Con: Do not expand welfare state
ALBUQUERQUE, N.M. EDITOR’S NOTE: The writer is addressing the question, “Are tax increases necessary?”
Barack Obama promises “change,” but the real question American voters—particularly taxpayers—should be asking is whether Obama’s brand of change will improve our situation or worsen it.
When it comes to Americans’ pocketbooks, Obama has laid out a clear vision that calls for a bigger, more costly government. Unfortunately, at a time when economic growth is slowing at least partly as a result of misguided government policies such as ethanol subsidies, refusal to allow oil companies access to oil, federal encouragement of the housing bubble, and the costly Iraq War, taking an even bigger share for government is bound to only prolong our current slowdown.
So, what does Obama propose? To be sure, he does have a few tax cuts aimed at middle- and low-income Americans sprinkled through his plan. His “Making Work Pay” credit would offset payroll taxes on the first $8,100 of earnings, generating savings of up to $500 per person or $1,000 per family. His campaign says that will eliminate income taxes for 10 million low-income Americans.
But we already have the Earned Income Tax Credit for low-income wage earners. The IRS estimates that nearly one-third of EITC payments—more than $10 billion annually—now are wasted in overpayments. Is it really wise to create an entire and complicated new credit that would be subject to the same abuses?
Obama’s small tax cuts will have a negligible impact on our economy because of their indirect and minimal impact on economically productive behavior. His tax hikes, however, are something else again and seem likely to have a significant, negative impact on our nation’s economic growth.
The centerpiece of Obama’s plan is to end the Bush tax cuts and allow the top two tax rates to return to 36 percent and 39.6 percent. He would also phase out personal exemptions and deductions for those with income in excess of $250,000.
Again, with an eye toward punishing those who have achieved economic success, Obama plans to end the Social Security payroll tax cap for those making more than $250,000. The cap is currently set at a more reasonable $102,000.
Under Obama’s plan, these individuals will face a tax rate of 15.65 percent from payroll taxes and the top income tax rate of 39.6 percent for a combined top rate of over 56 percent on each additional dollar earned.
In a single stroke, Obama’s massive payroll tax increase abandons any pretext of Social Security being “social insurance” as opposed to just another welfare program. It will massively expand government with almost no positive impact on Social Security’s solvency.
Obama’s plan would keep Social Security in the black for only three more years. Annual deficits would hit in 2020, instead of 2017, and by the 2030s the system would still run an annual deficit exceeding $150 billion.
As if those proposals were not enough to weigh the American economy down, Obama plans to nearly double the top dividends and capital gains rate from the current 15 percent rate to as high as 28 percent. Indeed, while most tax cuts may result in slight revenue declines even as they spur economic growth, Bush’s dividend and capital gains tax cuts actually have increased federal revenues. Obama would be wise to reconsider these particularly destructive tax hikes.
On the other hand, Obama pledges to follow President Bush in rapidly increasing the size and scope of the federal government. Bush has allowed the federal budget to grow from 18.4 percent to 20 percent of the nation’s GDP. President Clinton, on the other hand, oversaw a reduction of federal spending from 22.1 percent to 18.7 percent of the Gross Domestic Product.
Unfortunately for the American economy, the likelihood of massive government expansion under Obama means that the only important “change” will be in the mechanism by which our ever-expanding government is funded.
Paul Gessing is the president of New Mexico’s Rio Grande Foundation, a tax-exempt research and educational organization. Readers may write to him at 5500 Benson Ct. NW, Albuquerque, N.M. 87120.
Sep 10, 2008 at 2:30 a.m.
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Sarah...once again I am confused by your statements. You are trying to condemn republicans for not accepting facts that are backed up with numbers. What are you commenting on? This article is a bunch of facts that are backed by numbers and you are crying...what? Not accepting these facts backed up by numbers?
Sep 10, 2008 at 1:03 a.m.
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enough...how do we pay it off? Simple the same way every other family in our country does. Spend less than you make! If the government reduced spending across the board it could easily be done. Using simple math with rounded numbers the government received 2.57 trillion dollars and spent 2.73 trillion for FY07. If they would simply cut all spending by 6% it is break-even. Then if they freeze that spending until the debt is paid everything is fine. We all know that will not happen. But, what is very easy to see is that federal revenue has increased historically over the past ~10 years at 4%. If spending was held to an increase of only 1.5% yearly the national debt (yep that is the big one) would be paid off in 11 years at current tax levels. So we can all keep thinking an increase in taxes will fix our ills…but, until spending is held below expected returns nothing is fixed.
Sep 9, 2008 at 10:07 p.m.
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Regan trickle down economics have not worked as you say. Our deficiets at that time where owned by our own Countrymen. Today our debt is own by China, Saudi Arabia, Japan. and France. The interest grows daily on this debt. How do you suppose we pay it off? The money you received as part of the stimulus package was borrowed from China. It was not part of the pay as you go program.
Sep 9, 2008 at 12:51 a.m.
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Here's an idea:
CUT SPENDING!!!
Tax cuts have INCREASED revenues to the treasury EVERY TIME they have been done. The tax cuts spur growth, and actually create MORE revenue to the treasury. If you don't believe this to be true, look up the #'s from the GAO. The Reagan tax cuts saw revenues EXPLODE. You had deficits because of the out of control congressional spending. The problem is these pigs in congress SPEND OUT OF CONTROL. It's the insane increase in spending that is causing these deficits, and debt. If you want to stop deficits, and reduce the debt then CUT THE SPENDING! Then pass a balanced budget amendment.
Sep 9, 2008 at 12:27 a.m.
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The fact is raising corporate taxes will result in two things. Higher prices paid by consumers (you are naive if you believe only the corporation/businesses will feel the pinch on these taxes) and more businesses will fail or leave the country. The Tax Foundation just came out with a report showing that the US corporate tax rate, although some what flat since 1988, has risen in comparison to other competitive countries by over 50% because other countries have chosen to lower their rates. This causes a competitive disadvantage to leading companies to stay and perform in the US; which is a leading cause in job and revenue loss to local and federal levels as they leave our shores. Responsible spending by our government on both political sides is the fix that neither is willing to take seriously. But you say on this forum that the government should increase taxes…again wanting others or companies to provide [increased taxes] but you have failed to take the lead and perform this on your own. In my view that is hypocritical. If you truly believe this is the right thing please take the lead and show us!
Sep 8, 2008 at 10:06 p.m.
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What is it with some Republicans? Whenever someone provides facts and backs them up with numbers, these Republicans scream that we are bias or bashing unfairly?
Sep 8, 2008 at 9:38 p.m.
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retired air force....Bush Bash. I try to only tell the truth about what I have researched and read. Even McCain said you can't cut taxes when your going to War. Bush 1 raised taxes after the Desert Storm because if he didn't want the Nation would suffer, but still left us in debt.. It lost him the Presidency. Old man Bush did some good things for our Country. I read a lot I would suggest to you if you had an open mind to read Woodwards "State of Denial III". I voted for Bush 2 twice. I woke up in 2006. Now am an Independent. who believes rleigion does not belong in Governement. Anyway your premise does not make sense..
Sep 7, 2008 at 6:50 p.m.
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So your answer is you haven't....but you would rather Bush bash than be truthfull.
Sep 7, 2008 at 2:09 p.m.
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retired airforce. Peoples pockets are empty after 8 years of Bush Policies. I would think any thing would be better than to say well let me give you four more years. That would be like saying beat me I like abuse.
Sep 7, 2008 at 2:08 a.m.
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Enough...have you provided the government any additional money other than what is required for your taxes? I would think that everyone who believes we should all pay more should lead by example.
Sep 6, 2008 at 6:49 p.m.
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I disagree with you. Had Bush paid for these two Wars with Taxes we would not be the shape we are in today. We have to pay off this debt. How do you propose to do that. Those making over 250 thousand a year have only gained since this Administration came to office. I know I have and will be willing to pay my fair share now. Who ever become President Taxes will have to be raised. We can not continue to borrow money from China, Japan , and Saudi Arabia. If you want us to sell all of our assets to pay this huge deficet Then our country will no longer exist as we know it. Taxes must be raised. We should have never gone to War giving tax cuts. No President in history has ever done this tax cuts during war. We will be indebt for Presidencies to come, are children will pay for this ridiculious President who gave tax cuts during war time.
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