The Five Big Things- 4. The Tax Code

The thing I admired most about President George H.W. Bush the most was one of the biggest things that contributed to his political undoing- his decision to go back on his “no new taxes” pledge in the 1988 Election. It killed him with the political right wing and shot his political credibility with the broader electorate, but it was the absolute right decision for the country. The deficits the country faced at that moment were not a good thing, paying “debt service fees” are largely a waste of government resources that could be used for other purposes. His tax increases, coupled with Bill Clinton’s 1993 Budget, were the government’s contribution to the roaring 90’s.

The purpose of taxes is to fund the government. When conservatives cut taxes, they do so to disable the government from doing the things it does. They also do so to shift the tax burden off of capital (rich people) and on to labor (working people). It is the purest form of class warfare. The idea is that taxing capital harms the economy by stifling investment by rich people, so they stop it.

America needs to shift it’s priorities on who to tax, and entirely change the paradigm. Instead of not taxing capital as conservatives want, it’s time to not tax wages that are essential to living. No one should pay a dime of income taxes who isn’t earning enough to pay their basic necessities, like food, housing, health care, clothing, and even some needs that may not be essential to life, but are advantageous to success. The lowest tax bracket should begin at a living wage. Meanwhile the United States needs to stop giving loopholes that are basically for the rich. Taxing passive income at lower rates, huge loopholes for major charity giving, and taxing $500k a year salaries at the same rate as $10 million a year salaries. Considering bringing back Eisenhower’s top tax bracket on income beyond a certain threshold will also encourage corporations to spread the fruits of their profits broader and wider.

Secondly, America needs to tax for the revenue it needs to fund it’s priorities. One can argue there is government waste (there certainly is at the Pentagon), but that is a budget and priorities question- which can be solved at the ballot box. Rather than using the tax code as a social experiment, or as though it alone can move the economy, it’s time to view the tax code as it is- the way we fund the government. Capping the payroll tax at roughly $130k a year when that can’t adequately fund Medicare and Social Security shouldn’t be an option. I wouldn’t suggest that we have to balance the budget every year, or entirely through tax increases, but collecting a trillion dollars less than we spend every year is unrealistic. We know that tax increases are unpopular, so tying them to fixing large deficits is a good way to incentivize Congress figuring out their priorities and how to pay for them.

The third major principle I have for reforming our tax code is taxing generational wealth and passive income at a higher level, rather than pretending it’s been somehow earned. Taxing capital gains at a lower rate than income is simply denying reality- capital gains earnings are just income. Eliminating and/or weakening the estate tax pretends that inheritance is somehow earned, or more worthy of protection. Rich people already are born with major advantages and access in our economy, creating taxes that let them shield more money from taxation is really unnecessary.

My fourth and final principle for tax reform is reversing the Trump-Ryan tax cut plan’s move towards not allowing taxpayers to write off state and local taxes. To be clear here, eliminating this write-off has nothing to do with stimulating the economy or helping working folks. The idea is to cause suffering in “blue states” like New Jersey and New York, forcing their state governments to cut back on the services they offer, and to instead operate like “red states” in the South. Since wealthier people often pay a higher state tax on things like real estate, the goal here again is to cut the tax burden of capital. States should offer more services and take care of more people, that makes more sense, so the Trump-Ryan changes to write-offs for state and local taxes makes absolutely zero sense, policy wise. It should be reversed.

These are just some of my ideas, but the clear thing here is that our tax code needs to be fixed. The disadvantaged already operate with one hand behind their back in our economy, having a tax code that tilts the playing field more against the working class is idiotic. Having a tax code that makes it harder to pay for spending that helps the working class is stupid. Our current tax system incentivizes a broken status quo. Progressive tax reform is the most important thing to do, if you want the government to do anything at all.

Read big thing 3 here.

Read big thing 2 here.

Read big thing 1 here.

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One thought on “The Five Big Things- 4. The Tax Code

  1. Pingback: The Five Big Things- 5. Taming the Military Industrial Complex | Rags to Rich’s

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