Let’s try that program for while, and see if we still have a problem. Next step: single payer.
The Congressional Budget Office (CBO) projected in 2001 that the federal government would be $2.3 trillion in the black by 2011. What happened? The Bush tax cuts in 2001 and 2003. And two wars. These are the largest contributors to the current deficit.
Taxes in the US are lower than almost all other developed countries.
The US ranks between Uganda and the Ivory coast for income inequality and below Pakistan.
We need to raise taxes on everyone and get over it. Especially the wealthy. And stop redistributing middle class wealth to multi-national corporations who report record profits yet get tax rebate checks from the US Treasury. Modestly raise the limit that Social Security taxes apply to. Control health care costs and eliminate the largest wasteful expense – health insurance administration by private corporations. Cut the defense budget and close foreign bases.
We don’t have to end Medicare or alter Social Security or other safety nets. It’s not that hard. But it won’t happen as long as our politicians are bought and paid for by corporation donations, the media is controlled by large corporations and corporation lobbyists write our tax laws.
How do I vote for myown in the next election?
Federal taxes are lower, not the total tax burden.
Getting out of these wars would certainly be a start but they would have to be followed by a true change in how we spend money on defense. The cold war ended and yet we found “new” reasons to spend massive amounts of money on weapons that were designed to fight a war in Europe against an invading Soviet military. We still built the weapons, the f-22, the stealth bomber and so forth. I think now is the time to do it now is the time to really take on that form of corporate welfare.
But the debt IS a problem we are reaching levels that have never been seen except in one period of WWII when we were actually fighting a real war of survival, they are not okay. We will spend most of our federal spending on paying our debt not on creating a better country.
This has to be dealt with and in the end it is spending problem not a revenue problem.
brian’s post was a bit misleading about this, but the usa today article says very clearly that it’s the total tax burden (encompassing all federal, state, and local taxes) that’s at 23.6% of income, the lowest it’s been since 1958. surely that percentage is higher in nys, but still, it really puts the lie to the whole taxed-enough-already party phenomenon.
also — and i don’t mean this as a knock on mervel, whom i really respect — i’m really baffled by these oft-heard claims that we have a spending problem and not a revenue problem. how so? the bush tax cuts followed by the great recession have most definitely given us a revenue problem! i’m not saying we have a revenue problem to the exclusion of spending problems, but how can anyone say it’s only a spending problem?
Again, the defict is primarily from the 2001 and 2003 tax cuts and the two wars. We can reverse the tax cuts. Federal and State income tax rates are half what they were 30 years ago when the economy and employment were much better. Tax cuts have the same effect as spending and brought us the deficits. Add in two wars and it was a guaranteed recipe for deficit disaster. We have never fought wars and cut taxes at the same time before.
Totally irresponsible policies gave us the deficit. Bush and Greenspan didn’t like the idea of the projected budget surpluses and decided tax cuts were the answer. However, the tax cuts were too aggressive and certainly should have been reversed as the wars progressed. Cheney said the Iraq war wouldn’t cost us anything because it would be paid for by Iraq oil. Total incompetence. Even Reagan raised taxes after his tax cuts went too far.
Yes cut spending; on defense, health care administration, corporate subsidies. And stop the spending on tax cuts which has primarily benefitted the wealthy. The disparity in wealth in the US ranks us with third world banana republics and is the worst it has been since the Great Depression. The middle class is losing out because the political system does not represent us and middle class wealth is being redistributed up – the opposite of trickle down economics.
The majority of Americans favor increased taxes on the wealthy and no cuts to Medicare and Social Security. But all we hear from Congress is the opposite. Why, because they represent the interests of the wealthy and powerful like Goldman Sachs, BP, Exxon, Bank of America, Koch brothers and the miltary industrial complex.
It’s difficult to respond to your story when I suspect the facts are not accurate! You state since the 70’s the amount we pay to taxes from our income has gone down from 27% to 23.6%. Your statements would leave one to believe that a increase in taxes is necessary and justified. Let me add some facts yoy left out about taxes! not only do I pay income taxes to the federal and state governments but I also pay many additional taxes that keep going up. I pay school, town and county taxes: $3,118. On a gallon of gasoline I pay, 19 cents to the feds, 32 cents to the state and 4 cents to the county for a total of 54 cents (per gallon!) I pay a state and county sales tax on most items I purchase. I pay a $20 Taxes and Fees Charge each month on my phone. PLEASE don’t tell me my taxes have gone down. It’s the liberal left that will force me out of retirement. Over the past ten years my retirement check may have gone up 1-2% with a COLA. I estimate approximately 40% or more of my annual income goes to pay TAXES…ALL TAXES! Spending at all government levels needs to STOP!!!!!
Hermit,
That is somewhat of a pithy statement I agree, sure we can increase revenue and that would decrease the deficit for that year.
However the reason I believe this is essentially a structural spending issue is that the momentum of government spending simply uses what is supplied for revenue. The Clinton years were great from a deficit standpoint, but actual spending increased as fast as ever keeping pace with the revenues from robust economic activity. Robust economic activity is what essentially makes the difference and we can’t rely on that, it comes and goes in the normal business cycle. So until the government changes the continual unabated upward march of spending this problem is not going away.
We are not fighting WWII, what are we spending our money on? Those big things have to be structurally addressed and right now neither party has the will to do that so it will be left to the markets to effectively supply the discipline which will bring us into line.
Raising taxes on those who underpay which to me are the wealth is fine, but I don’t think we should delude ourselves that will solve this problem.
Gary, good point. All the taxes you mention are regressive taxes – everybody pays them no matter what your income. They can be significant to you and me but an irrelevant percentage for a wealthy individual. As NYS income taxes on the wealthy were cut in half, other taxes rose to compensate. Look at school funding. Every time the state cuts education funds property taxes go up. So we substitute raising funds from a progressive system to a regressive one.
Gas taxes, sales taxes and other taxes on phone, cable, etc. are all regressive and hit the middle class hard. When you combine all the taxes we pay it is a fact that the middle class are taxed at a much higher percentage of income than the wealthy. A big corporate CEO pays a smaller percentage of total taxes than his secretary.
Yes we can do a better job of controlling spending, but we also need to go back to the tax policies we had 30 years ago so the people who gain the most from the benefits of our system also pay a substantive portion of the costs.
When enough people think that they’re being taxed enough, the market will simply by-pass detection.
The money will “go to the streets” and Obama, et. al. will not be able to measure it.
We are well past the stage where some benevolent dictator can sit in the White House and say, “let’s raise taxes on people making over $250,000.”
Message to all. Go ahead! Try it.! I predict tax revenues will drop.
good idea JDM – lets try it (raising some income taxes). You predicted that lowering taxes would raise revenues – We tried that with the Bush tax cuts and revenues went down. Now lets try raising some taxes and see if revenues go up or down – I bet they go up.
And Gary – you probably pay zero federal and state income tax even though you pay 40% of your income in taxes. Thats because we have lowered the income tax and raised all the other taxes. If the tax burden were shifted back to upper income tax brackets via higher state and federal income tax there would be less pressure to raise the taxes you do pay. The question we are discussing really is WHICH taxes we pay and how big a role the federal and state income taxes on the upper brackets play.
JDM, The notion that lower taxes raise raise revenues has been thoroughly debunked. Read http://www.factcheck.org/taxes/supply-side_spin.html. That’s just one of many fact checks on this topic. A simple look at history shows that after tax cuts revenues go down. Yes, they do eventually go up again after a while but attributing the eventual increase to the tax cut is an act of blind faith in the “cutting taxes increases revenues” philosophy. It is in the same category as wearing a “lucky shirt” to a a ball game and attributing your favorite team’s wins to the shirt. There is no demonstrable connection.
Yes, we need to reduce spending but that won’t solve the problem by itself and the Ryan plan which also further cuts taxes on the rich and corporations most certainly will not solve it.
i just don’t think that’s true. as a percentage of the economy, federal spending decreased every year clinton was in office except for a small uptick in fiscal 2001 (of course bush came into office in 2001, but that year’s budget was set by the outgoing clinton administration). have a look.
Yes agreed; as a percentage of GDP. My point is actual government spending has marched on; never decreasing. As GDP rises and falls that percentage will change. During the Clinton years we had a robust economy and strong economic growth, thus as a % of GDP government spending was less, but actual government spending marched right on increasing every year under Reagan, Clinton, Bush, Obama, everyone.
So yes when we have good economic growth as in the 90s the federal spending as a percentage of GDP will fall. When we have slow or negative economic growth it will increase as will deficits and the debt. Tax increases will offset this somewhat, but the unchanging brute force of increasing government spending will always swamp the other affects.
You have to address the spending first.
well again i just don’t see how the data agrees with this. to get federal spending to actually go down (i.e. in nominal dollars) from one year to the next would require really severe austerity, since a lot of the spending increases are tied to a) inflation and b) population growth. so rather than looking at nominal expenditures, have a look at the graph i linked to earlier with inflation and population growth factored in. inflation-adjusted, per capita spending during clinton’s presidency was… basically flat.
Yes in real dollars it was close to being flat from a federal perspective. I know I am being slippery here, but that kind of makes my point, the one time we were successful was when we were controlling spending.
However from the same data check out total spending.
http://www.usgovernmentspending.com/downchart_gs.php?year=1990_2010&view=1&expand=&units=d&log=linear&fy=fy12&chart=F0-fed&bar=0&stack=1&size=l&title=&state=US&color=c&local=s#usgs302
Also how can we say we don’t have a spending problem right now when you look at the year 2000 and the year 2011 on that chart?
I would be in favor of returning to the rate of spending AND the rate of taxes that we had in 2000.
i’m in total agreement with you now, mervel, except that i do support the increases in federal spending that will be coming online due to the affordable care act (which, it must also be noted, are expected to be more than offset by new revenues). the wars have not been cheap!
I would like to return to my rate of spending on food, gasoline, and health insurance in 2001 too. I don’t use any more of any of those than in 2001 but the costs are radically higher.
Maybe it is time to bring in the concept of planning for a Zero Growth economy?
to be clear, i’m personally talking about the inflation-adjusted, per capita rate of spending in 2001, plus extra spending for the affordable care act.
however khl makes a good point, health care in particular has been rising at a rate well above inflation, and there’s simply no way to keep federal government spending down when that’s the case. indeed the long-term budget picture is almost all about health care.
I agree hermit it is all about health care if you look at the projections.
Yes, there is no debt crisis, and we just need to spend more. Keep saying it and maybe someday that will be true.
Dave to go back to your very first post- “If we are paying less taxes than we have since the 50s… how do people – including people who comment on this website – get away with saying our current troubles are a product of over taxation?” That question isn’t accurate really. The allegation, which I believe is true, is that over spending has lead to what is effectively over taxation to pay for the overspending. Lower spending and debt and taxes needn’t be as high.
Why anyone in their right mind would advocate for higher taxes is beyond me. It doesn’t matter who you steal from, it’s still legal stealing. And until we get spending under control, pay off our debt and get our dollar stabilized nothing will change, no matter how much you tax “The Rich”.