What Part Taxes Play in the Recovery
Let me preface this with a challenge. I’ve voted for my share of Republican candidates so don’t mistake this challenge as a partisan rant. A friend of mine recently asked me to tell him a single piece of legislation that the Republican Party has introduced and passed in Congress, that help the average voter. I was woefully unable to come up with even a single one. I must defer to our trusty readers for your expertise. Can you name a single piece of legislation benefiting the average American submitted and passed by the Republicans?
Now to our topic. What role will taxes play in the recovery process and what role should they play? Now that the foolhearty Conservative Economic joke has exploded in our faces, it’s time for us all to realize what went wrong so we can fix it and ensure it never happens again, at least not until the next Republican Great Depression.
Before JFK, the financial elitists were charged a 90% tax on anything over 3 million dollars. Over time, slimeballs in Congress passed bill after bill that allowed their rich buddies to get around the taxes. After enough time, the 90% was more like 70% actually getting paid. When JFK closed the loopholes (well, it wasn’t really JFK as he was assassinated before he could sign the law) he explained to the American people that this was actually a tax increase on the swine (my words, not his) bribing our representatives and the tax cut from 90% to 74% actually increased tax revenues.
Then comes along the next Republican president to attack the American economy, Reagan. He dropped the top marginal tax rate on those sickeningly rich scumbags trying to corrupt our government from 74% to 35%, while the Republicans in Congress were poking more and more loopholes in the laws JFK closed up. This had the short-term effect of making the economy look good but within a year we had Reagan’s first recession. And just a few years later, we had the second Reagan recession, the Savings and Loans disaster.
You may be wondering why taxes have anything to do with the economy and recessions. If you are, read the earlier posts describing how these interact. In short, taking spending money away from the government takes income away from government workers and the needy and thereby takes it out of the economy. Giving more money to the uber-rich puts more money in risky speculation. What follows are bubbles and crashes. On top of that, the Republicans were busy destroying the rules put in place to get us out of the past Republican Great Depression. The S&Ls were free to speculate and with billions in slush money from the Republican sponsors, the industry self-destructed.
Along comes Bush, Clinton, and Bush. I cringe at grouping Clinton in with the Party of the Uber-Rich, but he followed the same stupid ideals, reducing the size of government further, reducing the services to the needy, and removing safeguards on the risky investments. All this made us ripe for the next Republican Great Depression. By now, Bush Junior had reduced the average tax on the wealthy corporations to less than 7%, while the middle class workers (the actual financial engine) were paying as much as 35% and paying Alternative Minimum Tax on top of that.
The families of the 50s and 60s had almost 50% of their budgets available for discretionary spending, with a single bread winner. Today, the middle class family spends less than 25% on discretionary spending. The middle class pays more for taxes, more for health care, more for housing, and now needs two cars because both parents must work.
It’s simple. With less spendable money in the hands of the middle class, less money goes into the economy. The next step is to start relying on credit. The middle class went into hawk, up to their eyeballs. Rake up the credit cards, rake up the mortgage, charge your groceries when you can’t make ends meet.
Eventually, the middle class can no longer live off credit and spending grinds to a halt. That’s were we are today. All because of taxes and relaxed regulations.
Armed with this knowledge, how do we devise a solution to this mess? Obviously going back to the 90% tax rate for anything over 3 million dollars is a good start. Those who benefit the most from our country should pay the most back into it. Those who own Wall Marts and make billions of dollars while their workers go hungry must repay those stolen dollars back to society. It’s easy and it’s fair.
But, leveling the playing field by taxing the rich isn’t enough in iteself. Higher taxes on the rich will automatically translate to more money for the workers, barring the Republican generated loopholes. But this is still the trickle-down approach and the Conservatives have proven to us that this approach doesn’t work. The higher taxes on the sickeningly rich must be ballanced with a higher average wage for the workers, yes the engine of the economy. Our minimum wage must be increased to above the poverty level. A good start is $30,000 per year. A rising tide lifts all boats and this will translate to better compensation for all workers and will mean a stronger economic engine.
Sure, the billionaires will still make more money than a normal person can spend, but they will just have to deal with it.
I can almost hear the Conservatives groaning in disbelief. “What? You mean tax the rich? It’ll kill any incentive to make money!”
What are they thinking? Let me ask you. Would you be happy to invent something to make $3,000,000.00? This would actually increase innovation because there would be more people able to be innovators rather then working two and three jobs at below poverty wages.
So, how do we get there from here? We can’t just change the tax laws overnight. And, we can’t continue to borrow the money to pay for this recovery. We need to pay as we go. We need to implement a change as quickly as possible. This means a two-pronged approach. The first approach is the re-implement the Paris Hilton tax. There’s no reason for any estate to carry billions of dollars from one generation to the next to the next while others starve. The income from insurance policies and from inheritance should be taxed at the same rates as any other income. Anything over three million dollars get taxed at 90%. Just by turning back on the estate taxes, we will have enough tax money to pay this recovery package as we go. During the coming 5 years we can gradually re-implement the 90% tax on anything over three million dollars.
One more big shot in the arm is to open up Medicare to all Americans. If we can buy better insurance through Medicare than we can get by paying billions of dollars to the CEO’s of the big insurance companies, the businesses will have more money to pay for wages and other benefits, or they can pay for the 90% tax if they prefer.