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.