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Tax the Rich and the Corporations – The Hard Math
Our current federal fiscal accounts are out of balance by about $800B per year right now and we are not paying a dime for SS. When the bill comes due on SS (about 5-10 years) and the full cost of Obama care kicks in they will add about another $500B – 700B per year in costs.
We take in about $1.3T per year (not counting SS). To simply stop the growth of the deficit we need to double that. Since we only tax half the population that means that about 35M tax payers must pay the bill. You do the math. The tax increase would double to triple the average taxpayer’s federal income tax.
Yes, we can tax the rich more. Mr. Obama has proposed an increase of 4% in the marginal tax rate of those making over $350K yielding about $70B over the next ten years ($7B per year) Your can see how little of the deficit that would pay.
Now we can tax corporations. We currently tax between 15 and 35% - the latter the second highest in the industrial world. Last year that yielded about $200B (included in the revenue figure above). We could increase it. The recent high is the equivalent of about $500B annually today. Of course, most of the problem is in the tax breaks we have given those corporations. WE could take them all away. The first thing that would happen is that all the public policy initiatives that led to those tax breaks would be unfunded so that if we still wanted to do them the cost would be born by the taxpayers already trying to cover the existent imbalance. In fact, it is most likely that any corporate tax increase will be passed on to the consumer either in product cost increases or in increases in the social safety net to cover the existent jobs that those corporations take offshore to avoid our taxes.
Therefore, if we more than double effective taxes on corporations to the recent high and tax the rich as Mr. Obama has suggested we only have to accommodate a shortfall of about $1T per year. Now how much of that $1T a year should be paid by the 35M taxpayers? The rest must come from cuts. Note that the imbalance equals the SS shortfall and Obama care. Maybe we should have banked the SS trust fund or not added the entitlement to Obama Care. We knew the costs and the math is as it is and was.
Remember, in the above analysis not one dime is being used to cut the existent $14T deficit. Now I can be off in my analysis so I challenge anybody to come up with better numbers. What I suspect is a bunch of platitudes ignoring the hard reality or a deafening silence.
Perhaps it is this math that is bothering the credit rating agencies?? If after all the fuss we just went through we could only find something between $1 and 3T in real cuts over the next ten years and the only revenue enhancement on the table might have yielded upwards of $80B in that same period, when we need about $10T, maybe they have cause to do what they are doing??