Why raise taxes? There are better ways.


I note a news report this morning that the Secretary of the Treasury, Mr. Timothy Geithner, has contributed his two cents worth to the current debate over the authorized debt limit.

Treasury Secretary Timothy Geithner said Tuesday that a deal to raise the legal debt limit, which he expects to be completed in the next few weeks, will be only a short-term “down payment” on solving the nation’s debt problem, and that it would be “irresponsible” to reduce the massive federal deficit anticipated over the next ten years with spending cuts alone.

What is needed, he said, is a longer-term deal on a “balanced framework” that includes “revenue increases through tax reform.”

. . .

“I think for it to work for the economy you need to have a balanced framework,” Geithner told a Washington, D.C. gathering of CFOs from major corporations.

“If you try to do this, the magnitude of deficit reduction we need–and we need about $4 to 5 trillion in deficit reduction over the next ten years–to try to do that only on spending cuts in parts of the budget would be irresponsible and really not achievable politically,” said Geithner. “You can’t pass the budget without that.

“So, you need a balanced plan that has modest revenue increases through tax reform as well as some near-term spending savings and long-term entitlement reforms,” he said.

. . .

The national debt is now $14.34 trillion. This year, according to the Congressional Budget Office, the federal government will run a deficit of $1.4 trillion. Over the next decade, according to the CBO, the budget proposed by President Barack Obama would run up deficits totallling $9.5 trillion.

. . .

Geithner outlined a two-step process that would start with a deal for a short-term increase in the debt limit paired with some spending cuts followed by a longer-term deal for fiscal reform.

“So whatever we don’t do in the down payment we’ll have to do in the next couple of years,” said Geithner. “And if Congress can’t act, we want an automatic enforcement mechanism that locks in the deficit reduction savings we need.”

There’s more at the link.

*Sigh*

Don’t you get tired of hearing politicians pontificate? And make no mistake, although he’s the Secretary of the Treasury, that’s a political appointment, so Mr. Geithner is as much a politician as his boss, President Obama.

I have a few responses to Mr. Geithner:

  1. By ‘revenue increases through tax reform’, what you really mean is ‘increased taxes’. Don’t try to weasel your way around the subject – come out and say what you mean.
  2. I wouldn’t trust any Administration, much less a tax-and-spend juggernaut like the present one, with increased tax revenues. If you want more tax money, you’re going to have to earn it by cutting down your expenditure by a very meaningful amount. Right now, the government is borrowing 40c of every dollar it spends. That’s completely unsustainable, and criminally irresponsible to boot. If you haven’t got the money, don’t spend it!
  3. Rather than increase taxes, I have a better idea. Special interests have carved out all sorts of sweet deals for themselves, with tax rebates here, allowances there, and so on. Let’s take the bull by the horns and cancel any and every tax rebate, allowance and deduction on the books. Individuals and businesses will simply pay the percentage tax they owe on their gross income, without deductions. Sure, it’ll hurt – but it’ll hurt the special interests most of all. Let’s force them to pay their fair share, without the tax shelters their tame Congressional representatives have so obligingly erected for them.
  4. Another idea: kill all corporate subsidies. I’ve got no problem helping the small farmer; he’s the backbone of the country, in more ways than one. However, if an agricultural conglomerate like Archer Daniels Midland can make billions every year out of agricultural subsidies, something’s terribly wrong. ADM can do without the subsidies, and fish or cut bait. The same goes for the ethanol subsidy. It’s costing the US government more than $6 billion a year. Why??? If ethanol is that good an idea, it’ll sell itself. Why should taxpayers have to subsidize refineries to that extent?

I reckon those steps would be a good start, and would raise and/or save most of the money we need to balance the budget. How about it, readers? Any better ideas?

Peter

7 comments

  1. So the Wizards of Smart at the Federal Reserve have no idea what's clogging up the mythical recovery? Do they not shave in a mirror? For this performance we pay them HOW much, and WHY, tell me again?

  2. "I've got no problem helping the small farmer; he's the backbone of the country" Couldn't disgree with you more.

    Here in New Zealand ALL horticultural and agricultural subsidies were scrapped in the 1980's. Since then the farming sector is doing much better.

    Yea it was hard for some at the start but so what. How can you justify taxing the factory worker so the farmers don't have to move with the times.

    Thoughs subsidies have conditions attached that prevent inovation. They also distort land use. For example most of the dairy farm land in new zealand farmed sheep in the 70's becouse of the subsidies.

  3. As I understand it, a flat income tax is effectively a regressive tax–proportionately heavier for the lower-invoke sector who can ill-afford the burden due to proportionately higher basic cost of living.

  4. How about a true flat income tax? Tax every citizen 100% on say, their first $3,000 of income. People would make an effort to get themselves over that line.

  5. Anonymous: I can't think of a better way to discourage kids from taking their first job.

    Personally, I think Geithner is flat full of fucking shit. it would be "irresponsible" to reduce the massive federal deficit anticipated over the next ten years with spending cuts alone.

    No, it would be ideal to do it that way. The government already does too much. It does lots and lots of stuff I actively do not want it to do. I sure as hell don't want to pay more for the "benefit" of having the government do more stuff I don't want it to do at all.

  6. Also, scrap about 50% of government agencies. Like oh say the ATF, The Department of Education's Office of the Inspector General, and the DEA, to name a few.

  7. You want to tax busines on their gross income (revenue)? OK, the average profit, or margin, is about 9% of gross revenue. Most are far less, but some drive the average higher. OK, current corp tax rate is about an effective 28%. Assuming you maintain that rate, the average business would then take a loss of about 19% of its gross. To survive, they would have to either raise their prices by 24%, since you would then tax the increased as well, or reduce staff by that aomount or some combination of the two.
    Your plan doesn't affect "special interests" any differently whatsoever.

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