Let's Cut Spending And Raise Taxes

April 18, 2009|By JAY HANCOCK

Thoughts on taxes, tea parties and Washington's looming fiscal disaster.

Call me conservative, but I believe parents who toil and save and accumulate a modest fortune ought to be able to pass it on to their children and grandchildren.

Vanishing savings largely caused this financial crisis. We save so little we need the Chinese to finance our deficits. Let's not discourage Americans from saving by seizing big chunks of their nest eggs when they die.

A Republican proposal to exempt estates worth less than $10 million for couples and $5 million for individuals sounds about right.

Call me liberal, but I believe high earners should pay a bigger portion of their income in taxes than everybody else.

Taxes are user fees for The System - the laws and safeguards that keep the country running. Nobody benefits from The System as much as high earners and the wealthy. Look no further than Washington's bailout of Wall Street, in which billions in taxpayer dollars are being blown to save Citigroup and Bank of America bondholders. If that's not a justification for high taxes on plutocrats I don't know what is.

Even government social programs are partly an investment in civil peace, in which the rich have a huge stake. The capitalists didn't fare too well in the Russian Revolution.

Call me a mossback, but I believe even the highest earners, even overpaid CEOs, ought to be able to keep most of what they make.

Some lefty bloggers want to return to the tax brackets of the 1950s and early 1960s, when the top marginal rate was 91 percent for every dollar in taxable income over $200,000. (About $1.5 million today.) These days, that bracket would send talent and capital overseas so fast there really would be a giant sucking sound.

Liberals justifiably ridicule arguments invoking the "Laffer Curve" (named after Republican economist Arthur Laffer) that say cutting taxes produces higher government revenue through greater growth. That's absurd at today's tax levels. At 90 percent, however, the Laffer effect probably does kick in: Higher rates would produce lower overall revenue. But you really don't want to put it to the test.

Be careful how you treat the rich, or even the upper middle class. Households making more than $154,000 paid a whopping 60 percent of all income taxes in 2006, according to the Tax Foundation. President Barack Obama's proposal to cut charitable deductions for high earners is a terrible idea. We want the rich to give away money!

Call me pinko, but I think we need moderately higher income taxes on everybody, the rich included.

The country's soaring debt and terrible spending projections have it headed toward bankruptcy. Sure, blame the stimulus and bailouts, although I'd hate to see the economy without them. But don't forget about President George W. Bush's Iraq war and the Medicare drug program.

Spending cuts alone won't fix the budget, and it is difficult to argue that taxes are stratospheric now. They're among the lowest in the developed world. Obama wants to raise the top federal bracket from 35 percent to 39.5 percent - the level during the Clinton administration and below the 50 percent level in President Ronald Reagan's first term.

That would apply only to income greater than $250,000, and even then the bite wouldn't really be 39.5 percent. Shelters, loopholes and dodges ensure that nobody over a certain income pays tax sticker price. The top 5 percent of earners in 2006 - those making over $154,000 - paid federal taxes equal to only 21 percent of their income, says the Tax Foundation.

Raising that to, say, 25 percent - far beyond anything Obama has proposed - is hardly "socialist."

Call me a coldhearted right-winger, but I believe Washington must also drastically cut spending. Social Security is fixable, but Medicare is a monster that could ruin the country. We have to stop wasting billions on pills and treatments that don't work or preserve life for a couple of miserable months.

Tax increases are indefensible without broad hacks at the Washington leviathan.

Slashing the growth of government spending isn't an idea you get much from the left. Raising taxes wasn't what you heard at the tax-day tea parties. But if Obama doesn't do both after the financial crisis abates, his presidency will have failed.

Call me a fool, but I think the country can steer a middle course that satisfies neither side but saves our children and grandchildren from fiscal ruin.

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