From the Washington Post:
The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.
In January 2001, with the budget balanced and clear sailing ahead, the Congressional Budget Office forecast ever-larger annual surpluses indefinitely. The outlook was so rosy, the CBO said, that Washington would have enough money by the end of the decade to pay off everything it owed.
Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Political leaders chose to cut taxes, jack up spending and, for the first time in U.S. history, wage two wars solely with borrowed funds. “In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001.
Now, instead of tending a nest egg of more than $2 trillion, the federal government expects to owe more than $10 trillion to outside investors by the end of this year. The national debt is larger, as a percentage of the economy, than at any time in U.S. history except for the period shortly after World War II.
Polls show that a large majority of Americans blame wasteful or unnecessary federal programs for the nation’s budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.
The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That’s nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.
Big-ticket spending initiated by the Bush administration accounts for 12 percent of the shift. The Iraq and Afghanistan wars have added $1.3 trillion in new borrowing. A new prescription drug benefit for Medicare recipients contributed another $272 billion. The Troubled Assets Relief Program bank bailout, which infuriated voters and led to the defeat of several legislators in 2010, added just $16 billion — and TARP may eventually cost nothing as financial institutions repay the Treasury.
Obama’s 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion — 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributor to the trillion-dollar annual budget deficits that are dominating the political debate.
As Congress prepares this week to launch a high-stakes battle over whether to raise the legal limit on borrowing, the analyses offer a clearer view of the drivers of the debt — and of the difficulty of re-balancing the budget without new tax revenue.
Do the numbers lie? This is what many people have been saying for a decade. However, as usual, the Democrats failed to grab the rhetoric and allowed Republicans to own the day in defining the debt. They might as well define it as they primarily own it. Wars are not free. Tax cuts are not free. They are a form of spending. It all adds up.
Those who refuse to vote to increase the debt ceiling for right now are putting the country on a collision course with financial disaster. It appears that those nay-sayers are the same people who said yes to running up the debt.
Excellent article. In eight short years, the Bush Admin. turned our national surplus in 2001 into trillions of dollars in debt in 2009! And Cheney said deficits don’t matter. Outrageous
I guess there are sure a lot of people who think they do matter now.
It sure explains why the Prez kept talking about what he inherited, in addition to being on the precipice of a great Depression. No wonder he was concerned.
and this is the farce – the one’s who are most vocal about the spending, and the ones defending (or voting for) that same spending. Boehner does not want the Tank factory shut down near Lima, Ohio, he wants the F35 engine to keep going (Ohio Jobs), yet he talks about having to cut – he wants to cut anywhere except Ohio. Michele Bachman wanted Chrysler to go bankrupt, but now complains about selected dealerships that were shut down – if Chrysler went bankrupt, they would have shutdown all Chrysler dealerships. Two wars, and no funding – just spending. The blame is on both parties – they both went along for the party, and have woken up with a hangover – they think having another drink will help – it will not. Creating fights over Planned Parenthood is just a distraction, as the real spending continues. In times of Recession, the Government should step in and spend money to get the economy moving – the Bush tax cuts were just that, his economic recovery plan – they were meant to expire.
What I really do not understand is why SS, Medicare and the budget are all one conversation – it is three separate conversations, with three separate funding streams.
Pat,
Its three separate streams that all go into one pot, because Congress takes from those streams to pay for other things. Remember the IOU’s in SS? Obama funded part of Obamacare with Medicare funds, etc.
And its ALL taxes. If SS/Medicare/etc go broke, the gov’t is still going to pay out from the general fund. We’re talking about the ENTIRE budget. And those things make up 56% of the budget. And every OTHER dollar spent is being borrowed.
So, what spending do we cut?
on two wars: many years ago, had input to the Army Study where the scenario was having to fight two wars at the same time….evolved from being Europe & Korea to Middle East and Korea. One large appendix in that study showed the costs and wear & tear on equipment would just about ruin the military, and run a debt for the Nation sky-high. Alas, like all studies, they are done and just filed.
cargo – we should not be talking about spending cuts to fund SS – it has a revenue stream – either decrease SS benefits, or increase the FICA tax – same with Medicare – we should not be talking about decreasing SS or Medicare so that we can fund DHS or DOD. But that is what Congress wants to do, so that they do not have to get into any detail.
Um…isn’t decreasing SS benefits a cut?
I say everything must be on the table. Entitlement programs, Industry/sector specific subsidies, defense, ALL of it. We need to start with a clean sheet of paper. Develop a new, rational budget, and a new tax structure to sustain it. On defense, we need to take a very hard look at where we have our troops based, why we have them based there, how much the host country contributes to the bill, and how much economic benefit is pumped into the host country’s local economy, with a minimum goal of making it cost-neutral to the US taxpayer.
I say we need to re-discover what government’s intended role is for the individual, and for the civil society. I think the meaning of “Provide for the defense, promote the general welfare, and ensure the blessings of liberty” have been bent and twisted over the years. Time to apply some heat and a hammer, and bang it back into shape.
Pat calls this a “hangover”. I think we are dealing with a hardcore addiction. Cold Turkey would probably kill us, but getting clean should be our goal.
But I think we as Americans really need to look in the mirror. We’ve been marketed to since the end of WWII, and have come to believe that happiness and prosperity is measured by how much stuff we can acquire. Unfortunately, our expectations have outpaced our earnings, and many of us have relied upon high-interest debt (mostly in the form of EEEEZZZZZZEEEEE Credit) to fuel our consumption. Our entire economy is based on ever-increasing consumption. This is the fatal flaw of any services-based economy. We don’t “make” anything anymore, really. Most of our economy is based on getting stuff from “where it’s made” to “where it’s consumed”. It’s the “WalMartization” of our economy. Madison Avenue Advertisers are telling us what “the American Dream” is.
This system has grown so complex in the last 30 years, and so interdependent on other regions and other countries, the least bit of destabilization elsewhere can cause shockwaves locally, or a down-turn in one sector of our economy, drags all sectors down with it. The positions of both parties are based on a flawed assumption: Growth is infinite, and infinite growth is good. All either side is doing is acting like children, pushing the peas around on their plates, and tucking them up under the mashed potatos. Tax more, cut taxes. Cut their program, but don’t cut mine. Government should fund this social program, but not those, because those are _________ (insert moral judgement here).
So now we are beating up the Fed, and trying to assign guilt to either one party or another. I say it is a wasted exercise. Our democratically elected government is nothing more than a reflection of ourselves. We wanted more and bigger. Bigger houses, bigger cars. Fancy kitchens and big honking AC systems. We want our “72 degree, climate controlled, surround-sound multi-media experience”. We want it at a WalMart price, and have no reservations about borrowing to get it. “Super-Size Me” has become our mantra. Same holds true for our expectations on government. As a people, we have attached presumption on tomorrow.
I am done with that. If you want to know what I mean, and what I am doing, ask me. I’m not going to clutter up this blog with a series of preachy rants (or keep them very short), and I’ve no plans (now) to start my own. I’ve just looked around and said “I am done with this global paradigm”. I choose to be “in the world, but not of the world”. This transition started for me and my family 2 years ago, and will continue for as far in the future as I dare plan. I started by downsizing my expectations, and reprioritizing what I think matters.
Here endeth my rant.
Er, Ray…didn’t we fight 2 wars in that little dust-up in the early 40’s?
Steve, you are welcome to put it in installments. I don’t consider you a ‘blog clutterer.’
Steve – #8 – Exactly!
cargo – we should not be cutting SS to fund some other program. SS has a funding source – FICA – is SS needs money, raise FICA or cut SS.
Medicare has a tax – if Medicare needs a bailout, cut medicare or raise the tax.
What should not be happening is to cut SS to fund project X, where X has nothing to do with SS. IF this was a rational discussion on the Federal level, it would be distinct conversations about each, not all globbed up together so that no one can understand what is happening. But that is they way they want it, so that the plan offered by (Obama, Ryan, or Senate) does not have to go into any substance on how to fix anything. For instance, how does the Ryan plan on medicare vouchers really work? (no detail there).
@Steve Thomas
Steve, the difference between the early dust-up and the scenario is: Volunteer Forces, no draft, limited recall of retirees. Fight with with Active Forces, and selective call-up of Guard and Reserves. In other words, the way we have been fighting the last decade.
No full out Defense Condition (DEFCON) One ..heaven forbid politics allow a callup of the draft. We were flat told that was not to be condition in the planning.
It did not escape me that the young folks out cheering and partying Sunday night had never felt the pain of that decade long war(s) that we are still in. Back in my day, the young people were doing something else. They were either in Viet Nam or protesting against it.
Not sure I believe in wars where the civilian population has to feel no pain. That makes it too easy to forget that people are dying and the bills are running up.
Agree with you, Pat. Aside from using SS to fund some project, quit tying every social program into the “Old Age, Survivors & Disability Insurance Program of 1935” aka SS.
I could “clog the blog” with a long list of every Act since President Johnson’s “Great Society” in ’65 that have compounded the “spider web” effect of SS being tapped for all the other programs.
Totally agree, Raymond. No wonder it is depleting faster than it should.
Ray,
Ah, yes, the all-volunteer forces would get worn out pretty quickly fighting 2 wars. I recall during my time with Mother Green, we trained to fight “1 & 1/2” wars. Not sure how one fights a “1/2” war. Kinda like having 2.5 children. One of those kids isn’t going to look quite right. Later, when I became a tad more aware, I realized the “1/2” war was either a low-intensity or “localized” conflict, or a “combat retrograde” (holding action), akin to Viet Nam or the Pusan Perimeter. I remember thinking at the time “those didn’t work out too well either…gimme the full war”.
Steve,
From the very bottom to the very top, we are all culpable for our current predicament. ‘Although the ones at the top may have bigger footprint, we can all look in the mirror and change how we view success. Capitalism was not intended to require overwhelming debt.
@Pat.Herve
Pat, I wholeheartedly agree. That is what is happening now. I want cuts to bring spending down across the board. What we have now is insane.
@Cargo,
You are aware that there are programs that simply cannot sustain cuts?
An example or two might start with medical facilities for vets, pay for enlisted military, etc, social security checks. Those are just a couple areas.
Withdrawing from Iraq and Afghanistan would go a long way toward bringing costs down.
I agree with Steve – every option, including tax increases, should be on the table.
We need to attack this from both ends, top down, and bottom up. With regards to a rational tax structure, I favor a consumption tax. Don’t tax someone on what they earn, how well they steward wealth and assets. Tax someone on what they consume. The rate of the tax needs to be set based on what the three levels of government require to provide services to the citizenry. On this front, we need to really look at what the role of government should be.
Let’s start with by asking ourselves what “poverty” really is in this country. “Poverty” has turned into a relative term, especially in our consumer driven economy. I grew up in a two bedroom, one bath house. I shared a room with my sister until I was 7. Then I slept on a pull-out sofa, and used the “coat closet” to store my stuff. No AC. No cable TV. No microwave. The internet hadn’t been invented yet. Black & White floor model TV that didn’t even have a UHF knob. We had one family car, which my mother bought used. I was raised by a divorced woman without a college education. She worked 40-50 hours a week. We had a 1 week vacation at the beach, most years. By today’s measure, I would have been considered “poor”. Back then, “poor” meant not having enough to eat (I never missed a meal), clean & servicable clothing (never an issue, I proudly wore my older cousins hand-me-downs), and shelter (our home wasn’t the Ritz, but I was never emabarrassed to have a friend over, because my house was just like theirs).
Now, there’s all this talk about “affordable housing for the poor”. This housing has Air Conditioning, wall-to-wall carpeting, etc. etc. An inventory would reveal most, if not all the amenities, such as multiple color TV’s, and perhaps a game system or two. Microwave and kitchen appliances, broadband internet and a PC or two. A quick look at the kids, and they are wearing sneakers that cost the equivilant of what I presently spend to feed my family for a month. Same deal for the clothing. Can’t be wearing stuff that’s out of style. A check of the driveway may reveal one or two expensive vehicles, purchased new and financed.
“Poor” has become a word in our society that describes someone who cannot consume at the same rate as “the Rich”. We keep defining “poor” up, and “rich” down. Look at how the “rich” are described today in the public tax debate; Those making $250K or more are condsidered “wealthy”. Wikipedia has a pretty nice article on how “poverty” is defined and measured by our government: http://en.wikipedia.org/wiki/Poverty_in_the_United_States
Several years ago, I read an article written Dinesh D’souza, which has stuck with me to this day. In the article, he tells of a friend of his who was eager and anxious to emigrate from India to the US. D’souza asked his friend what excited him most about coming to this country. His friend remarked “I want to live in a country where even the poor people are fat”.
So what we have is a government that measures “poverty” based on a relative scale, an economy wholly dependent on consumption-based growth, and a social-welfare system based not on ensuring “subsistance”, but rather ensuring that the defined “poor” can keep a relative pace with the “wealthy” with regards to consumption. To cap this insanity, we have a tax system to feed this vicious-cycle, that taxes primarily based on income, and almost totally ignores the consumption side of the equation (unless it is some “sin” tax). I know, I know “what about sales and excise taxes?” Take a look at what you pay in income taxes, property taxes, etc. etc., and compare that to what you pay in consumption based taxes, and you will have your answer.
I say, get rid of income-based taxes. If I earn a dollar, save that dollar, or better yet invest that dollar, why am I taxed on it? Why am I taxed on the interest it has earned as some “windfall”? I didn’t spend it. I didn’t feed the beast. So if I do spend it, I am also taxed (by a different level of government). If I live frugally, and choose to deny myself the “gratification” that comes from the acqusition of stuff, with the aim of leaving an inheritance to my children, the estate gets taxed when I die. Why? Got to get that last bite out of me, ’cause my consuming days are over. Ya can’t take it with ya, right? Better live for today, and buy some stuff that will make me happy, and I need to make sure that “those less fortunate” get theirs, ’cause they need their stuff too.
To me, the fairest tax system of all is a consumption tax. Everyone pays, based on what and how much they consume. Want to pay less? Consume less. Now you have much greater control of the “outgo” side of the equation.
If your “outgo” exceeds your “income”, your “upkeep” will be your “downfall”.
Steve, how do you make sure a consumption tax doesn’t disproportionately penalize “the poor”? A family of four living on $30,000 a year will pay a larger portion of their income for food and gasoline than a family that lives on $60,000 or $450,000.
I agree that our society is much too consumption-oriented. Older tract-home neighborhoods are overlooked as viable housing stock. Many of them have large yards, brick exteriors that require little maintenance, sidewalks, etc. , but they don’t have granite countertops, stainless steel appliances, crown molding, huge bath tubs and all the other crapola pushed by HGTV and your local and not-so-local builders. Every time a new ‘burb comes into existence, new roads and schools have to be built and older trees and wildlife are lost. The local and state governments spend bucks trying to keep up with the basic demands of the new population and can seldom afford to build the bike trails, parks, etc. for the population that was already here.
Since Steve mentioned housing costs, and the “affordable housing” issue, I provided below the Virginia information from the National Low Income Housing Coalition (NLIHC) who just did a nationwide study:
According to a report released yesterday, the Housing Wage for Virginia is $19.65 per hour.
The Housing Wage is the hourly wage a family must earn – working 40 hours a week, 52 weeks a year, to be able to afford rent and utilities on a modest two-bedroom unit in the private housing market.
The Housing Wage for Virginia is 7% higher than the national Housing Wage of $18.46.
The 2011 Housing Wage for Virginia represents an increase of 55% since 2000.
Virginia’s housing wage of $19.65 translates into $40,876 annually.
The report, Out of Reach 2011, was released by the National Low Income Housing Coalition (NLIHC), a Washington, DC-based housing advocacy group. The report provides the Housing Wage and related data for every state, metropolitan area and county in the country.
Virginia is the 11th most expensive state in the nation in terms of rental housing cost.
In Virginia, an average wage for a renter is $14.90 an hour. In order to afford the FMR for a two-bedroom apartment at this wage, a renter must work 53 hours per week, 52 weeks per year. Or, working 40 hours per week year-round, a household must include 1.3 worker(s) earning the mean renter wage in order to make the two-bedroom FMR affordable.
A minimum wage worker earns an hourly wage of $7.25. In order to afford the FMR for a two-bedroom apartment, a minimum wage earner in Virginia must work 108 hours per week, 52 weeks per year. Or, a household must include 2.7 minimum wage earner(s) working 40 hours per week year-round in order to afford the two bedroom FMR.
Virginia ranks 39th highest of the 50 states in order of rental housing cost.
Housing Wages by County and City
The 2 bedroom housing wage by jurisdiction for Virginia is:
Accomack County $11.90
Albemarle County $17.90
Alexandria City $28.10
Alleghany County $11.31
Amelia County $18.42
Amherst County $12.56
Appomattox County $12.56
Arlington County $28.10
Augusta County $13.25
Bath County $12.52
Bedford City $12.56
Bedford County $12.56
Bland County $11.31
Botetourt County $13.87
Bristol City $11.31
Brunswick County $11.71
Buchanan County $11.31
Buckingham County $11.31
Buena Vista City $11.31
Campbell County $12.56
Caroline County $18.42
Carroll County $11.31
Charles City County $18.42
Charlotte County $11.31
Charlottesville City $17.90
Chesapeake City $18.56
Chesterfield County $18.42
Clarke County $28.10
Colonial Heights City $18.42
Covington City $11.31
Craig County $13.87
Culpeper County $15.27
Cumberland County $18.42
Danville City $11.87
Dickenson County $11.31
Dinwiddie County $18.42
Emporia City $11.73
Essex County $13.83
Fairfax City $28.10
Fairfax County $28.10
Falls Church City $28.10
Fauquier County $28.10
Floyd County $12.54
Fluvanna County $17.90
Franklin City $12.56
Franklin County $11.31
Frederick County $14.96
Fredericksburg City $28.10
Galax City $11.31
Giles County $11.31
Gloucester County $18.56
Goochland County $18.42
Grayson County $11.31
Greene County $17.90
Greensville County $11.73
Halifax County $11.31
Hampton City $18.56
Hanover County $18.42
Harrisonburg City $13.71
Henrico County $18.42
Henry County $11.31
Highland County $12.52
Hopewell City $18.42
Isle of Wight County $18.56
James City County $18.56
King and Queen County $18.42
King George County $15.42
King William County $18.42
Lancaster County $13.62
Lee County $11.31
Lexington County $11.31
Loudoun County $28.10
Louisa County $15.88
Lunenburg County $11.71
Lynchburg City $12.56
Madison County $13.46
Manassas City $28.10
Manassas Park City $28.10
Martinsville City $11.31
Mathews County $18.56
Mecklenburg County $11.40
Middlesex County $13.62
Montgomery County $13.50
Nelson County $17.90
New Kent County $18.42
Newport News City $18.56
Norfolk City $18.56
Northampton County $13.62
Northumberland County $13.62
Norton City $11.31
Nottoway County $11.31
Orange County $13.87
Page County $11.79
Patrick County $11.31
Petersburg City $18.42
Pittsylvania County $11.87
Poquoson City $18.56
Portsmouth City $18.56
Powhatan County $18.42
Prince Edward County $13.23
Prince George County $18.42
Prince William County $28.10
Pulaski County $11.31
Radford City $13.50
Rappahannock County $13.46
Richmond City $18.42
Richmond County $13.62
Roanoke City $13.87
Roanoke County $13.87
Rockbridge County $11.31
Rockingham County $13.71
Russell County $11.31
Salem City $13.87
Scott County $11.31
Shenandoah County $12.19
Smyth County $11.31
Southampton County $12.56
Spotsylvania County $28.10
Stafford County $28.10
Staunton City $13.25
Suffolk City $18.56
Surry County $18.56
Sussex County $18.42
Tazewell County $11.31
Virginia Beach City $18.56
Warren County $16.35
Washington County $11.31
Waynesboro City $13.25
Westmoreland County $14.15
Williamsburg City $18.56
Winchester City $14.96
Wise County $11.31
Wythe County $11.31
York County $18.56
Steve, affordable housing doesn’t necessarily include all the amenities that you mentioned. I chose my neighborhood because it isn’t cookie-cutter, has preserved most of its trees, and has a variety of housing prices, conditions, and inhabitants. The house next door as well as one nearby have been “affordable”. The one next door has only the AC window unit that the last tenant supplied. (It has central heat that was oversized and the last few tenants couldn’t afford to run it and used wood instead). It’s kitchen was rebuilt a few years ago after someone’s dog did some damage, but the space is minimal. It has no carpet as far as I know and has two bedrooms. The other nearby house is a one bedroom rental.
Some tenants would pass by these houses because they’re not loaded with extras but some tenants are happy to have a roof over their heads. Some tenants put up with the cramped and haphazardly maintained house but have large boats or RVs in the yard. Everyone is different.
Censored,
If I were designing the “consumption tax”, I would break things down and tax them at different rates, something along the lines:
Food: No tax if it’s something you buy at the grocery store, farmers market or similar. Taxed if it’s purchased elsewhere, such as a restaurant.
Clothing: Minimal tax rate. The less expensive, the lower the tax. No tax on something purchased in a consignment shop, 2nd hand store, etc.
Shelter: No tax on a rental. Minimal tax on the purchase of an existing home. Higher tax on the purchase of a new home.
Healthcare: No tax on medically neccessary healthcare. Tax on elective stuff, like cosemetic surgery.
Transportation: No tax on the purchase of a used vehicle. Tax on purchase of a new.
Heating and cooling systems: No tax on renewables (wood, solar, wind, geothermal,)
Gasoline and other non-renewable fuels (moderately low tax, revenue to fund roads & public transport)
Water/Trash/Sewage: Usage based. Recyclables exempt from trash usage fees.
Pretty much every other consumable is taxable.
The idea is something my grandmother used to say: “Use it up, wear it out. Make do, or do without”.
Steve, how would you tax materials used in home repair or remodeling? They are expensive and necessary. Septic systems, wells, roofs, windows, kitchen appliances, etc. are items that are sometimes replaced and always necessary.
Some used vehicles are more expensive or gas-guzzling than newer ones. I could buy a $12 piece of salmon at Wegman’s and be exempt, but a guy who bought a $3 lunch at McDonald’s wouldn’t be? Would you tweak your answer?
Where would you find the replacement revenue for your exemptions since you have an extensive list?
Censored,
The materials you cited are already taxed now. The increased tax (for the consumer) would be offset by the decrease/elimination in income taxes, windfall profit taxes, estate taxes, etc. which are on the income side of the equation.
As to your “wegman’s” example, yes. Your $12.00 Salmon would be tax free. My 2 for $1.00 can of tuna would be tax free. I’d pay less, because I consume…less. My $3.00 value meal would be taxed, as would your dinner at Morton’s. My tax burden would be less, because I consume…less. These items are taxed now in sales and use taxes. Grocery “non-prepared” food items would be tax free. A boon to the poor, who made the wise choice to eat at home.
As to “replacement revenues”: reduce the size and scope of government, revenue requirements are reduced. Also, Americans are consumers, not savers. Predictably, much of what was saved by reduced income taxes, would be spent on consumption. If consumption is taxed, replacement revenues need not be found. Individual financial stewardship becomes as case of consume less, pay less. Rich people will pay more, because they consume more stuff, and it tends to be more expensive. Tax that coffee bean that passed through the digestive tract of a bird, and those diamond studded strappy shoes (unless purchased at a 2nd hand store). A lower-income renter who chooses to live within their means would have a very small tax burden. Someone like me, who has made a determined effort to reduce/reuse/recycle would see an instant rise in disposable income.
Steve, if you buy $.50 tuna and I buy $12.00 salmon, you aren’t consuming less. You’re just buying a less expensive item. But, the tuna usually comes in a recyclable can whereas the salmon will usually be in a styrofoam and plastic wrap combo. You may save on taxes but you may not necessarily be buying a more earth-friendly or recyclable item.
The poor often have to choose those prepared food items because they’re cheaper than fresh vegetables or meat. So a richer consumer would get a break for non-prepared foods while a poorer person would pay a tax on prepared stuff.
Censored,
When I say “consumption” as a means of taxation, it is on the value of the item being taxed. A consumption tax based on the value of the item consumed is about as fair as you can get. Don’t want to pay the taxes? Don’t buy it. My .50 cent can of tuna is priced less, because the cost to produce it is less, or the market has determined what the price should be. Now I could choose to pay $12.00 for a piece of Salmon, and pay a higher dollar value in tax, because I chose to consume it. My tuna comes in a recyclable steel can, and therefore, disposal of the packaging would cost me less.
When I am talking about “prepared food” I’m not talking about stuff that comes in a can, stuff on the shelves, or even stuff in the deli. I’m not talking about the stuff in the produce isle. All this would be non-taxable. It’s food. So, if I go buy a 1/4 of virginia ham, a subroll, some bagged lettuce, and a tomato, you are actually going to argue that I am paying less per ounce for that sandwhich, then I would be at subway? I’ve done the math. It doesn’t prove out, and therefore cannot be used as a justification for poor people to eat fast food.
How fair is the current tax structure? The more I make, the more they take. No correlation whatsoever to what I consume in services. I could make a million dollars next year, drive a 3rd hand hoopdy car, wear 2nd hand clothes, keep my heat at 50, cooling dependent on how wide I can get my windows.If someone makes wise decisions regarding money, they get penalized. Ever stop to think that there are many “poor” people who are only “poor” because they make poor decisions? I’m not talking about those who are where they are due to circumstances beyond their control, like the truely physically and mentally disabled, or have been the victims of some personal disaster. These folks are deserving of compassion and assistance. I’m talking about those people who chose to fritter away their public education, engage in crime and drug use, or have otherwise made no attempt to honestly improve their station in life.
“Poor” is a state of mind. “Broke” is an economic condition. I’ve been “broke”, but I’ve never been “poor”.
The way things are now, the choices presented by our society are “feed the beast”, “be dependent on the beast”. I have decided to feed the beast as little as possible, and never, ever, be dependent on it.
Correction:I could make a million dollars next year, drive a 3rd hand hoopdy car, wear 2nd hand clothes, keep my heat at 50, cooling dependent on how wide I can get my windows, and still get taxed the same on my income, regardless of how I choose to spend it (or not).
Actually, all of those can be cut. None of those is mandatory. One just has to prioritize. NOTHING is sacred.
If pay is cut for the military, then you have a smaller military. SS is just a tax that people get back. The gov’t has no responsibility to pay it back. Medical facilities for vets can be cut too. Is it a good idea to cut drastically? No. Will there be draw backs? Yes.
There is no way to cut the budget without pain. We have do decide how much pain we can tolerate.
We have to do two things. We have to get the economy growing again, so as to increase government revenue and we have to cut spending. One other thing I would like is to broaden the tax base and include those not paying any taxes, and reduce the tax rate across the board.
Perhaps the debate should be about why we favor one tax structure over another or our differing reasons for perhaps choosing the same structure. Do you favor a consumption tax in order to use fewer resources or to avoid paying higher taxes or both? Is it a way to control your tax donation to Uncle Sam?
I’m rather conservative with my money. I’ve bought no more house than I would have qualified for using those old traditional loan standards. I charge as much as possible to my credit cards to gain flight benefits and pay them off in full each month. I make my cars last about ten years. I haven’t complained as my taxes went up as our income rose because we were still making more money. I don’t think of it as being penalized. There is unfairness in every tax structure proposal.
Don’t you think that prices in general are going to go higher as the taxed item is passed along? Will businesses be able to write off taxes on the items they buy to make their products? Will only the end product be taxed or not taxed?
I favor consumption tax because of the positive effects it would have on capital formation. If you want to fundamentally transform our economy from consumerism to that of savers and investors, start by transforming the tax system.
Of course, this will never, ever happen regardless of whomever happens to be in charge because our current system of taxation is the source of power for our politicians. If one were to change that to say, people choosing taxation via consumption that power would disappear. Would you give that up willingly?
Cato,
You took the words right out of my mouth, and did a better job of articulating them.
This is an academic debate, at best. Our current tax structure is like a giant onion. Too many layers of special interest. Too much power over the individual.
“Do you favor a consumption tax in order to use fewer resources or to avoid paying higher taxes or both? Is it a way to control your tax donation to Uncle Sam?”
All of the above, although I wouldn’t call our current method of taxation a “donation” by any stretch.
Europe uses the “Value Added Tax” (VAT) which is a defacto consumption tax. A tax is applied at each stage of production, based on that stage’s “Value Add” to the finshed product. Pull a turnip out of the ground, throw it in a bushel basket, and sell it at the farmers market, results in a lower VAT, than say a can of processed tunips bought in a supermarket, because there is less “value add” applied in the processing. The tax is “collected” at the time of sale.
The only drawback to a VAT is companies that are vertically integrated (ie. can take raw materials or “stock materials” and complete the process of producing a finshed good “in house” have a tremendous advantage over companies who must outsource a high percentage of the process to subcontractors. There is a reason why European companies have a much lower incidence of “offshoring” than American companies. The tax structure they operate under incentivizes them to keep it “in house”. Now the argument many make is “this results in higher consumer prices”. True. But the money the consumer uses to purchase the finished good, AND pay the VAT, has not been taxed as income.
Under our tax structure, we’re taxed when we earn it. We’re taxed when we invest it (if we realize a profit), where taxed when we spend it, and we are taxed when we leave it to our heirs. Cradle to grave taxation for the entire lifecycle of that dollar in my hands. We tax the hay the horse eats, and tax the manure that comes out the other end. Our tax structure incentivizes off-shoring, the errosion of our manufacturing base, and the further “walmartification” of our economy. It disincentivizes “localization” of our economies, something we REALLY need to start thinking about…which I will leave for another rant.