Dollars and Sense, another look
I talked about the proposed tax cuts of both candidates yesterday. And in the midst of these frightening economic times, I found an interesting article on tax cuts that I thought was very relevant. Larry Beinhart says:
Do tax cuts actually stimulate the economy? Vast sums of money have gone into creating that myth. Major intellectual industries have been created and sustained to sell that story. At the center of that claim is the Legend of Saint Ronald Retro Reagan. Reagan cut income taxes, big time. But he raised Social Security and Medicare taxes. That meant that rich people paid less and working people paid more. The immediate result was that the economy faltered. Then Reagan raised taxes, though not by as much as he cut them. At about the same time, oil dropped from $40 a barrel to $20. The economy did grow. That is until the stock market crash of '87. There is vastly more evidence the other way. Tax increases stimulate the economy. It may not make sense, it may be counterintuitive, but here are the facts. What if taxes went up to over 90 percent? According to the Reaganauts and Bushwackers, the world would collapse. Business would grind to a halt. Investors would flee. Workers would lay down their tools. Back in World War II, taxes did go up that high. Americans who earned as little as $500 per year paid income tax at a 23 percent rate, while those who earned more than $1 million per year paid a 94 percent rate. The result: The American economy expanded at an unprecedented (and unduplicated) rate between 1941 and 1945. The gross national product of the United States, as measured in constant dollars, grew from $88.6 billion in 1939 -- while the country was still suffering from the depression -- to $135 billion in 1944, according to Economic History Services. From 1946 to 1963, the top rate fluctuated from 86 percent to 91 percent. Average economic growth was 3.5 percent per year. The current top income tax rate is 35 percent. Economic growth has been, at best, 2.5 percent -- that is, if you stop counting in 2007. And don't consider the type of growth, which consisted primarily of increased debt and pyramids of borrowing. In 1992 the top tax rate was 31 percent. Bill Clinton increased it to 39.1 percent. The Dow Jones average went up 360 percent. The number of jobs went up 237,000 per month (under Bush, as of 2007, it was just 72,000 per month). Median household income went up rather than down. The budget was balanced. Both candidates are talking about tax cuts to fix the economy. Does that make sense? Here, in New York State, we are facing a budget crisis due to the collapse in the financial markets, which is where a lot of our tax revenue comes from. The governor has a choice between raising taxes and cutting expenditures. He's a good, fairly liberal Democrat. But he polled the people and the Legislature, and everyone wanted to cut spending. That means cutting the state workforce. That means that people who had jobs and were spending money will be unemployed and spending a lot less. That means less revenue for the state and for the places that they did business with, which means the economic crisis will grow worse.The economy is a super tricky beast. One that I do not pretend to fully comprehend. But what he says makes sense. You cut federal spending in the areas of jobs, and less people can afford to buy stuff, which makes other people lose jobs, so they can’t afford stuff, and over and over until it spirals out of control – kind of like now. Now the question is: who do we trust to pull us out of this financial fiasco? The man who stepped up the plate yesterday and said we have a problem, and I have ideas on how to fix it – or the man who said, “What problem”?
Polly Ticks: a snarky look at the happenings in the world today entangled in female perception, appears right here at iconoclastic
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Some background: If you go to
http://www.census.gov/compendia/statab/2006/tables/06s0464.xlw
(you will need Excel to view it), you will find that the government received 1.1202 trillion dollars from income taxes, personal and corporate, in 2005. This is the last year for which numbers are available.
I did some checking around and I found that the value of all the assets traded in all of the American stock and commodity markets totals over twenty trillion dollars annually.
Let’s do some math: 1.1202/20=.05601.
If our government taxed the purchase of stocks and commodities at a mere 5.6%, they would raise the same amount of money they do now.
If the tax rate was 10%, the extra 879.8 billion dollars every year could retire the National Debt in a little over ten years.
A simple plan.
As it is now of course, most people pay more than 10% of their income in income tax. Many corporations end up paying far less than that amount, and would naturally be opposed to any changes in what they themselves have wrought with their corruption of Congress.
The plan is voluntary in that no one would be forced to buy stocks or commodities. Of course, most people would probably want to invest their money, having more of it.
The corporate media will say that a tax on investment reduces investment.
Does a tax on working reduce working?
The corporate media will say that this plan is inflationary.
Don't believe it. (What causes inflation and what it really is are the subjects of another essay.)
Gains on stocks and commodities are currently taxed at either regular income or long-term capital gains rates—which are both higher than 10%.
As more people invested in America, the revenues to the Treasury would increase. The revenues to the businesses traded would increase, stimulating the economy—honestly, not like it is now with manipulation. The capital that would spread among “We the people,” would raise the standard of living for all Americans—not just the few. The concentration of wealth would ease.
Besides corporate America—and the multinationals traded in America—there would be strong opposition to this idea by other powerful interests.
The instruments of the National Debt are held mostly by banks and foreign governments (you would be amazed if you knew how much we are in debt to China!). Some of these instruments pay interest of close to 15%, but if we were to use a modest figure of 5% interest overall, we are paying just about 445 billion dollars a year in interest. The folks on the receiving end of that 445 billion are going to oppose anything that would threaten their golden goose.
General Motors bought a car company a few years ago for 67 billion. With this plan, they would pay 6.7 billion in taxes—far more than they have ever paid, but closer to their fair share. They would be against it.
Finally, let’s not forget the people who make close to twenty billion a year figuring out taxes. I’m sure they would oppose this idea too.
The odds are against us—unless we speak up.
If you don’t think this is a good idea, I want you to do something. Your personal share of the interest on the National Debt comes to just over four dollars a day. Take four dollars for every person in you family and flush it down the toilet. Do this every day for a year. What will you have to show for it?
Exactly what we have to show from paying interest on the debt. The debt doesn’t go down one bit. In fact, it’s climbing about 23,000 dollars every second. If we don’t tame the debt—and soon—we have damned our future as a country. When the creditors come calling, and we don’t have the money to pay them, they own us.
If you think this is a good idea; a fair idea, forward it to everyone you know. Ask them to forward it to someone else.
Maybe if enough people heard about it, something good will come of it.
Posted by: Quentin--The Uncomfortable Truth | September 16, 2008 01:59 PM