We’ve got a federal debt problem, and our political leaders are not taking it seriously. Granted, Paul Ryan was ready to step up and give us a budget that will eventually get us back on the path to fiscal solvency, but even his suggestions were promptly scorched by our president, whose own budget proposal was such an excellent idea that it got rejected unanimously by the Democrat controlled Senate. One of the biggest problems with getting any kind of spending reforms in Washington is that to most people the federal debt is some distant issue, or worse, something that can and should be paid by somebody else. I want to change that.
I had previously written a post showing how we could spread the pain of paying off the existing national debt by spreading it across every adult taxpayer in the United States. It was a quick, back of the envelope estimate that I even admitted at the time was flawed and a number of commenters rightly called me on it. I’ve gone back and made a few tweaks, such as adding an additional bracket for earners making over $5M per year, and making the brackets more progressive. Here is what I came up with:
(Side note: Click on any image in this post to view a larger version)
The boldface shows where I made a few tweaks to the numbers. The schedule is now more progressive across every income bracket. Yes, this will be painful for every person, but if you think you have it bad look at what the person in the bracket immediately above you is paying. That person has it even worse, and that continues right up to the top, where the 8,274 Americans who reported over five million dollars in income last year get a bill for 100 times their annual income. I hashed out a few details as to how this could be repaid and possible exceptions, which you can read in my original post. You might notice that the totals also increase somewhat. In the nine months since I wrote the original post our leaders have added another $1.3 trillion to our federal debt. Ho hum.
This time I took it a step further. I found some debt projections over the next few years to see how much additional debt we can expect to assume by year:
The next step was to use my same rules to project how we could pay for our additional debt in each coming year. Here is how 2013 looks:
Again, no American is exempt regardless of income, and both the rates and actual dollars are progressive all the way up the line. And if you haven’t already noticed, yes, we are confiscating twice the annual income of our top earners. I did the same exercise for each year through FY17, and pulled together an aggregate of what each American’s total bill will be. To avoid repetition I’m not displaying them here. Instead I’ve summed them all up in the separate table:
Now take a look at what you owe. The column on the far right shows your combined bill for paying off our total deficit plus the projected deficits for the next four years. I can’t imagine a single person being happy with their bill, and if you don’t like what you’re getting stuck with, again – look at the person in the next bracket up and it gets even uglier. And as bad as this looks, it gets worse.
If you’re married these rates don’t apply to household income; they’re based on the incomes of both you and your spouse. I’m looking at where Sister Babe and I fall under this payment schedule, and it’s not pretty. If we were handed a bill like this over the next few years our spending habits would change dramatically. This would all but end going out to eat, going to the movies or any other shows, and cutting every discretionary expense (not to mention savings) in our household to the bone. As this same effect multiplies across every household in the United States guess what happens to all of the lower wage earners in those service industries and every other business that they support. Now with the contracting economy think about what happens to the tax base at local, state, and federal levels. And it gets worse.
Why do we have this debt to begin with? Simply put, it is because the government is spending far more than it is collecting. That means that all of this money you’re being asked to spend only pays for the deficit spending. In case you missed it this is not some alternative tax or fair tax or flat tax – this is an additional tax, not a replacement for the existing code. So in addition to federal, state, local, property, sales, and any other taxes you’re already paying this monstrous bill is what you owe on top of what you pay now.
How about if we just go after those evil one percenters, or call for a "Buffet Rule" or whatever the left’s class warfare meme of the month will be? The Forbes 400 wealthiest Americans have a combined net worth of $1.5 Trillion. Let’s start off by confiscating every cent that they own. Doing some rough math that gets you a ten percent discount on your bill for the current debt, and will naturally increase your bill on subsequent years since we’ve killed the geese to get their golden eggs. And if we set a precedent for the government to decide to arbitrarily confiscate the wealth of private citizens at a certain income level guess what the people who fall below that line start doing? And guess what the effect on private investment will be at all income levels? "Eat the Rich" might be a great Motorhead song, but as a tax policy it doesn’t measure up.
(Click on the image if you want to hear Lemmy at his best)
"Shetland pony extra pepperoni, just pick up the phone"
Now that we’ve dispelled the notion that eating the rich will solve our problems, what about businesses? Um, why do you think that we’re having such an anemic "recovery"? The Nation ran an interesting article called "Six Rigged Rules Corporations Use to Dodge Taxes"
It breaks down a few complications/loopholes in our tax code that allow corporations to avoid paying taxes. Most leftists reading the article will conclude that we need additional taxes and regulations so that our government can get its hands on this money. Most conservatives reading the article will take away something to the effect of, "Well, if you lower the tax rates and make it cheaper to pay the tax code than to pay lawyers and accountants companies will choose to pay the tax."
Keep in mind one other flaw in the notion of taxing businesses – any tax charged to a business increases its cost to produce whatever it sells, and gets factored into the cost of the product sold. In other words, business taxes get passed right along to you and me, whether it’s a direct tax, a value added tax, import tariff, etc. If you don’t believe me the next time you buy a cup of coffee look at your receipt and take note of who pays for it – it isn’t Uncle Starbucks. Or as Fred Thompson said it so well in 2008, "Now, our opponents tell us not to worry about their tax increases. They tell you they’re not going to tax your family. No, they’re just going to tax ‘businesses.’ So, unless you buy something from a business, like groceries or clothes or gasoline, or unless you get a paycheck from a business, a big business or a small business, don’t worry, it’s not going to affect you!"
Mentioning class warfare versus the wealthy and going after businesses was not something I wanted to bring up in this post, but I felt it had to be included to take away the left’s favorite arguments and to drive home my main point. Our federal debt is not somebody else’s problem; it is our problem, as in each and every one of us. We can impose whatever level of tax rates we want on the wealthy that we deem "fair", but the reason that no leftists supporting these proposals show their math is because any impact on our deficits will be negligible at best. Taxing businesses sounds easier until you realize that we already have the highest corporate tax rates in the world. And as The Nation pointed out, GE has over 900 accountants dedicated to finding every loophole they can in the system. The massive multinationals will always have the resources to avoid high taxes. The small and mid-size business do not. Saying that you favor a "balanced approach" that combines slightly lower than planned skyrocketing spending with impactless class warfare tax increases might play well to the disciples of Paul Krugman.
Without numbers at least somewhat grounded in reality
a plan like that is as empty as the person proposing it. This is the point I’m trying to drive home – you can propose any tax increase that you want. Unless we make fundamental changes to how our government spends our money, no level of tax increases will accomplish anything.
We can pretend that we can pass this off onto people who make more money than us or onto businesses, or future generations as we are doing now, but at the end of the day it all comes back to you and me. I know that nobody reading this is going to like what I’ve had to say here – that includes me. If you’ve got better ideas let’s see your numbers. I’ve shown you mine – you show me yours.
One other piece to not lose in all of this – my calculations only go through 2017. It makes no mention of what our bills will be in 2018 and beyond.
I have no delusions that my tax increase proposals will ever see the light of day, but every American needs to know about this. Hopefully if enough people see how badly our government is being mismanaged they’ll start to pay much closer attention to what’s happening, and voice their displeasure to their elected leaders. And hopefully this will happen in November.
Cross Posted from Brother Bob’s Blog