Posted on 09/29/2015 6:58:54 AM PDT by SeekAndFind
Americans are funny about taxes: When we complain about them, we dont moan that we are paying too much we lament that others are paying too little. In a Pew Research Center poll last year, only 27 percent of Americans cited their own tax liabilities among their complaints about the tax code, while 64 percent complained that other taxpayers the wicked 1 percenters, the dreaded corporations were getting off too easy.
If youve ever met anybody who believes that we can balance the budget by cutting foreign aid, that the Social Security trust fund is a real thing rather than a figure of speech, or who is a Trump enthusiast, you know that certain Americans are not about to let their minds be troubled by facts.
But here are the facts:
One, Americans earning $100,000 or more pay basically all of the federal income taxes, about 80 percent. That is far in excess of their portion of national income (national income being another thing that does not exist but which we are obliged to talk about), and they are only about 15 percent of all taxpayers. Households earning $250,000 or more, a tiny group (2.4 percent of taxpayers) pay about half of all federal income taxes, which is, again, disproportionate to their income relative to the rest of the population.
Two, wealthy people and corporations do not, in the main, benefit from arcane exclusions and sweetheart provisions in the tax code. As Josh Barro notes in his unimpressed analysis of Donald Trumps tax plan in the New York Times, exemptions and deductions taken by those earning between $500,000 and $10 million a year add up to about 12 percent of their income. That figure is very much in line with the exemptions and deductions enjoyed by those with less exalted paychecks.
Third, populist rhetoric of the Trump-Sanders variety notwithstanding, hedge-fund managers do not in the main escape progressive taxation. Hedge-fund managers are generally compensated on a 2 and 20 model they charge a 2 percent management fee on the assets invested with their funds and then a 20 percent performance fee on profits earned by their investors above a certain threshold. The 2 percent management fee is taxed as ordinary income, at the current top rate of just under 40 percent. For hedge-fund managers, much or all of that 20 percent is taxed as ordinary income, too, because hedge funds do not often hold investments long enough to qualify for the long-term capital-gains rate, currently 23.8 percent. Private-equity investors, which range from big, diverse outfits such as Bain Capital, where Mitt Romney earned his fortune, to Silicon Valley angel investors putting money into three-person startups, often do benefit from the lower long-term capital-gains rate, because they take large positions in companies, often acquiring them outright, and hold them for extended periods of time. Which is to say, because they are not the sort of short-term casino-capitalism speculators that stalk the popular imagination.
Fourth, people with moderate and low incomes often pay a lot more in federal tax than they know. All but the highest-earning 20 percent of U.S. households pay more in Social Security and Medicare taxes than they do in federal income taxes; adding insult to injury, the government lies to them about what these taxes are, pretending that they are contributions to retirement programs. They pay a lot of other federal taxes, too, on things such as gasoline and telephone services, that are not obvious to them. And of course they pay a lot of other peoples taxes, too, as their employers, landlords, butchers, bakers, and candlestick makers all endeavor to pass their own taxes on to their customers and employees in the form of higher prices and lower wages. You think your employer is paying his part of your payroll taxes out of his own pocket, or out of yours? But there is very little appetite for cutting those taxes, because of the myth that they support in some special way things such as Social Security and federal highways, and because there is no way to control tax-shifting by businesses and individuals.
#share#At the moment, our national fiscal situation is considerably less bad than it was during the Obama-Pelosi-Reid era of one-party Democratic rule; the 2010 and 2011 federal deficits were 8.7 and 8.5 percent of GDP, respectively, but the 2014 deficit was only 2.8 percent of GDP. Federal spending went from 24.4 percent of GDP in 2009 to 20.3 percent in 2014, thanks in no small part to budget sequestration, the one national policy in which Washingtons Democrats and Washingtons Republicans are united in loathing. The 2017 deficit is projected to be 2.3 percent of GDP.
That puts us within striking distance of having a balanced budget (albeit one that is balanced at a spending point that is too high for my own taste) or at least the reduction of budget deficits to trivial levels. All that is needed to get there is a little sober reform on the taxing front and a little sober reform on the spending front, with the hardest piece being reform of our entitlement programs, which in the long run will be the major drivers of deficits. I like the idea of radical tax reform, scrapping the tax code, abolishing the IRS, and starting over, and then privatizing Social Security and abolishing Medicare and Medicaid to boot. But you dont actually have to do that to balance the budget.
You do have to stop pretending that you can give the American middle class a big income-tax cut when it hardly pays any income taxes, and stop pretending that you can get spending under control without touching the tiny handful of popular programs (Social Security, Medicare, Medicaid, national security) that constitute the vast majority of federal spending. You dont have to reinvent the wheel; you just have to cut federal spending from 21.4 percent of GDP to 19.1 percent a couple of years from now, and maybe reform the tax code with an eye toward making revenue meet spending halfway. That isnt going to make everybody happy, but it isnt landing on Omaha Beach, either.
Instead of working on that, we have an electorate that is, if the pollsters are to be believed, motivated by resentment, thinking it has been cheated, along with a populist Left that seems to believe that the richest society in human history is right on the edge of mass cannibalism and a populist Right that seems to believe that it is involved in an Elizabethan tragedy rather than an American political dispute.
Voters sometimes look around and wonder, Who is going to be the adult in the room? Fact is, it had better be you, citizen.
Kevin D. Williamson is roving correspondent at National Review.
All we need to do is remove the socialist in the white hut, and his boy Mitch.
No, we actually do complain that we’re paying tooo much.
And we’re deeper in debt than we’ve ever been before, so I don’t know how anyone can think we’re close to a balanced budget.
Bill Buckley must be turning over in his grave.
Fact: Spending will have to decrease in order to balance the budget, which big government doesn’t want.
An op-ed from another shill at National Review. Tax cuts and spending cuts lead eventually and inexorably to balanced budgets. When the Demagogic Party is in charge, there's not a bit of balanced budget talk either from the Partisan Media Shills or the elected officials. When Pubbies are ascendant, they are pilloried with balanced budget talk in order to sucker them into tax increases. To Hell with National Review!
We're not likely to get any closer.
Just imagine when Yellen turns off her magical money machine and interest rates on $18 trillion in debt returns to market rates. A five percent rate hike would put $900 billion more interest per year on the tab.
Kevin may have a point, but often when reviewing Trump it remains firmly to his head.
The middle class, those earning between 50k and 150k per year are the ones who are most in need of the social security, right along with the poor. They are the ones paying the highest percentage of of their income as taxes into the programs. Including employer percentage these people are paying at least 15% of their income in taxes where as a high earner is paying less as they have a cap on those taxes. AS THEY SHOULD.
As for those programs, privatization is the key. Eliminating the bureaucracy in DC with it’ tens of thousands of worker bees all earning far above the average private sector wage with the addition of massive benefits packages should be all but eliminated.
Medicare should be sent to the insurance company of the participants choice. Allow the state government oversight of the programs and private insurers as they do already for the private insurance market. Allow for several different programs with several different benefit packages, but all with hospitalization and regular check ups included.
Medicare Plus is a success and people who are on it generally love it.
As for Social Security. A program allowing 50 and under to put a portion into private equities that are transferable to beneficiaries would be far superior to the nonsense we have now. That would allow for several different forms of investment, all could be handled by private insurers as well. They could also be regulated by the state.
I agree that Americans of more modest incomes need to be carrying more of the tax burden. As it stands now they have little to no skin in the game, which explains their growing support for people like Bernie Sanders.
When a country is in debt over 100% of it’s GDP I think it’s a little premature to start cheering.
“That puts us within striking distance of having a balanced budget “
Everyone knows a balanced budget does not bring down the deficit. Beyond that, the deficit I believe is supposed to rise again after 2020.
They can’t even pass a budget let alone balance it.
Balancing the budget is actually one of the smallest of our problems, and politicians can’t even accomplish that.
Paying down the debt is the really big problem, and there is about 0.0% chance they will even attempt to do that!
Balancing the budget is actually one of the smallest of our problems, and politicians can’t even accomplish that.
Paying down the debt is the really big problem, and there is about 0.0% chance they will even attempt to do that!
“Just imagine when Yellen turns off her magical money machine...”
It’s been off, for over six months now they haven’t printed a dollar. If they print any more, they’ll hit the debt ceiling, so they have been avoiding that.
By definition, a balanced budget has no deficit.
Accounting 101, you cannot balance your budget on the revenue side every, it doesn’t work. You do it on the spending side.
NRO is a Republican party organ at this point. They are conservative only in their, fly over country bashing, cocktail sipping minds.
Then there's that whole interest thing that will get you every time.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.