America Taking Less in Taxes Than Since WWII, and the Economy Isn't to Blame
As a percentage of the GDP, which is perhaps the best indicator for what the government is actually taking in takes, the U.S. government is taking in less from taxes than it has since World War II. In fact, according to the IRS the 400 wealthiest taxpayers to the government have an effective tax rate today that is almost half of what it was before the Bush tax cuts. That alone, regardless of the economic state, spells ruin for a country that relies heavily on spending and is forcing the U.S. to cut necessary programs. Such low tax receipts essentially force the government into a deficit, and in conjunction with interest on the debt, are creating a level of public debt that may soon reach an unsustainable stage.
The public eye, and the mainstream political arguments, are always centered around the tax rate. Cutting or raising the tax rates for the rich and the middle class are essentially all we hear about. However, what we don't hear about is the government's effective tax rate, which is how much the government is actually taking in. That rate is effected by loopholes in the tax law even more than it is by the actual tax rates themselves. Loopholes are what allows the world's biggest companies like GE to pay no taxes at all, and loopholes are what has bought our tax rate down below what it was for Reagan, Clinton, and every other president. Only four months into his presidency, President Bush met a campaign pledge by signing a $1.35 Trillion tax cut and declared according to USA Today that, "This is only the beginning." It was, and our country will be paying the price for years to come.
Admiral Mullen, the then Chairman of the Joint Chiefs of Staff said in 2010 according to MSNBC that, "Our national debt is our biggest national security threat." What also seems clear, is that the majority of people are unaware of what the biggest causes are of the United States' current economic state. The problem is that some people think the answer is smaller government. However, essentially every time our country has come out of recession or depression in this century, it has spent its way out. These people hold the idea of supply-side economics, thinking that if you help the suppliers, the demand will be there. However this simply does not work.
Demand-driven economic policies work, and have been proven to work far better. Essentially, think about giving 10 million dollars to 10 people, versus giving 10 million dollars to 1 million people. The 10 people with a million each will spend some of it, but will probably save or invest the rest. However, the 1 million people will likely spend the money immediately. Not only does this money then immediately help the economy, but those entrepreneurs who set up businesses will benefit from people spending more money. Stimulating the middle class, and helping the poor benefits all levels of society financially, and is the only way to ensure our country's future.
It is clearly time for the pendulum to swing back from benefiting the rich to benefiting the many, and hopefully this time we will remember that those policies do not work so we won't be in this position in another 20 years.
The public eye, and the mainstream political arguments, are always centered around the tax rate. Cutting or raising the tax rates for the rich and the middle class are essentially all we hear about. However, what we don't hear about is the government's effective tax rate, which is how much the government is actually taking in. That rate is effected by loopholes in the tax law even more than it is by the actual tax rates themselves. Loopholes are what allows the world's biggest companies like GE to pay no taxes at all, and loopholes are what has bought our tax rate down below what it was for Reagan, Clinton, and every other president. Only four months into his presidency, President Bush met a campaign pledge by signing a $1.35 Trillion tax cut and declared according to USA Today that, "This is only the beginning." It was, and our country will be paying the price for years to come.
Admiral Mullen, the then Chairman of the Joint Chiefs of Staff said in 2010 according to MSNBC that, "Our national debt is our biggest national security threat." What also seems clear, is that the majority of people are unaware of what the biggest causes are of the United States' current economic state. The problem is that some people think the answer is smaller government. However, essentially every time our country has come out of recession or depression in this century, it has spent its way out. These people hold the idea of supply-side economics, thinking that if you help the suppliers, the demand will be there. However this simply does not work.
Demand-driven economic policies work, and have been proven to work far better. Essentially, think about giving 10 million dollars to 10 people, versus giving 10 million dollars to 1 million people. The 10 people with a million each will spend some of it, but will probably save or invest the rest. However, the 1 million people will likely spend the money immediately. Not only does this money then immediately help the economy, but those entrepreneurs who set up businesses will benefit from people spending more money. Stimulating the middle class, and helping the poor benefits all levels of society financially, and is the only way to ensure our country's future.
It is clearly time for the pendulum to swing back from benefiting the rich to benefiting the many, and hopefully this time we will remember that those policies do not work so we won't be in this position in another 20 years.
DISCLOSURE OF MATERIAL CONNECTION:
The Contributor has no connection to nor was paid by the brand or product described in this content.
The Contributor has no connection to nor was paid by the brand or product described in this content.
Published by Richard Johnson
Currently in law school at Loyola University Chicago School of Law, also graduated from Loyola University Chicago with a Bachelors in Psychology and a minor in political science. View profile
Rev. Jeremiah Wright: Politics and the PulpitAssociated Content contacted the Archbishop to discuss the embattled Reverend Dr. Jeremiah Wright, politics, the black church and how many of his fellow clergymen and congregati...
Politics in Late Nineteenth Century AmericaDuring the first portion of Reconstruction, Americans were uninterested in politics. As interest peaked in the late Nineteenth Century, topics like women's rights, racism and r...- A Reaction to The Politics of Injustice: Book Derides Harsh Penal MeasuresBeckett and Sasson write, "The punitive turn in crime policy is not primarily the result of a worsening crime problem..." Politicians are using politics of panic, supporting wrongfully harsh penal measures when other...
- Understanding How the Government Stimulates the EconomyA constant subject of debate and concern in the political arena, the economy remains to be a highly debated topic. Stimulating the economy is accomplished in one of two ways. The government can increase government spe...
- Sanction Against Palestinian Government Will Be LiftedThe Bush administration is ready to lift economic and diplomatic sanction against the government since the new formation does not include the Islamic group Hamas.
- The Trouble with Politics in America
- National Politics in Office Politics?
- Experience in Washington Means One Thing: Dirty Politics as Usual
- Power and Politics: A Sociological View
- Negative Politics in an American Idol World
- The Battle Between Religion and Politics
- The Problem with Talking Politics
5 Comments
Post a Comment(continued...) The Bush tax cuts also eliminated a cap on the amount of deductions a taxpayer can take annually. This has actually reduced the tax intakes by the gov't as much or more than the 5% tax rate deduction, yet no one talks about it because it is so complicated.
Tax credits like the EIC are targeted at the poor yes, but these credits are a fraction of the sum that wealthy people evade by manipulating the tax code each year. If everyone paid their actual tax rate for only a few years the deficit, and the debt, could be paid off.
If you haven't seen the movie "Too Big to Fail", you should. I would have supported the bailout, if it had been given with certain restrictions as to what it had to be used for. The bailout money was given so that the American people would be able to continue to loan money from the banks. However, since large banks make a large chunk of their money essentially from screwing people over, it wasn't a shock when they used that money for their purposes.
Hi Kristopher:
First, tax loopholes. The tax code is so complicated that it is hard to determine what is the "most expensive" part of the code. While it can be measured, like you said, in exemptions. It could also be measured in how different types of income are taxed. For instance, the capital gains is only 15%. Many wealthy people will thus stick to investments that will count as this type of income. That's part of the reason why Warren Buffet or Mitt Romney are taxed at a fraction of the rate of most people. However, these people still have an extraordinary amount of business related deductions, which can equal a huge percent of income. These deductions though, only have to reduce the taxpayers income from 15%, instead of the 35% most people have to start from. I would argue that this combination of tax evasion is the most expensive, costing the government hundreds of billions annually. What most people don't know, is that the Bush tax cuts didn't just reduce the tax rate.
Richard:
Interesting article, raises a lot of good questions about a topic that certainly needs some attention. I'd be interested in hearing your thoughts and comments on a couple of points.
You mentioned that tax loopholes are out of line. Some of the most expensive loopholes in the tax code are things like Home Mortgage Interest Deduction, Personal Exemptions, Child Tax Credits, Earned Income Credits. These "loopholes" most often benefit non-wealthy people/families. Do you think any of these types of credits and deductions should be edited or eliminated?
You also mentioned stimulus, that many people should be given a small amount of money to spend. I'd be curious to hear your reaction to the Making Work Pay Credit authorized by the American Recovery and Reinvestment Act of 2009 signed by President Obama. The credit gave $800 to most Americans in each of 2009 and 2010. Do you think this credit was a good idea and has it helped the economy?
Hi there. Well, a few inaccuracies in your comment, frequently continued by today's conservatives but still untrue. Reagan cut the tax rate, but because he closed loopholes while he did it the taxes the government took actually went up. He also made speeches about how a tax system targeting benefits to the rich was unfair. So if we really want to be like Reagan, let's raise taxes. What you said about the recession of '92 is wrong since that was when Clinton was in office. Unless you think we were in recession from '92 until 2001. and only came out of it with the Bush tax cuts. Lastly, FDR is famously debated as being one of if not the best presidents. His policies didn't "prolong depression" any depression takes time to rebound from, just like recessions. The worse they are, the more time they take to rebound. Now I understand that you probably glazed over the facts about Reagan, but calling it closing loopholes instead of raising taxes doesn't change the truth.
WWII brought us out of Great Depression after FDR's "spending" policies prolonged depressed economy for 16 years........Recession of late 70's / early 80's finally was curtailed with bold Reagan tax cuts giving business' confidence to reinvest.......Recession of 92 ended due to Bush Tax cuts.......What distorted history have you been reading.?? Yes, loopholes are a problem, many conservatives want to do away with them in lieu of a simple flat tax and do away with the burdensome IRS ( who takes 11% just to pay there operating fees!!!!!) STOP BIG GOVERNMENT!! RON PAUL 2012!!!!!