Editorial: Ten Ways to Pay off the Debt and Create Jobs
Until the mildly progressive tax on the 1% idea was promoted by Governor Mark Dayton from Minnesota, Democrats seemed fearful of talking about taxes altogether. Although the 1% is a good sound bite, the idea really makes more sense if the cut off was at 0.5% or 0.1%. There is evidence that indicates the wealthy are not paying their fair share. The top 1% pay 37% of all income taxes. However, their personal wealth represents 43% of what all Americans make and only the wealthier are experiencing income gains. This disparity between taxes paid and amount of wealth greatly increases as you move up the ladder until the top .01% are paying much less in taxes (e.g., Romney) relative to their total personal wealth. However, tax fairness alone, doesn’t create jobs. This strategy only helps may off the debt.
Republicans often argue that lowering taxes across the board will improve the economy when there is no evidence to support this idea 1, 2, 3, 4, 5, 6. Lowering taxes across the board not only doesn’t create jobs or improve the economy, it has significant negative repercussions such as increasing disparities between the middle class and the wealthy 2, 3, increasing the amount of wealth moving out of the country, raising the national debt when revenue losses prevent the government from meeting its obligations (e.g., social security and Medicare), lowers average wages 4 and misdirects reasonable people away from simple meaningful solutions that work as outlined below.
Libertarians argue that all government is all bad all the time. However, that’s not a logical or rationale position to hold. For example, several of Mr. Romney’s largest donors are businesses discriminated that have been found guilty of discriminating against minorities and women. They continued doing it until the government stopped them. The Justice Department frequently protects individuals from exploitation.
Government does all sorts of things that prevent businesses from exploiting their customers. Therefore, government is necessary unless you don’t believe in equal opportunity which many people believe is the linchpin of capitalism and Democracy. The framers of the constitution explicitly set up a government based on the idea of equal justice and opportunity. Opportunity as they define it, doesn’t mean giving businesses the opportunity to exploit their customers. That’s why Adam Smith advocated for Free and Fair markets.
So what does work? As outlined below, closing loopholes in order to increase revenues and reduce wealth inequality and giving lower taxes to those who invest or buy American is a proven solution. Below are ten ideas that have merit.
Mr. Romney has claimed that he will close loopholes but has refused to tell anyone which one’s he would close. However, he has said which ones he will widen. He would end the estate taxes that primarily affect the wealthy. He will also open other loopholes that would lower his personal tax rate to nearly 0.
1. Catch the Tax Dodgers (Green Party, Justice Party, Libertarian and Progressive)
Republican Presidential Candidate Mitt Romney has suggested he is for closing loophole but then flip-flopped and said he wouldn’t close the biggest one.
Why it Works It pays off the debt.
This problem is so big that it could pay off the entire U.S. debt if it were addressed
2. Estate/Inheritance and Gift Taxes for Very Wealthy (Supported by Obama Rejected by Romney, Green Party, Justice Party, Libertarian and Progressive Support)
Why it Works It pays off the debt, improves business productivity, increases the trade balance and allows for lower taxes for those who help to improve the economy.
The top 400 billionaires have more wealth than the bottom 50% of of americans. In fact, just the Walmart family owns more than the bottom 40% even though Walmarts tend to suppress good joba in favor of low paying ones. That’s why taxing the middle class is like drawing blood from a stone. The bottom 50% of all americans only have 1.1% of the wealth.
What would happen if you taxed inheritances at 100% for everything over $50 million? Most billionaires are very old and as they die off their billions could pay off the entire national debt which would make it easier to lower taxes for those who create jobs or spend their money on things that improve the economy.
Mr. Romney has proposed eliminating estate taxes which currently only begin to tax those who leave more than $5 million behind. Obviously, this contradicts his assertion that we wants to close off loopholes. In fact, his suggestion will add $5 trillion to the national debt.
3. Lower Small Business Taxes (Green Party, Justice Party, Libertarian and Progressive Democratic Support)
Why it Works Study after study has shown small businesses create the vast majority of jobs, especially very small businesses!
Romney believes all small businesses should receive lower tax rates but the President believes that only 97% of small businesses should receive lower tax rates. The difference is in how you define a small business. Romney wants larger small business that make up to $50 million per year in profits to receive tax breaks.
Progressives argue for a progressive tax system, of course, where you have no or very low taxes for very small business and individuals and gradually higher taxes for larger businesses and wealthy individuals. They argue this system creates more small businesses which in turn creates more job growth. It forces large businesses to pay for the vast amount of government resources they use.
4. Lower Taxes for the Poor and Middle Class (Supported by Green Party, Justice Party and Progressive and non-Blue Dog Democrats)
Why it Works
The poor spend what they have so any additional money they receive stimulates the U.S. (not foreign economies). Given the small amount of money they have this is only a partial solution.
Despite claims to the contrary, cutting taxes for the wealthy doesn’t create jobs or improve the economy. Wealthy people are told to diversify their investments which means that they invest overseas and take advantage of loopholes that involve moving money overseas in order to avoid taxes. This strategy removes wealth from the U.S. economy. Furthermore, the wealthy may help create jobs in the U.S. or they may choose to create jobs overseas so providing wealthy people with more money is less efficient. In addition, the wealthy spend money on odd things (e.g., superPacs) that don’t grow the economy in a sustainable manner.
Although Romney has said he will not give any tax cuts to the wealthy, his plan will reduce taxes for the rich by over six trillion dollars. About five trillion goes to reductions in the estate tax. Also, he will not give tax cuts to the middle class as he has claimed.
5. Progressive Lower Corporate Taxes Tied to American Job Creation With Increased Unionization ( Green Party, Justice Party and Progressives )
Why it Works
Giving small companies tax breaks for creating U.S. jobs is just common sense but you also want to create high paying jobs because in the long run that gives us a technological advantage and grows the economy because wage earners spend most of their money within the U.S. economy.
Unions, in particular government run unions, keep wages higher. High wages are desirable because the middle class and poor will spend most of their money on things that support the U.S. economy.
Even though he denied it during the debate, Mitt Romney’s plan is have the middle class and poor pay taxes which is the opposite of a progressive tax. He’s proposed a regressive tax.
6. Reduce Expenditures for Military Bases Around the World (Supported by Green Party, Justice Party, Libertarians and Progressives)
Why it Works It decreases the debt.
Other economies that are doing as well as ours have us pay for their military. The argument is that the U.S. needs a military presence around the world but history is replete with examples where that presence has caused more harm than good. With high speed planes and other technology, the U.S. has a presence without military bases.
This idea is strongly opposed by Republicans and the President who is a hawk on military matters. In fact, all of his appointments have been conservative.
7. Close CEO Board Loopholes to Refocus on Corporate not CEO profits (Supported by Green Party, Justice Party and Progressives )
Why it Works It refocuses business on making profits for the company not for upper management, encourages greater corporate accountability that in turn encourages companies to reinvest (as opposed to paying out more and more to administrator’s ) which creates more profits and job growth.
The current system demands that CEO’s pick their own Board of Directors. This system is broken and corrupt. Suppose every CEO and Board member was required to put their resume into a database and have that resume ranked by all other CEOs and Board members in their business sector. When it comes time to hire new Board members, they would be picked from the top of the list. This system would create greater board independence, more accountability that would lower CEO and Board member salaries and create more competent companies.
The President and others have suggested putting limits or greater taxes on owners profits. Currently, investments are taxed at 15%. Owners profits just make owners more wealthy and as noted above, this money is less likely to create jobs.
8. Taxes on the Very Wealthy who Renounce Their Citizenship to Move to Tax Havens Overseas (Weakly Supported by a Few Democrats: mostly off the radar of most political parties)
Why it Works It avoids having the very wealthy move all their assets to a foreign country to reduce their tax rate which reduces tax revenues and adds to trade imbalances.
9. Taxing for Use of Government Services and for Problems that the Government Must Clean Up (Libertarian and Some Progressive Support)
Why it Works It closes a loophole by targeting businesses who use government services which helps reduce the debt. It prevents government officials from playing shuffleboard with tax dollars.
This one seems like a good idea for some aspects of government but highly debateable in other areas. For example, many argue that the poor and middle class don’t receive an adequate education and can’t afford attorneys and court costs to address their legitimate grievances. Most agree that other public good services like the policy, fire, military and emergency services have to be paid for by everyone while others argue that those with more to protect pay more.
However, all sorts of government services are free and state and local governments give more tax breaks to businesses so they will move from some other U.S state or town to theirs. That creates unhealthy competition between American cities. Stopping the give-aways will increase revenues for state and local governments and by mandating that government charge for services it creates a more efficient government that ensures adequate funding for needed services.
As noted above, when Mr. Romney’s supporters discriminate against minorities, they should pay for it and boy have they as should those who wreck the economy, pollute or create their own wealth at the expense of others. That’s why we need government regulation. Lack of government regulation leads to consumer exploitation, bank bailouts and economic collapse. On the 47$ tape, Mitt Romney said he would reduce regulations that protect consumers from financial schemes.
10. Raising Interest Rates (Australia, Ken Rogoff Support )
Why it Works Improves value of the dollar, improves trade imbalance, allows middle class to build savings safety nets, reduces class inequalities, reduces corruption, corporate welfare and stops bubble and boiling frog economy.
This is renowned economist Ken Rogoff’s idea and was credited with saving Australia from the 2008 economic collapse. The U.S. has had low interest rates in this country for 25 years and the theory was that low rates creates jobs and economic prosperity. Instead, he got bubbles, flat Middle class incomes and the rich got much richer. We’re told higher interest rates would destroy the already weak real estate market, create inflation and reduce business investing that relies upon short term loans. Therefore, lowering interest rates all the time must be a good thing.
The problem is that low interest rates can create a deflated economy which is what we have now. A little inflation increases prices competitiveness and weeds out companies that take advantage of the system by using loans to pump up their corporate profits and fuels the 2001 tech and 2007 real estate bubble-busts. One reason the middle class wealth has remained stagnant is they can’t save any money through CDs but with higher interest rates they can.
The above video shows FDR warning people not to trust politicians who want to solve economic problems by adjusting your social security or Medicare. Those are not economic solutions. They are attempts by the wealthy to redistribute wealth toward the upper classes.
by Todd Miller
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