The federal government is once again on the brink of a shutdown. I think most reasonable people agree that anything anyone might ever call a "deal" will include both spending cuts and tax increases. But Republicans disagree. They are holding the budget hostage because they refuse to accept any tax increases, in any amount, on any demographic.
Democrats have already agreed to spending cuts. Now they just want Republicans to agree to allow certain Bush tax cuts to expire. But Republicans have argued that this will hurt the economy. They have no evidence of course, since before these tax cuts existed, the economy was actually better than it was now, but that doesn't matter.
They also argue that rich people already pay all the taxes. Rich people do in fact pay most of the taxes - because they make most of the money. But as a percentage of income they actually pay less in taxes than the middle class. Go figure.
They actually don't pay less as a percentage if all of their income is traditional income. I mean, if you just do the math on the tax brackets, that's clear. The major exceptions come in with large portions of money put in tax-deferred accounts (like 401K - on which you would eventually pay tax when you retire) or with investment income (stock earnings), which is only taxed at 15%. Since Warren Buffet makes money in stocks, and undoubtedly puts some of it in tax-deferred accounts, he pays a lot less. But not all millionaires make their money the same way, so those who are not in the stock trading business are in a different boat than those who are.
ReplyDeleteThat said, I still agree with the overall point that raising taxes just makes sense at this point. No way around it. And the discussion around the super wealthy is especially ridiculous. Who are these politicians kidding to pretend like raising the tax 1% on income over $1 million PER YEAR is going to seriously hurt the economy? Really? Who buys that argument?
To be fair, I did read an article citing that certain types of small businesses pay taxes at the personal tax rates, so I can actually see how this would be an issue for a small business of say 20 employees. $1M a year is actually not that much in that circumstance. But that seems to be the exception, not the rule, so let's just GET REAL and figure this whole tax thing out! They can make changes to work around those situations.
I will say that I place blame about 60% on Republicans, but I still reserve 40% of the blame for Democrats. I think the Republican "no new tax" rule is absurd, BUT let's also look at a pie chart of our budget. We can't exactly make this work for the long term without total revamps of Medicare, Medicaid, and Social Security: http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png