Monday, December 03, 2012

Punitive Policy

If the president gets to repeal the Bush era tax cuts and raise the marginal rate from 35 to 39% on those making more than $250,000 per year, how much revenue will that actually generate? We are trying to deal with the deficit of $1.3 trillion per year. Will Obama's tax increase have an impact on that? If we run the numbers we find that the tax increase on those who are most successful in the nation and most likely to reinvest their excess capital into new jobs or business growth would equal about one week' s worth of government spending.

Recently the Republicans in Congress have opened the door for discussion of revenue enhancements. More revenue for government doesn't necessarily mean higher tax rates. It can mean addressing the question of carveouts, deductions, exclusions and favorable treatment that pepper the internal revenue tax code. Have you done your taxes with TurboTax? Then you are familiar with the page after page of questions regarding whether this exclusion or that deduction applies to you. You don't have to look very far to find places where money could be saved and revenue could be enhanced.

Of course any time we start to deal with deductions you will get the paired arguments of not wanting to eliminate the home mortgage interest deduction and a particular deduction or exclusion being too minor to make a difference in total revenue or the assault on the deficit. Recent discussions have raised the issue of a possible total On deductions for every tax payer. Don't worry about whether it is a mortgage interest deduction or some special privilege carveouts. Set a percentage or a dollar value for income adjustment and don't worry about where in particular it will come from. Revenue could be increased drastically the debate on where to cut would not be contentious and most importantly, we would not be doing serious damage to the most successful within our economy.

It Isn't about the Dollars

No, it isn't about the dollars. The president doesn't really care about the deficit. What he cares about is income equity. He is a believer in the concept that all persons should have approximately equal success in life regardless of what their input is to the process. If someone is overly successful it is the task of government to make their success available to those who have failed to achieve as much. This doesn't involve questions of deficit reduction or tax rate structures. It involves social engineering and redistribution of wealth.

The president doesn't care about the budget or the deficit. He cares about giving money from people who have created it to those who have not done anything to deserve it.


Murphy's Law said...

He should start by heavily taxing all of his supporters in Hollywood who make millions and millions of dollars for their work in or on one movie. Take 90% of anything over $100,000 per year earned by anyone in the entertainment industry (including rappers and athletes) and maybe then we can talk about taxing productive people. Of course those wealthy entertainers would probably stop giving money to Obama if he did that, but it would only be "fair" (by his definition), right? After all, not everyone gets a chance to be a movie star, sing on stage or play pro sports.

Mike K said...

Income equity didn't work out all that well for the Soviets, the North Koreans, and even the Chinese have veered away from that mode of thinking. Sad that we have those who want to give it a go here.