I might have just become an economic liberal.
The discussion on taxing the rich is being brought to life (not that it died, really) by a piece from the Wall Street Journal. With the astounding deficits the US is facing ($9 trillion in the next 10 years), cutting public spending alone might just not do it for the Obama administration. Unless they are okay in keeping a huge number for a very long, long time. The other option is no other than increasing taxes. And who better be taxed more than those who have more to give. This is almost inevitable. I’m somehow becoming more flexible with my beliefs to accommodate the idea of increasing taxation as the only means to narrow the US’ deficit.
The primary argument against higher taxes on the wealthy is that businesses will flee. But I ask to where? And perhaps a less explored idea is that of the wealthy seeking tax havens where they will be able to keep more of the money. However, now that these havens are facing a clamp down, and even secretive banks now being targeted, the rich just have fewer places to hide their riches in. With that said, I think it would be unfair to advocate higher taxes only for the wealthy. The middle-class would also have to give their share if they want to escape the $9 trillion deficit sooner. The only thing is, higher taxation cannot and should not come soon lest recovery is overruled.
Let’s put the $9 trillion deficit into perspective and how taxation just on the wealthy isn’t ideal:
Start with some rough arithmetic. The three million or so fortunate taxpayers whom Mr. Obama counts as rich are projected to earn about $27.5 trillion from 2010 through 2019, according to the Tax Policy Center, a Washington think tank, and about $23.9 trillion after deductions. They are projected to pay $7.4 trillion in taxes. That’s 31.1% of every dollar of taxable income, on average.
To squeeze an additional $9 trillion out of these taxpayers would require boosting that to 68.9%. And that assumes these taxpayers wouldn’t find tax shelters to hide their income or work less. There isn’t enough money in the over-$250,000 crowd to stick them with the $9 trillion tab.
Here’s how higher taxes would benefit the US:
If I were to be dubbed a liberal, it’s only out of necessity. I understand the enormous need for public spending and cutting it isn’t probably the best idea at the moment when consumers cannot be relied upon to spend even with tax cuts in place.