Let’s Grow Up And Raise Taxes (Guest Voice)

LET’S GROW UP AND RAISE TAXES

by Marc Pascal

The first of several stimulus packages has just passed but it is just the beginning of our efforts to address our immediate and long-term economic problems.

After 2010, the federal operating budget will face trillion-dollar deficits as far as the eye can see. They have to be addressed for the long-term prosperity of our country and our future credit-worthiness in the world.

Eventually every American has to dig in and pay more taxes to help our country and our fellow citizens. We must put in place the laws and mechanisms to steadily increase taxes after 2010. We have to owe up to our massive public and private financial messes. Cutting federal earmarks and waste will not eliminate even half the annual deficits. The federal budget gap will require increasing taxes by over $500 billion by 2011. Fiscally irresponsible and spoiled children hate to hear this news but it’s our only choice for our collective long-term prosperity.

A number of prominent publicly-minded millionaires and billionaires including Warren Buffet have recommended higher income taxes on themselves and their friends for several years. Certainly Mr. Buffet has been right more than most politicians and it’s time to effectuate his recommendations. Their altruistic economic view may simply be a rational response for their long-term preservation and that of the nation as a whole. The Bush tax cuts should expire by their own terms by 2010 and marginal income taxes will return to the rate of 39% for incomes over $250,000. Additionally, and instead of capping executive pay, we should create a new marginal tax rate of 49% for earning over $1 million.

If there are any short-term tax cuts, they should be combined with long-term tax increases. The 2009 FICA payroll tax for social security is a 6.2% tax rate on every dollar earned up to a gross annual income of $106,800. For more than a decade, everyone has agreed that to save social security (without increasing the retirement age, the tax rate, or lowering the average monthly benefits of just under $1,000 per person) the best solution is to raise the taxable income limit so the wealthy contribute more to the entire system. We could provide both a short-term economic stimulus to the majority of Americans and save social security for the long term.

Let’s lower the FICA social security tax rate for rest of 2009 and all of 2010 to 5.5% but raise the income limit to $250,000. In 2011, let’s raise it to 5.75% and set the income limit to $500,000. By 2012, the rate would be 6% and the taxable income unlimited. This would simply parallel the 1.45% FICA tax for Medicare and Medicaid imposed on all earned income. Its rate will probably have to be raised to 2% after 2010 to pay for existing programs and any expansions of benefits.

Across the political spectrum, most people agree that our various transportation, water/sewer, and electrical grid infrastructures have been long neglected. Infrastructure spending is the best use of government stimulus money because more jobs are created both quickly and over the long term. Just to modernize our existing infrastructures systems will cost at least 2 trillion dollars over the next 10 years. Furthermore, we must also invest in new energy technologies, mass transit and high speed rail lines – all of which will cost billions more. We can’t put off such spending and we have to be honest about paying for them over the foreseeable future without resorting to further borrowing.

Across Europe, the average tax per gallon of gasoline ranges from $4 to $6. The U.S. federal gasoline tax is a paltry 18.3 cents per gallon with each penny raising $850 million to $1 billion per year depending upon how much Americans drive. Only when gasoline hit $4 a gallon during last summer did we start taking mass transit, buying hybrids, shunning gas guzzlers, demanding more energy-efficient cars and buildings, and seriously considering alternative solar, wind and nuclear power, and our own oil and gas reserves. The best and only way to ensure long-term energy independence is to have a serious financial incentive that hits everyone.

While we should not enact excessive gasoline taxes, we can at least impose an additional and modest oil import fee on foreign barrels of oil. More importantly, we should increase the federal gasoline tax from 18.3 to 75 cents per gallon, by monthly increments of about 5 cents per gallon over 12 months. The overall U.S. gasoline price per gallon by the end of 2010 should still be around $3.00 but the U.S. would have $70 billion a year to pay for our many needed transportation and energy infrastructure projects. This would be the responsible, mature, and intelligent solution for raising the necessary funds for these projects.

These tax proposals should be considered promptly to address our medium and long-term fiscal issues. We are in truly uncharted waters with this economic downturn, and our short and long-term solutions may also have to be rather different from what we have ever done before.

Marc Pascal lives is an independent business and management consultant to private enterprises in the Phoenix area.

Guest Voice posts do not necessarily reflect the opinion of TMV or its writers.

Author: Guest Voice

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18 Comments

  1. Sounds good to me. There is no free lunch. I'm sure my Republican friends will all say “if you want to send money to Washington, go ahead and write a check.” They don't want to realize we are all in this together – whether we like it/them or not.

  2. I disagree that social security is in a real crisis. The main problem is that benefits rise faster than inflation, and if it were merely indexed to inflation that takes care of the problem. That should be done before raising taxable income limits.

    That said, tax rates will have to be raised in general to pay down the debt, there is no getting around it. Once we have a new transportation/energy infrastructure mostly in place, then tax rates should be lowered again to encourage investment in technologies that take advantage of them and lead to a period of new economic growth.

  3. You want to maintain open borders and unlimited immigration with free healthcare, free education, and free housing for 30 milion illegal immigrants while taxing the crap out of Americans who work and save and look out for their families.

    You can raise taxes all you want and the politicians will find a way to spend every dollar and be back asking for more (See California). If I wanted to live in a country with 50% tax rates I could move to Europe. Instead of raising taxes, why not start asking what government really should be doing and what it should not be doing. Giving medical benefits and welfare to illegal immigrant will have to stop before people should be asked to pay more taxes.

  4. Raising the Social Security cap and gasoline taxes have been pushed by the left for some time, even when the economy was doing well. This article is looking for a new excuse. Intuitively raising taxes when the economy is tanking seems like an incredibly bad idea.

  5. SD All those “illegals” are paying payroll and income taxes if their employers report them.

    Maybe robots could replace the illegals in meat packing plants. Or we could just “enslave” them until a better cotton gin could send them back to …

  6. Rudi,

    Illegal aliens pay little if any income taxes. They work off the books, they use stolen identieis. they claim five kids so that nothing is withheld. And eventually, they will get the social security benefits. There have been several reports that have shown that illegals are a huge drain on the economy.

    the beef packing industry survived in the 1950's with few if any illegal aliens. It can go back to paying real wages and real benefits instead of a race to cheat the government as much as possible.

  7. Why don't you grow up and stop spending so much?

    Here's a hearty FUCK YOU to your idea of more taxes. Perhaps if the people in the government actually paid their taxes, or if Congress didn't vote themselves pay raises, I might be a bit more amenable to the idea, but as it is, no way.

    If those “publicly minded” billionaires and millionaires think that they should give more, why don't they just start donating money to the government? Or pay off the mortgages of those in foreclosure? Or payoff my mortgage?

  8. I am curious about the source of the “30 million undocumented immigrants” since most reports I have seen give a conservative estimate of 12-20 million. So thanks for inventing 10 million new tax payers. Yes, even with their fake or stolen IDs many of these people are still having income tax, FICA withholding out of their pay checks. They still pay sales tax in states with no income tax. Of course there are probably just as many if not more citizens that also avoid taxes by “working off the grid”. Now of this group, aside from some drug dealers, I doubt any would be impacted by a top marginal tax rate of 49%. At that point you are a millionaire and probably aren't having to worry too much about food, shelter, healthcare, education, retirement, vacations, legacies.

    Hello all you millionaire TMV posters. Thanks for your input.

  9. LKurxst,

    The 12-20 millin is the official government estimate that many suspect is too low. 30 million is the high side estimate. And they pay little if anything in income taxes. They know how to claim multiple dependents so that nothing is withheld and there are many pro-illegal immigration tax return services that will help the illegal aliens get tax credits so that they get money back instead of apying anything in. If illegal immigratns were good at paying taxes, California would not have a $40 billion plus budget deficit right now.

  10. How about we grow up and raise the retirement age, an option the author glossed over? Right now upwards of 30% of all state, federal, and local tax dollars are direct weath transfers to retirees (and growing). We can't afford this. The system was NEVER set up to support people for 30 to 40 years. For crying out loud, a large portion of the American public voted for a 75 year old man for our countries most important and difficult job. 75 should be our retirement age.

  11. God forbid that we should expect our incompetent legislative branch, you know the branch that actually levies taxes and decides how our money is spent, to actually get spending under control. Hmm…do you think the country would might have been in a better position to weather this economy if it wasn't always operating from a debt position?

    We have grossly lowered our expectations of congress, while they have given themselves raises and entrenched themselves in their positions. I suggest we raise our expectations and fire as many of the boobs as we can!

  12. Thank God for Code Section 403b………….it's a great innoculation against the ill effects of liberals trying to solve fiscal problems with other people's money.

  13. IR-FRICKING-RELEVANT.

    I don't care what the rest of the world's tax burden is. Just because other people in other countries are paying more doesn't mean those of in the USA have to.

    Go ask your mommy and daddy what they think of their taxes. When you grow up, you'll understand.

  14. Zzzzz – I hope you have a laborer Job, but you probably sit on your fat and take welfare.
    Most people cannot physically or mentally handle work after the age of 65. I know there are exceptions but the body cannot last forever and the younger workers will always have all the job oportunities first. To resolve the Social security issue, use the same percentage for all wage earners, no cap, and put that money into a separate pot that the government cannot touch for anything else. That is what was promised when the system was started just after the depression. Your Social Security is now put into the General Fund, reappropriated each year for retirements, along with appropriations for Social Security Survivors Benefits, and Social Security Disability and probably some other give away programs. These are all called “entitlements” and are on the chopping block constantly to fund other welfare programs for those who do not contribute to society. I can assure you, If I had the money I put in Social Security put in a Deferred Comp program, I would have a $4000 per month retirement income with the option for my spouse to have 62% of that for her remaining lifetime if I died. I know because I did just that. I now have my retirement and social security. By the way, I also must pay income tax on 85% of my Social Security Retirement income although I paid income tax on the entire amount that I put into the fund.
    Social Security was originally only a gauranteed retirement program, not to be taxed, not to be used for anything but retirement benefits, not for disability, or other social programs.
    If we eliminate the Cap on payroll tax, keep the percentage the same for all, look at the benefits for the average working person.
    $45,000 income = 3375.00 paid in
    $250,000 income = 18,750.00 paid in
    $500,000 income = 37,500.00 paid in Enough for 2 current high end Social
    Security retirement checks.
    That is just one year investment in the program. Multiply that by 40 yrs working + interest and everyone would have a real nice retirement. If you need more, start a private plan like I did. Stop your griping and take responsibility. Pass this on to your legislators State and Federal.

  15. I've had my fill of helping my country and my fellow citizens. For the last twenty years I've been helping my country and my fellow citizens to the tune of half or more of what I earn, after payroll, income, property, sales, and various other taxes are figured in. In return for this coerced “generosity” I get collectivist asswipes like Marc Pascal telling me I'm somehow not paying my fair share.

    At this point, my country and my fellow citizens can go piss up a rope, SweetWilliam's vapid “we're all in this together” crap notwithstanding.

  16. Re Regor's point- I forget who it is who's proposing this, but someone had a plan on the table to have two tiers of retirement age- one for manual laborers and one for desk job types. Makes sense to me.

    And I can't help but agree with Zapp_B's response to Sweet William. How can you criticize the portion of the country who pays most of the taxes already for not having the spirit that 'we're all in this together' when the bottom half of earners aren't even going to be paying any income tax at all? Which group isn't doing their share?

  17. No regor, stop your complaining. I have a full-time salaried professional job, and frankly, I have seen LITTLE evidence that my older (approaching retirement age) peers are incapable in any way of doing their jobs. I've seen little evidence that most of the retirees in my community (below their later 70's) are incapable of working, either. True, some people become disabled with age, but their are programs for that. Healthy older people shouldn't be spending DECADES on the government dole. Social security wasn't set up for that, and it shouldn't be used that way.

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