Vajgrt:A taxing debate

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Jul 122011
 
Authors: Joe Vajgrt

President Obama and Speaker of the House John Boehner have been in negotiations in recent weeks to make a “grand bargain” that would raise the national debt ceiling and slash programs such as Social Security and Medicare in order to reduce the budget and roll back the Bush-era tax cuts for the wealthiest Americans in an effort to increase revenues.

However, that last compromise is what caused negotiations to come to a screeching halt over the weekend. Republican party leaders, such as House Majority Leader Eric Cantor, have been quick to pressure Boehner to consider raising revenues through increased taxes.

“Cantor drew the line on revenues, saying that no changes in the nation’s tax code could be used to eliminate deficits, but could only be utilized for tax relief in other areas,” according to an article in the Los Angeles Times.

As a result of the growing pressure from his party, Boehner has changed his stance and now favors a plan that would raise the ceiling, but only in concert with heavy cuts and no new sources of revenue.

“If you don’t do the revenues, then to get the same amount of savings, you have to add more cuts, which means it’s seniors, it’s poor kids, it’s medical researchers or our infrastructures that suffer,” said Obama during a news conference on Monday.

Here we are at another impasse between the two major parties; Democrats demand that tax increases are a prerequisite for big spending cuts, and Republicans reject the notion unless taxes are lowered elsewhere.

It’s easy to understand why people don’t like taxes. No one wants their hard-earned money to be taken away, especially by a wasteful government that has grown dramatically in size and scope over the last few decades.

However, a little perspective is in order.

According to the Urban Institute and Brookings Institution’s Tax Policy Center (TPC), “U.S. taxes are low relative to those in other developed countries. In 2006 U.S. taxes at all levels of government claimed 28 percent of GDP, compared with an average of 36 percent of GDP for the 30 member countries of the Organization for Economic Co-operation and Development (OECD).”

The TPC goes on to mention, “Among OECD countries, only Mexico, Turkey, Korea and Japan had lower taxes than the United States as a percentage of GDP.”

Under President Eisenhower, the highest marginal income tax rate was a whopping 91 percent. Over the last 50 years, the rate fell to a low of 28 percent under President Reagan, then increased again under Clinton to nearly 40 percent. That’s when Bush famously lowered the tax rate for the wealthiest Americans to its present 35 percent.

Granted, 35 percent is a significantly higher rate than the average American pays in income taxes. However, it’s important to note that since 1980, the share of income earned by the richest one percent of Americans has more than doubled.

According to Stephen Moore of The Journal of the American Enterprise Institution, this has happened at the same time that “the share of the income going to the poorest income quintile has declined. Income disparities, in absolute dollars, have grown substantially.”

It’s tempting to try to link our record deficits with the tax cuts of the last three decades, but there is actually no correlation between the two. Rather, the dramatic spike in the federal deficit since the 1980s was caused by massive federal spending increases.

But cutting spending alone just isn’t good enough. Paul Ryan’s widely criticized and equally praised plan to cut funding for social programs to the bone is a perfect example. His plan, as Draconian as it is, wouldn’t balance the budget until 2036.

That’s precisely why any cuts must be combined with increasing revenues somewhere, and it’s perfectly reasonable to ask millionaires and billionaires to help shoulder a bit of the extra load.

John Steinbeck once said, “Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires.”

Perhaps this quote shines some light on the reasons why the GOP can get away with holding the debate over raising the debt limit hostage. Middle- and lower-class supporters of the GOP make up the vast majority of those most adamantly opposed to tax increases, even for the wealthiest Americans.

What these people fail to realize is that they will never “suffer” the burden of being so obscenely wealthy that they’ll be asked to pay a little heftier share of the income tax burden. By blindly supporting the GOP and tax policies that heavily favor the super rich, conservative voters consistently vote against their own economic self-interests.

Joe Vajgrt is a senior journalism major. His column appears sporadically over the summer in the Collegian. Letters and feedback can be sent to letters@collegian.com.

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