In the Loop 9: Taxes: How We Take of Each Other

Posted by: Bob Groves in Seniors Blog

Tagged in: Untagged 

As a blog written about senior service and health issues, In the Loop has primarily tried to inform readers rather than taking controversial stances. However, current circumstances in our country seem to be calling me to take a strong stand on behalf of, of all things, the virtues of taxes!

Clearly the Republican-manufactured “debt crisis” has led many into more serious consideration, perhaps greatly needed, about how much we spend and tax in the public sector. While economic recovery involves more than taxes, their fundamental role has gotten lost in the shouting and shoving.

In my view, taxes are one very important way in which we take care of each other. They can be viewed as an expression of our shared humanity and interdependence. They need not be seen as some horrible burden that we should resent at every turn. The Republican hard right, of course, does not see it this way. The mostly meek and mild Democrats choose to ignore this stance because they lack [fill in the blank] or because they seem to barely know what they think or for what they stand.

I think those of us concerned about “seniors” need to now focus on educating and advocating about the positive and necessary role of taxes. Feel free to insert other words in place of “seniors” like children, teens, adults of any age or the future of our country! In my view, many Americans are in deep denial about the role of taxes. This denial, combined with a lack of knowledge, is best exemplified in a famous nonsensical statement from a town meeting participant during the health reform debate, i.e., “keep the government’s hands off my Medicare.”  

Through taxes we take care of each other in very basic, apparently underappreciated ways. Some of these are: public education, environmental protection, health care, food stamps, food safety, Social Security, public transit, parks, recreation centers, police, fire fighters, investment in bridges, roads and, yes, our Coast Guard and military.

My radically obvious thoughts above are ones that even “conservatives” in the past would readily acknowledge. In 1990, the conservative intellectual, William F. Buckley, Jr. published a book called Gratitude. In it he talked about how we who live in the United States are the lucky beneficiaries of a cultural inheritance that gives us enormous advantages compared to many other parts of the world. He included in this the laws and institutions that allow a free people everything from greater opportunities to prosper to the music we enjoy. He went so far as to say that we, as citizens, need to acknowledge this debt to our country. Then, by today’s standards, he went way overboard. He advocated for a broad program of national service of all types, and that citizens also should express their gratitude and pay this debt through taxes reasonably exacted (Miller 2010). When was the last time you heard any politician speak in these rational and reasonable terms?

Now, do I think all tax money is wisely spent or that there is no public corruption? Of course not—but the debate has swung so far to the right that we cannot even get to a serious discussion of wise public spending because one side does not really believe government should have an active role in guiding our society. I opposed much of what Richard Nixon did with everything I had in me, but today he, amazingly, is looking good in certain ways. Why? He at least recognized that government plays a necessary and irreplaceable role in society. A debate was possible with him that turns out to be more on point than the ridiculous, talk-past-each-other posturing that passes for debate today.

One response to those of us who advocate for higher and fairer taxes (more on that below) is that charitable donations should be seen as how we can best take care of each other. While there are personally generous people of all political persuasions, we have no shot at truly helping people in need at the scale required, let alone funding our basic infrastructure of needed investments, without an adequate supply of tax dollars. Where would we be without Social Security and Medicare? Think—shorter life span and older people dying in the streets. Charitable gifts, great as complimentary contributors, are not cutting it when it comes to our major responsibilities to each other as a society.

Many surveys indicate that Americans recognize this to some extent. For example, a recent New York Times/CBS News Poll indicates that 63 percent of Americans support raising taxes on those earning more than $250,000 per year to help address the deficit (New York Times Editorial 2011). A June 2011 survey by the Pew Research Center showed that 67 percent approve of subjecting a higher percentage of high earners’ income to the Social Security tax, 66 percent approve of raising taxes on those making more than $250,000 and 62 percent approve of limiting tax deductions for large corporations (Pew Research Center Publications 2011). In the Pew survey, those results included very high support among Democrats but also large percentages of Republicans (49 percent for increased taxes on those making $250,000 or more, 54 percent for raising the Social Security tax cap and 62 percent for limiting corporate tax deductions).

As a result of the debt deal this summer, playing at media outlets near you is the drama of the new Congressional “Super Committee” of 6 Democrats and 6 Republicans. They are charged with reducing our federal deficit by $1.2 to 1.5 trillion by Thanksgiving. Of course, the Republicans announced from the jump that none of their appointees will consider anything resembling revenue increases—whether it is an actual tax increase or closing tax loopholes like the enormous one enjoyed by the oil industry. Their view is that all savings must come from further cuts in spending. This drama could hold grave danger for today’s seniors and, oh yes, my 3 year old granddaughter and EVERYONE ELSE!

If the Republicans are successful in preventing significant increases in revenue, much, if not all, of our nation’s deficit reduction could come at the expense of poor and middle income Americans. Social Security, Medicare and Medicaid could see deep cuts—not just for future beneficiaries but also for today’s seniors (National Committee to Preserve Social Security & Medicare  2011)—that means you, dear reader. Of course many other worthy programs and public investments will be chopped or eliminated.

Now for a few more facts (Bartlett 2011): Federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimates that they will consume just 14.8 percent of the Gross Domestic Product (GDP) this year. The last year federal revenues were lower was 1950. In Ronald Reagan’s Presidency federal revenues averaged 18.2 percent of GDP. Also, the United States has the lowest effective corporate tax rate of any country among the 34 members of the Organization of Economic Cooperation and Development. In fact, corporate taxes are expected to raise just 1.3 percent of GDP this year, about one-third of what it was in the 1950s.

There are many articles and points of view about what is a fair tax system that meets our real needs. My main point for this blog is to argue that we need to view taxes differently and change the debate away from a view that all taxes are somehow inherently bad to one where their role is seen as positive and totally necessary for us to survive and thrive as a country. To help move the discussion along, however, I offer a few specifics below about some ways taxes could be fairer and higher that meet the needs of both today’s seniors and my 3 year old granddaughter. There could certainly be other views on these specifics—as long as putting your head in the sand is not one of them and the legitimate role of taxes is recognized, not derided as evil incarnate:

  • My personal favorite is to raise overall rates back to where they were during the Clinton Administration except for those with the very lowest incomes; remember that in 2001 the Bush Administration inherited a very substantial budget SURPLUS!
  • End the Bush tax cuts for those making over $250,000 per year; what have these accomplished except driving up the deficit and lining the pockets of the wealthy—accompanied by the worst recession since 1930s? Did you know that the approximately $60 billion in annual revenue resulting from this could create a national infrastructure program to build/repair/upgrade roads, bridges, mass transit, water systems and levees (with accompanying jobs); or a universal pre-school program for all 3 and 4 year olds with small classes (with accompanying jobs); or, of course, deficit reduction (Leonhardt 2010)?
  • Lift the cap on social security taxes so that all wages and salaries are taxed and this taxation does not end at $106,800 but is for all earned income; that will handle most, if not all, of the Social Security problem.

Many believe the current “temporary” payroll tax reduction for social security is a good, short-term economic stimulant. While it may be, I worry that politicians will lack the courage to assure that it goes up again from 4.2 to 6.2 percent of salary. From the point of view of a senior advocate, this runs the risk of truly making Social Security dependent on the overall budget, as opposed to its long-term status as independent because of the payroll tax. That, of course, really does threaten its long-term viability.

To see some additional ideas on addressing the financing of Medicare and Social Security, check out the following: “So What Would You Do? Real Solutions for Medicare Solvency and Reducing the Deficit” and “Twelve Ways to Fix Social Security”. If you would like to try your own hand at addressing our spending and revenue issues go to a simulation provided by the Committee for a Responsible Federal Budget or one provided by the New York Times.

Closely related to the issue of taxes is the debate on the role and size of government. While this is a topic well beyond the scope of this blog, my view is that we need BETTER government rather than smaller government. Sure some parts could/should shrink, but others may need to get larger. All government needs constant transparency and accountability, but to act like all government, like all taxes, is all bad is totally irresponsible. By the way, what is it that is patriotic about hating government?

As the song says, “Get Up/Stand Up.” Do it now for fairer and higher taxes—so we as Americans can take care of each other today and for future generations to come.

References

Bartlett, B. (2011, May 31). Are Taxes in the U.S. High or Low? The New York Times. Available at http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/?scp=2&sq=bruce bartlett are taxes low or high&st=cse.

Leonhardt, D. (2010, December 5). What Else Would $60 Billion Buy? The New York Times. Available at http://www.nytimes.com/2010/12/05/weekinreview/05numbers.html?scp=2&sq=leonhardt what else could 60 buy&st=cse.

Miller, M. (2010, November 25). If You Are Grateful, Pay More Taxes. The Washington Post. Available at http://www.washingtonpost.com/wp-dyn/content/article/2010/11/24/AR2010112403659.html.

National Committee to Preserve Social Security & Medicare. (2011). Social Security, Medicare, Medicaid & the Debt Limit at the Mercy of the “Super Committee”. Available at http://www.ncpssm.org/news/archive/debt_limit_agreement/.

New York Times Editorial. (2011, August 7). The Truth About Taxes: There is no credible budget fix without more money coming in. The New York Times. Available at http://www.nytimes.com/2011/08/07/opinion/sunday/the-truth-about-taxes.html?_r=1&scp=1&sq=The Truth About Taxes: There is no credible budget fix without more money coming in&st=cse.

Pew Research Center. (2011, June 7). More Blame Wars than Domestic Spending or Tax Cuts for Nation’s Debt. Available at http://pewresearch.org/pubs/2017/poll-what-created-the-national-debt-wars-spending-tax-cuts-deficit-reduction-proposals.

Comments (1)Add Comment
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written by Don, October 18, 2011
Good article, though a bit repetitious in parts. Timely issue. Would also advocate for reinstatement of capital gains tax on sale of primary residence (done away with during the Clinton era). This would reduce housing speculation and act as shock absorber, reduce "flipping" and dampen volatility in housing prices. Would also support broad-based, 10-year tax increase on middle class (incomes $75,000 to $200,000) but only if used to pay down US debt. Employed Baby Boomers have the most to gain from restoring stability to financial markets because they have retirement savings invested in stocks and bonds through 401(k) plans. This tax would be designed to send strong signal to markets and investors here and overseas that US is serious about paying down debt, reducing leverage.

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