Why the American people shouldn’t make tax policy

I think it’s fair to say first, that while I’ve been gone for a while from posting to this blog, I haven’t been living under a rock, nor completely out of touch.  So there are lots of thoughts and opinions I have concerning the recent events in the US financial and governmental spaces.  I will do my best to not talk at length about past issues nor cast too much one sided blame, mostly because I think the entire mess was avoidable, and the politics surrounding the debt ceiling, jobs creation, etc are so far out of control that I simply must state, everyone in Washington that was in office for the last 6 months simply doesn’t deserve to be re-elected.  Period.  I’ll consider a pass for freshmen (2 years of less in office) in the Congress that didn’t stand purely on party lines, but rather stood up for common sense and practical solutions (should any of those actually exist).

But that’s not what prompted me to post today.  Nope, this post is directed at everyone in America.  Yep, at me and you and all of our neighbors.  You see, there is a popular stance right now (favored in the democratic circles, but popular all over) that somehow taxing the rich is a great way to resolve some of our debt problems.  This allows that group to “protect” the entitlements programs where we spend a huge volume of our budget.  In still other circles (these being more of the republican ones, but again not exclusive to them) the cry is to reduce spending, and not allow taxes to be raised.  Both of these positions are popular positions and both do have some degree of merit…  however…

Let’s take a look at a few items related to each stance.  First the tax the rich argument.  Let’s face it, we ALREADY tax the rich (despite the rhetoric heard in many left leaning media sources).  The “rich” (we’ll talk a moment about why that is in quotes) account for about 3% of the population, and roughly 26% of the income earned that was taxed.  Yet the top 5% of earners pay roughly 60% of the taxes.  So about 5% of the people, earn roughly 30% of the income, but pay 60% of the taxes.  Should the Bush Era Tax Cuts expire, and I suspect they will, that percentage will only go up.  With our progressive tax brackets, you pay higher and higher percentage of tax as your earning go up (capped in the 35-40% range I belive, but I’m not sure on that).  For the record and to ensure I try to stay fair, from that same report, out of the 4 million people that are “rich”, 1470 didn’t pay any income tax and the corporate taxation problem (handouts plus tax breaks) is one that simply must be solved.  But where did the definition of “rich” come from?  Why is that level chosen, when in fact different areas of the country have different costs of living, making it likely that in some places 200,000 feels rich, where in others it just feels ok.  But even if we go after the rich, what then?  We generate $750 billion over 10 years, or $75 billion per year.  Now that IS a lot of money, but compared to the actual debt, it’s peanuts.  It is something, which as they say is better than nothing, but still peanuts compared to the problem.

So what about spending cuts?  Sure everyone can talk about the waste in government, and everyone can point to stupid things that we’ve seen the government do and buy.  But where is the real money going?  Let’s look at the spending we did in 2010 for our data.  24.5% of our money was spent on Defense (I didn’t dig enough to know if this includes or excludes the wars in Iraq and Afghanistan), followed by Health Care (23.7% with 13.1 percent being Medicare), Pensions (21.7, with 20.4% being Social Security), Welfare (14.5%), then we have Interest on our Debt (5.7%).  We spend more on interest on our debt than we do on Education (4.1%), Transporation (2.7%)  and Protection (Police, Fire, Courts, Prisons)(1.5%).  Ok really?  We allowed our debt to get so high we spend more on interest than on our schools and roads?  Anyway, let’s see that makes huge elements of the budget untouchable in the current political environment.  Cut defense (do you want the terrorists to win?), medicare or social security or welfare (why do you hate old people and the poor?), so that leaves the next biggest category.  Interest on our debt.  Hmm even politicians probably realize that can’t be cut, so on to the next line items, schools, services, and roads.  Yep, let’s cut the things that made this country an economic power house, so we can recover the economy.  Makes sense I suppose to someone not looking at the budget, or doing math, or thinking about it.  If our politicians can’t compromise on ideological issues, we get stuck taking the cuts in the programs they can agree to cut that hurt the population the most.

So why is this post pointed at the American people?  First, I’ll just say it.  As a collective group, we are too stupid to make rational policy about multi-trillion dollar budgets.  Sure I don’t like paying taxes, nor allowing our defense to get weak, nor take money out of social programs.  I want to have it all and not pay for it.  Wouldn’t that be great?  As a populace, that is exactly the message we send to our government, and it just isn’t possible.  I’m not defending their actions, becasue IF they were leaders and not poll-following, vote-grabbing, self-serving, special-interest-puppets they could calmly tell us that we’re too stupid to make these decisions, they’d get into a room and discuss, debate, and decide on actions that were good for us despite our short sighted whining about taxes and services etc.  Of course, that would also require them to act for the people, not for themselves and we don’t seem to have those guys (or gals) running for office much anymore.  They’d also risk not getting re-elected because they acted for the good of the country and not the good of selected voting blocks in their district or party (yeah I’m talking to you Tea Party).

So while everyone likes to complain about the idiots in Washington, and I’m easily in that category, let’s remember, we send them there, we tell them (through polls and things like blogs) what we think about their actions, and through their lens of “job security” they try to please everyone, while pleasing the special interests, making compromises on issues, and trying to stay vaguely close to on top of the polls so they have a job in the future.  Which is why I say, “The American People Shouldn’t Make Tax Policy, we’re too selfish and stupid as a collective group to do so effectively.  We like WalMart; goods and services for cheap, even though they are cheap goods and services, and that’s no way to run a coutry’s financial policies.

Now that I’ve pretty much angered everyone who got  this far in the post, thanks for reading.  🙂

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