Exactly Who, Specifically How Much?

Every once in a while, I hear something on the news that really excites me. It excites me because it mirrors exactly how I feel on some issue. That happened the other day when I was listening to the morning update on one of the cable stations.

The pundit I was listening to put forth the following premise - a close election this year will settle nothing, in fact, it might make our national divide worse. It will not matter who wins - if it is a close election, nothing will be put to rest. On this issue, I could not agree more.

This issue that divides us has been, is today, and always will be the same until addressed, discussed and finally settled. That issue is taxes. Exactly who pays, and specifically how much. As a nation, we have tinkered with our tax code so much for so long, it is as complicated as reading the Dead Sea Scrolls. Nobody understands it, not even high priced tax attorneys.

First some facts. Even though this data is a few years old, not much has changed and I believe it still to be valid. The basis of this data comes from the IRS. In 2008, the top 1% of all income earners, the group which has been excoriated by the Left for over a year, paid 38% of all federal income tax. The bottom 50%, paid 3% of all federal income tax. The top 10% paid over 70% of all federal income tax and the top 50% paid 97%. Get the picture? Our current tax system is progressive to the max.

More than once I have heard someone on the Right ask the question to someone on the Left, "Okay, how much would you like me to pay? In your mind, what is my proper amount to pay?". The answer from the playbook is "First off, lets get rid of some of the Bush tax cuts, and have the wealthy go back to the Clinton tax rates". In other words, for people making over $250,000 a year, their top tax rate would go from 35% to 39.6%. With annual deficits over $1,000,000,000,000, the 4.6% increase is taxes over $250,000 is a drop in the bucket.

The next example takes this logic to the extreme. If we taxed at 100% all the income of people who earned over $200,000 (not $250,000), it would yield about $1.89 trillion.  This amount is enough revenue to cover Medicare, Medicaid and Social Security expenses for 2012. So for 2012, this confiscation of wealth would take care of that year's financial problems. However, the next year the expenses would be the same (or larger) and since we squeezed every drop out of the 1% the prior year, we would not get the 38% they had paid in the past. In other words, one year of euphoria will lead to decades of depression.

So what is fair? The proponents of the progressive tax system believe that the sky is the limit. Rates could go as high as 70%, maybe more. The other side of the argument believes that everyone, regardless of income, needs to have "skin in the game". One of the solutions would be the flat tax - if the tax rate was 10%, every dollar earned would yield 10 cents paid to the federal government. The federal income tax code would be one or two pages. No credits, no deductions, just a percentage of what was made paid in taxes.

So this is the framing of the argument which divides us. People don't have to like paying taxes, but they should not feel ripped off either. A national dialogue needs to happen with both sides realizing the current path will lead to nothing but continued resentment. We need to heal this country from the social engineering we have baked into the tax code. People who have never paid a dime into the federal income tax system need to realize they too, need to help. To help fix our out of control debt, we ALL might have to pay slightly higher taxes which unfortunately, could take us to the boundary of another recession.

This is it, plain and simple. The question was "exactly who, specifically how much". The "who" should be all of us - no exceptions. The "how much" should be incremental at best. Our debt is based on spending much more so than insufficient revenue. A balanced budget amendment to the constitution would help - in absence of that, we need strong national will to adhere to a firm budget. If annual deficits were "trued up" by all of us, rather than putting the shortage on our credit card, the "how much" would get very small, very fast.