In this essay, your humble narrator will attempt to take as objective a look as he possibly can, considering he is what some people might characterize as a bomb-throwing Bolshevik, and see if there may not be any rational ideas to be salvaged from the cesspool of irrationality that constitutes our present political situation.
When I say I am going to be objective, I mean I am not going to give Mr. Obama and his party a free pass. Stop and consider, ladies and gentlemen of the left: our corporate tax rate is the highest among the major industrialized nations. Small wonder it is that a good many of our clearly American businesses are trying to fob themselves off as Swiss or Irish or what have you. Although I have nothing but scorn for the “Read my tealeaves, no new taxes” crowd, I think it would probably be a constructive and a stimulative idea to get that rate down by a good margin. More on that later.
Another lament we hear from the corporate sector is in regard to all those “job-killing” (Ah, yes, the favorite buzzword of the right. Anything that does not serve to make fat cats yet even fatter must be, by its very nature, “job-killing.”) regulations which are strangling our free enterprise system. Of course, there are many powerful people out there in the private sector with larceny in their hearts, who would like nothing better than to have a free hand to rip the American public off in any of several creative ways. That is so, whether our friends on the right of the spectrum care to admit it or not, but, let’s be honest: much of this regulation a lot too ham-fisted for its (and our) own good. I’ll bet serious people with seriously honest intentions could do a huge amount of streamlining (by which I mean eliminating) without giving away the store.
Mr. Obama, like many presidents before you, you have appointed commissions for this and for that, most of whose findings you and your predecessors have ignored. That said, how about a top-notch commission of capable people from both the private and the public sectors to get together with the mission of finding out just how much red tape we can dispense with? I know, we’ll call them The Tape Dispensers. Sounds catchy, doesn’t it?
The odds that such a commission would a) come to pass; b) come up with any useful solutions or c) most of all, have their findings taken at all seriously are astronomical, and I only said that to make myself feel good. It’s just not going to happen, period. That being the case, I can only hope that the leaders of our free enterprise system finally achieve an epiphany along these lines:
Yes, whenever governments try to regulate, they regulate badly, with a maximum of cost and inefficiency. Even in the best of circumstances, we still have to pay a whole phalanx of bureaucrats a huge wad of cash to enforce the new regulations.
Now consider this: our political system has seldom been in such a state that those who wanted to meddle and regulate could get away with finding new ways to do so just for the sheer joy of it. No, just about every regulatory “monstrosity,” from the Sherman Anti-Trust Act forward (Sherman was a Republican, by the way.), has come about because some people were behaving in a reprehensible manner to the detriment of the public at large. You know this is so, even if you will not say it out loud.
The simple solution? Stop screwing the public. The means of bringing that about? Police yourselves, for a start. Then drop the ridiculous notion that all government regulation is unnecessary and uncalled-for. Focus only on the truly detrimental regulations, and maybe you can get somewhere.
Getting back to taxes, let us put aside the rhetoric for just a brief moment and take a good hard squint at the situation. We have a huge budget deficit that is making the national debt expand to very, very dangerous levels. I think we can all agree on that. The no-tax crowd is absolutely convinced we could easily resolve the situation with no change whatsoever to the tax code, if only we’d stop handing out welfare checks to those lazy, shiftless minorities and illegal immigrants.
Please understand, nothing in this essay is meant to convey the idea that we don’t need to cut spending. We do, and very deeply. What is more, we need to take the very painful step of doing some of that through entitlement reform. I say this as someone who is on both Medicare and Social Security. Yes, we need to cut; so stipulated, okay?
The more controversial part comes in the area of repairing our debt and deficit with the help revenue enhancement. The hard-core Republicans believe that, all we have to do is unfetter business and increased tax revenues will flood the treasury. Sure, and what that does not quite provide, the tooth fairy will doubtlessly make up.
More than one political thinker has embraced the notion that, if we did away with all the special tax exemptions, even the good ones that apply to most people, such as mortgage interest and charitable giving, we could lower everybody’s tax rate significantly. The idea now afoot is that, if you cut out the deductions, you could also cut the tax rates in half and be revenue neutral. Well, revenue neutral doesn’t address the problem, does it? On the other hand, if you cut out those same deductions and lowered tax rates by a third, you could bring billions upon billions of dollars to bear on the problem.
Sure, the average homeowner will probably resent losing that big deduction, but it is part of the bathwater that must be thrown out with the baby, if we are not going to see the idea collapse amidst yet another barrage of shameless lobbying. On the other hand, there are a lot of really big deductions out there whose only design is to give the super-rich and super-powerful a yet even greater advantage over the rest of us. And somehow, they have managed to trick so many of you into shouting and waving placards in their passionate defense.
I was heartened to see a recent New York Times guest editorial by Warren Buffett, one of the richest people in the world, about the tax situation of the very wealthy. While I heartily encourage you to read the entire link, let me provide this one telling quote, regarding tax breaks for the super-rich:
“These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species.”
Yes, but what about those job-killing taxes, you may ask. Fine, let’s talk about taxes and jobs. Here is where we get back to that business about the corporate tax rate. First of all, if you go ahead with the deduction elimination (And notice how I am avoiding the pitfall of demagoguery by not calling them “loopholes?”), you could reduce that corporate rate quite a bit. Now notice we are talking here about corporate taxes on the income those fine, upstanding job-creating corporations make. Yes indeed, to increase that particular tax (or maybe to fail to reduce it) would be a real job-killer. No argument there.
Here is a possibly creative way to reduce the corporate income tax. The very first campaign ad I saw on behalf of Mr. Obama in 2008 was his bold proclamation he would eliminate tax breaks for corporations which sent jobs overseas. What ever happened to that promise, Mr. President? Well, it may be dicey getting that done, even if you had a vague notion of keeping your first campaign promise, but the idea might have some use in a carrot-and-stick approach to the unemployment problem. Reduce the corporate tax rate to some number significantly below the present 35% for those businesses that did not export any American jobs in the past year. If they did, they get no reduction from the present rate. And, for goodness sake, do not, do not, do not fall for the lobbyist’s favorite trick of not making the law effective until well into the future, or else about 80% of our jobs will disappear to Mexico or India.
Of course, we need to make an important distinction between outsourcing and growing your overseas business. If an American company sells a good deal of its merchandise in Europe, for example, it is perfectly legitimate to employ an appropriate number of Europeans to facilitate its sales, much as Toyota does with the American jobs it creates here. On the other hand, closing your plant and opening another one halfway across the world, just to reduce your bottom line, is outsourcing and should be discouraged.
But, then, corporate income is not the same as personal income, is it? The sometimes obscene personal wealth the top executives of our largest corporations award themselves is not the engine that drives job creation, unless you count hiring an extra pool boy or maid. And, of course, it’s not just the fat-cat executives who make wildly extravagant incomes. We could say the same for many of our athletes and entertainers, the result of which is that we, the public, must pay ever more extortionate prices to watch them entertain us, but that is a story for another day.
That is why a refusal to extend the irresponsible Bush tax cut to the very wealthiest Americans is not a job-killer — unless you happen to be that pool boy or, perhaps on a grander scale, a yacht salesman.
Keep in mind how our tax structure works. If you are in the highest income tax bracket, you do not pay that rate on the first dollar you earn or on the first several, for that matter. If the gateway to the highest rate is $250,000 (on which some of us, I imagine could scrape by), then that rate only applies to the income you earn beyond the 250,000. The income you earned before it is taxed at the graduated levels that would apply all the way up the line. In other words, for the first quarter-million you earn, you are not treated as a member of the super-rich, even if you earned that sum in the first two days of the year.
Whatever else we do about jobs and taxes, the Bush tax cut on the highest personal incomes has to go. The honest, fair-minded and patriotic among our super-rich (They are not all greedy scoundrels, by any means) realize it, admit it, and sometimes, as in the case of Warren Buffett, advocate for it. It is only the truly selfish in their midst who will continue pouring a good deal of their wealth into the coffers of their political allies, so that they can keep a yet even greater portion of it for themselves.
If you are a member of that crowd, then shame on you. Your greed is unpatriotic in the extreme. On the other hand, if you are a middle-class someone who feels the need to do all you can to advocate for these people and their super-abundance, then you are being played for a sap. Wake up and snort the java.
Sources
WETA, “Inside Washington,” broadcast of 8/19/11
The United States Tax Code