For the Love of the Money (or alternatively, fiscal responsibility)
The New York Times – as is its wont – has a pretty good editorial on the need for higher taxes in the age of Obama:
But, sooner than he may prefer, Mr. Obama will have to face up to what he has so far avoided: the need to raise taxes broadly to rein in deficits.
The deficits are not of his making. Some two-thirds of the $9 trillion shortfall resulted from policies that predate his administration; most of the rest is the cost of policies that both parties consider necessary, like continued relief from the alternative minimum tax.
But when he inherited the burden of the budget mess, Mr. Obama also inherited the responsibility to clean it up. Neither economic growth nor spending cuts will be enough to fix the projected shortfalls. Nor is there enough to be gained by confining tax increases only to families making more than $250,000 a year, a campaign promise that Mr. Obama still says he will keep. [...]
The question then is not whether taxes must go up, but when, how and how much.
I’ve made this point several times here and on my own blog, but it’s worth reiterating: fiscally, our current path is completely unsustainable without either significant cuts in spending or significant increases in revenue. Seeing as how the former isn’t particularly likely (and seeing as how I’m pretty much on board with an expanded welfare state and more comprehensive benefits), the only real option we have – at least in the short term – is to raise taxes. And while I understand that a significant revision of the tax code is a near political impossibility (though there might be some hope for a progressive consumption tax), there is quite a bit of low-hanging fruit with regards to ways we can raise revenue. Here are a few of the more obvious ones:
- “Infinite tax brackets”. I kind of elaborated on this on my own blog a little while ago, but basically, the idea is that you can use computers to adjust the tax rate for every marginal dollar past a certain point. So, for instance, if incomes of $500,000 are taxed at 45%, each additional dollar after $500,000 is taxed at 45.00001%, 45.00002%, etc. etc. I don’t think it’s a stretch to say that you could raise enormous amounts of revenue this way, and rhetorically, it sounds much more palatable than a single 70% marginal tax rate for the super-wealthy. You’d have to change the name though.
- Standardizing alcohol taxes. Here’s the National Journal: “In the same report, the CBO suggested that standardizing federal taxes on alcoholic beverages to 25 cents per ounce of alcohol would increase revenue by $60 billion over 10 years. Currently, different types of alcoholic beverages are taxed at different rates: 21 cents per ounce of alcohol in distilled spirits, 10 cents per ounce of alcohol in beer and 8 cents per ounce of alcohol in wine.” What’s more, as Matt Zeitlin points out, a sin tax targeted at alcohol would significantly reduce consumption among heavy drinkers, which in turn, could reduce the assault rate by as much as 20%.
- “Soda taxes.” Broadly, these would simply be taxes on any beverage containing a certain amount of sugar per ounce, and could be expanded to include food as well. Here’s the National Journal again: “According to a Congressional Budget Office report released in December, a national excise tax of 3 cents per 12 ounces of sugary beverage — that’s 3 cents for a can of Coke or 5 cents for a 20-ounce bottle — would yield $50 billion over 10 years, while potentially reducing overall health care costs because of the link between sugar intake and health conditions like diabetes and obesity.”
Even ignoring the first point, these minor changes in taxation would yield well over $100 billion over ten years, which would put a healthy dent into the cost of health care reform. I know that most of you aren’t particularly amenable to tax increases, and would prefer to see smaller government. But, to put it bluntly, that simply isn’t going to happen. Conservatives as well as liberals have been fairly enthusiastic about expanding the scope of government, and I don’t expect that to change anytime soon. The real question, in my view, is how do we make government work as effectively as possible? Especially, as seems to be the case, if we’re going to have an expanded welfare state as well as a substantive presence on the international stage. And the obvious first answer – I think – is that we need government to be fiscally responsible, and to have that, we simply need more revenue.
Also, I love Soul Train.
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22 comments
I’ve always had a soft spot for the O’Jays, as they are fellow Buckeyes.
Maybe Don Cornelius has some ideas on reducing the deficit?
That’s rather absolutist of you to say that government spending cuts won’t happen. You might see some deep,deep cuts before all this is over. America is sick of tax and spend, and while you think they might not want the government to cut their favorite programs, many, many Americans don’t get very much from government in the form of welfare, yet pay a whole lot in. The government can’t tax enough to pay for the coming state financial storm.
North
September 4th, 2009 at 5:12 pm
Well Bush and the Republicans certainly plumbed the limits of borrow and spend, Mike, which is why they can barely even say fiscal responsibility with a straight face.
mike farmer
September 4th, 2009 at 8:18 pm
I agree with you, North — I didn’t support Bush, and I’m not a Republican. So, what’s your point?
North
September 5th, 2009 at 6:25 am
Sorry Mike, the term “tax and spend” is so heavily republican branded that I assumed that the criticism was coming from a republican angle.
mike farmer
September 5th, 2009 at 10:43 am
No, I realize it is both a Republican and Democrat tendency to tax and spend — it’s a government tendency.
mike farmer
September 5th, 2009 at 10:46 am
Perhaps I need a footer, so I don’t have to explain each time I criticize the Democrats. Maybe something like this — Attention! All criticism of Democrat policy is not meant to be in support of Republican policies. I am an equal opportunity critic.
North
September 5th, 2009 at 11:24 am
Could be helpful. But for my part I’ll try and remember that you’re criticising from the outside in not from one side to the other.
Joseph FM
September 5th, 2009 at 1:05 am
“Won’t” does not mean “shouldn’t”. That cuts of any real significance will not be happening until our creditors force them on us strikes me as an utterly obvious political reality regardless of what anyone’s preferences are. To say this is no more absolutist than any of your own statements.
I mean, I think that eventually even the US will fall prey to the kind of international monetary crisis that have plagued most other states with excessive public debt, and will be forced into austerity. But I don’t think that’s what you were implying, Mike.
mike farmer
September 5th, 2009 at 10:41 am
Yes, that is what I’m saying, plus, I have no problem making absolutist statements (I was kidding with the non-absolutists — some things are amenable to absolutes) when economic laws are involved. If I spend more than I make, at some point I will absolutely have to cut spending, make more, or collapse financially. There is a limt to “making more”, so I have to cut spending if spending continues to exceed what I can bring in.
Jamelle, flat out eliminating the possibility of any government cuts makes no sense to me as a Democrat. Where is it written that we as a party must embrace the same absolutism that hurtled the Republicans off the cliff into the political wilderness? Your third suggestion: taxes on soda, is a prime example. Why why would we tax soda and sugar drinks when we are massively subsidizing the very sweeteners that are causing the problem? Obama currently is facing no challenge from within the party or without, where is this idea that he is enslaved to the agribusiness interests coming from?
What is it about cutting wasteful harmful government spending that is so much an anathema to the left? Why can our party not embrace some sensible ideas from the center, capture the title of fiscally responsible party for ourselves, the loyalty of the intellectually honest libertarians and establish a majority for a generation? I don’t understand.
Jamelle
September 5th, 2009 at 6:28 am
I think North gets my point. I’m not saying that we shouldn’t have any cuts in federal spending – I, for one, would love to see significant cuts in our defense spending – but in all honesty, it’s very unlikely that the political will exists for those cuts.
Jamelle
September 5th, 2009 at 6:29 am
Oops, and I meant to say, “I think Joseph FM gets my point”
North
September 5th, 2009 at 11:33 am
Here I was getting all excited. If your position is Josephs; that the political reality won’t permit cuts, then I am sorrowfully in agreement. I just don’t fully appreciate why. Surely there are some concrete practical cuts that Obama could make. What about no more business as usual? What about hope and change? What about bridging the partisan divide? What about political acumen?! I mean look at the libertarian wing of the right; they’ve been screwed more by Bush’s term than the left has. The rest of the party is essentially telling fiscal conservatives to “Shut up and pray” when it comes to policy. Even the lip service to libertarianism seems perfunctory. They’re hemorrhaging libertarians all over the place. I mean honestly, how many cuts would it take to swing them around even just for a cycle or two? The republicans gave them nothing when they had every reason to give them something. What kind of cuts would it take to have Libertarians reward Obama with votes next season? I don’t think it would take much. Hey Mike, Jaybird etc… if Obama axed some government programs how many do you think he’d have to slash to get your approval? How many would he have to cut to get rewarded with your vote next election? For the next two?
Now I’m off to nurse my deflated ego. Curse you Joseph! *Fistshake*
Jaybird
September 5th, 2009 at 3:54 pm
At this point, I don’t know what he could do to get my approval.
I mean, even the stuff that I thought he’d be good at… he’s awful at.
For example, I expected the DEA to stop raiding medicinal marijuana dispensaries. Not a big step, right? He could even hide behind the whole “people with cancer on chemo” thing and how he wants to bust dealers who are likely to be engaging in violence. Maybe he could even say something about going against California law isn’t his number one priority right now if he wanted Libertarians to swoon. Nope, medical marijuana places are still being busted.
So it’s not like I can say “oh, drop the TSA and I’ll get on board” or something like that. I don’t have enough creativity to know where to begin that particular daydream.
The stuff that would get me to say “well, I won’t yell anymore” (or similar) is stuff like “be good where democrats and libertarians are supposed to overlap”. Medicinal Marijuana. Gay Marriage.
As it stands now, he’s another George Bush… the stuff where he’s worth defending are things where Democrats and Libertarians don’t overlap… and the stuff where they do overlap, he’s the opposite of good.
North
September 5th, 2009 at 7:26 pm
Thanks for the opinion Jaybird. I don’t consider him the second coming of W but I’m no great fan. I’ll admit, he’s surprised me, I expected something (anything) daring based on his rhetoric but I’m still waiting to see it. He’s got a while yet for me to see if this is one of his supposed long game/rope-a-dope strategems or just political cowardice/hypercaution.
mike farmer
September 6th, 2009 at 4:28 am
I’ve written several times on my blog, that if Obama had begun his presidency by being a leader who ended corporate welfare, increased the power of private school alternatives, ended the wars in Iraq in Afghanistan, and started trimming the waste in government, he would be wildly popular, but he has committed to so many grand government schemes, now, he would have to admit to having an epiphany. Recently someone said he has two faults — inability to admit that his views need to change and lack of economic understanding. Obama is an idealist who doesn’t understand the generation of wealth and the importance of wealth generation. Many of his supporters loved it when they thought he was a Clinton pragmatist, but he only talked pragmatism. Obama doesn’t understand that government is incapable of running the type of world he envisions. His lack of understanding regarding government limitations will be his downfall — he’s surrounded by people who believe an elite group of technocrats can manage the U.S. and it’s global interactions — this is sad, laughable, and just a little scary.
North
September 6th, 2009 at 6:30 am
Thanks Mike. I sadly can’t disagree with you. I was a Clinton supporter myself. We’ll see how it turns out.
mike farmer
September 5th, 2009 at 10:51 am
I got your point, too, I just disagree that spending will not be cut — it will have to be cut, and fairly soon.
You forgot to add, “Put those N million people who work and live in this country but aren’t citizens on the tax rolls”. Sane immigration policy can actually be a fiscal boost.
I do think there are quite a few venues for cuts in the national budget, but this will take actual, real action from fiscal conservatives (in both the Democrat and Republican parties) working on popularizing reining in spending… or a broad hand of a President who isn’t looking at re-election. Personally, I think conservatives who want financial responsibility can make big political inroads among moderates (who they’ve largely alienated) by proposing precisely those cuts in the military budget.
Why doesn’t Obama try a new tactic for Dems which is cutting spending? We’ve already had a stimulus spending bill, cash for clunkers and now he wants to spend almost a billion to socialize health care.