Viewpoint: Why We Should Go over the Fiscal Cliff

We have nothing to fear from the cliff, and it will get us closer to fundamental tax reform

  • Share
  • Read Later
Vernon Wiley / Getty Images

The fiscal cliff is a powerful metaphor. It sounds like an impending disaster, but in reality, we’ll wake up on the morning of Jan. 3 and life will be unchanged. Sure, tax rates will nominally be higher, some tax breaks will have been canceled, and the government will be expected to implement major cuts in military and domestic spending. If that continues for several months, it will have an adverse effect on the economy.

(VIDEO: TIME Explains: The Fiscal Cliff)

But letting the law take effect will also have some real benefits. For one thing, on the other side of the cliff, we’ll be a big step closer to the kind of fundamental reform of the tax code that both Democrats and Republicans say they want. Two provisions that limit the deductions and personal exemptions the wealthy can take — similar to the cap on deductions proposed by Mitt Romney — will come back into effect. Capital-gains rates will rise from 15% to 20%, and dividends will be taxed at normal rates, reducing the incentives for tricks like the notorious carried-interest loophole. And instead of a tax system that produces less revenue as a percentage of GDP than at any time since 1950, we’ll move toward one that is adequate to the needs of a modern, dynamic economy. The fiscal cliff is, all by itself, a budget deal and a step toward tax reform. A flawed and dangerous one, to be sure, but a far better starting point for a real budget agreement than the temporary rules of 2012.

Once tax rates and other provisions have returned to their previous levels, as planned, Congress and the White House will have a little time to look at taxes and spending and decide how best to keep the economy moving now and in the future. Is it by cutting taxes for low- and middle-income working families, who were hit hardest by the recession and gained little in the George W. Bush years, when most of the benefits of growth went to the top? Or is it another round of tax cuts for those who have gained the most?

(MORE: Fiscal-Cliff Deal? Don’t Hold Your Breath)

Let’s remember also that the fiscal cliff is not a natural phenomenon; it’s the law. None of the tax cuts that will be changed by it were supposed to be permanent in the first place. Some of the cuts — mostly those from the early Obama years — were to provide economic stimulus during the recession. Those should be revisited every couple of years, and if we think the economy still needs a boost, we should renew them for another year or two. But the bulk of the tax cuts that expire date from 2001 and ’03. At that time, when our country had budget surpluses, both Democrats and Republicans wanted to cut taxes. But Republicans wanted to cut them by about twice as much and to make much bigger cuts for the wealthy than for the middle class. Rather than compromise with Democrats, Republicans twice employed a special rule, known as reconciliation, to use their narrow congressional majorities to push their version of tax cuts through. Because that special rule can’t be used to make permanent changes that worsen the deficit, they had to put an expiration date on those tax cuts. So the fiscal cliff is a long-overdue chance to revisit choices from the past and better address what we need to do for our future.

(PHOTOSThe Recession in Pictures: America Copes with a Stagnant Economy)

In the world on the other side of the fiscal cliff, Democrats and Republicans will have no choice but to work together on tax cuts that will be fairer to the middle class and encourage economic growth. And then, over several years, we have an obligation to look closely at Medicare in particular and figure out how to slow the growth of health care costs in that program. That work can only begin on the other side of the fiscal cliff.

70 comments
LenSimpson
LenSimpson

Amazing how quickly we went from a relatively small surplus to an absolute massive deficit. is there an explanation somewhere in the etherworld?

dobermanmacleod
dobermanmacleod

Frankly, I am sick of the media scaring people.  It is always some kind of crisis - one the one hand it is a financial crisis brought on by the rising deficit, and on the other hand it is the "fiscal cliff."  Either we want to pay our bills and balance our budget, or not.  The media is just trying to scare people so they will want to read up on the latest crisis.  Read the book Abundance: the view the media has saturated the public with is contrary to how the real world is shaping up.BTW, it is tragic that our government is working with such flawed budget numbers.  Soon a new energy technology will emerge that will super-charge our economy (imagine, as an example, 1 $/gal gas):

"A volume about the size of a #2 pencil eraser of water provides as much energy as two 48-gallon drums of gasoline. That is 355,000 times the amount of energy per volume – five orders of magnitude." ( http://oilprice.com/Energy/Energy-General/New-LENR-Machine-is-the-Best-Yet.html ).This phenomenon (LENR) has been confirmed in hundreds of published scientific papers: http://lenr-canr.org/acrobat/RothwellJtallyofcol.pdf"Over 2 decades with over 100 experiments worldwide indicate LENR is real, much greater than chemical..." --Dennis M. Bushnell, Chief Scientist, NASA Langley Research Center"Total replacement of fossil fuels for everything but synthetic organic chemistry." --Dr. Joseph M. Zawodny, NASABy the way, here is a survey of some of the companies that are bringing LENR to commercialization: http://www.cleantechblog.com/2011/08/the-new-breed-of-energy-catalyzers-ready-for-commercialization.htmlFor those who still aren't convinced, here is a paper I wrote that contains some pretty convincing evidence: http://coldfusionnow.org/the-evidence-for-lenr/

JohnPatterson
JohnPatterson

Going "off the fiscal cliff" would not hurt the wealthy.  

The other side of the fiscal cliff is an even deeper recession which would hurt middle and lower class Americans.  The 16% U6 unemployment we have now could increase by another 10%.

Rather than playing chicken, both parties should take the cliff of the table immediately.

Ol'Bob
Ol'Bob

I suspect that we will, in fact, "go over the fiscal cliff".  The Republicans, with their usual distaste for actual governance, will be attempting to make political points - if not immediate ones, then ones for the 2014 elections.  The Democrats would also be happy to have "the fiscal cliff" as a bit of political ammunition going into the next elections, with the added benefit that it actually gets them some of what they want.  Neither side will compromise; neither side wins; neither side loses.  And thus we end up with one more example of gridlock and foolishness in Washington...

ks1234
ks1234

The Republicans represent the wealthy and don't care for the midlle class or the poor just as Romney said during the election. They have fought ferociously to make the Bush tax cuts permanent and will not compromise on that. So it is better for the middle class and the poor to let the fiscal cliff deadline expire as the article suggests. That will allow the Democrats to introduce legislation to provide tax cuts for the middle class and the poor.

GaryRMcCray
GaryRMcCray

The global society and civilization is destabilizing, resources are getting both depleted and more controlled by interests who's primary goal is to use them to amass fortunes for themselves while draining the economy as a whole to do so.

Excesses have lead to global warming that may be cataclysmic in a very few years as well as toxic pollution of the oceans and our freshwater supplies. Land itself has been over used, over fertilized and abused by high intensity agriculture.

Sooner (rather than later) a domino will fall that cannot or will not be propped back up or compensated for by emergency action and then they will all come down and our governments, our infrastructure and our entire global civilization will fail horribly and very quickly.

When this happens most of the earths population of human beings will die.

We have already shown a considerable propensity to inject an emergency measure or two at the last possible moment but the mounting pressure means that soon it either won't be enough or it will just simply be too late.

The bottom of the "fiscal cliff" may be further down than you think, or maybe not - - - yet.

PRob38
PRob38

gee what a thought go over the fiscal cliff. when you think about it I would speculate that Obama would want that to happen then blame republicans.  That's the only reason why this would occur. at the end of the day the problem with Washington is taxing it's spending and that's where this argument needs to start-the federal gov't needs to not recklessly spend money it doesn't have. 

DeweySayenoff
DeweySayenoff

I believe there is one MAJOR issue being overlooked by the concept of diving over the "cliff": The economic impact.  

On a fundamental level, the economy is driven by bottom-up spending.  I think we can all agree that the ONLY sector of the economy aided by "supply-side economics" is the wealthy.  Bottom up spending is people spending money for the goods and services that businesses offer.  That generates demand, which in turn generates new job creation. The price they offer for those goods and services is utterly moot if the customers have no money to spend in the first place (Which is why top-down economics doesn't work).

And that is where this idea of going over the cliff being "okay" goes badly wrong.  In proportion of their income to expenditures, the wealthy do not spend nearly as much money as the Middle Class and the poor.  By and large, they invest it.  By NOT spending the money, the economy is stalled.  The Middle Class and Poor both spend much larger proportions of their income and because there are a lot more of them than there are of the wealthy, they actually outspend the wealthy with smaller, individual spending.  THAT is the spending that's helping the economy recorver.  If they had more money to spend, the economy would be recovering a lot faster.  

But if the tax hikes hit the Middle Class, the proportion of their income that can go to spending is decreased.  A little decrease across a LOT of people means a hell of a lot of decreased spending.  Money isn't circulating into the economy from the bottom up.  The economy stalls.

Now, this is basic stuff.  It's how it works on a fundamental level.  So we can at the very least expect to see the people who spend, getting and spending less.  That is very likely to have a negative effect on the economic recovery, stalling it or even making things worse - increased unemployment and a return to recession.  At the very least it will likely have a chilling effect on NEW employment and job creation.  Given that the inertia of the economy can be drastically affected by public opinion about things, if people THINK things will get worse, they will.

The question then becomes is it worth stagnating the recovery (or making it go back into recession) for the sake of something WE CAN FIX WITHOUT THE "CLIFF"?

If we maintain the status quo - that is to say extend the tax cuts and such until the new congressional session where we won't have a bunch of spoil-sports screwing up Congress who will be replaced by people who have a new mandate (WORK IT OUT!) - there's no reason to endanger what little recovery we have.  We can look at the good of the fiscal cliff (closing loopholes and increasing taxes on the wealthy, who sure as hell can afford them, trimming excesses in the budget including actual handouts, trying to match spending to tax revenue) while avoiding the bad (increased taxes on the spenders who actually drive the economy).  Instead of rushing over the "cliff", we can climb down carefully and deliberately to get the tax reform we so desperately need without as much suffering of the poor and middle class the alternative could very well create.

There is a balance in the system that can be achieved by shifting the fiscal burdens appropriately with respect to fairness in AFFORDABILITY rather than percentages.  Find that balance and the system will run well.  We don't have it yet because the debt is so large.  But if you reliably put money int he pockets of the spenders, the debt will take care of itself.  They'll spend, more people will become employed, more taxes will be collected and (assuming the government can get its collective crap together and budget correctly), we'll stop deficit spending and, maybe even lower the debt.

There's no reason we need to go over cliffs to do that.  We just need reason in Congress.

Mace
Mace

It they do not hurry there will no longer be much of a middle class.

66garrett
66garrett

Our tax system needs reform, and we need spending restraints as well.  We are only collecting 15% of our national income in revenue, yet our spending is at  about 24% .  The difference is the growing national debt we face.  I believe that both of those numbers should be at about 20%.  How we get to this level is the difficult part, because, no one really wants to receive less in govt benefits, but no one wants to pay more in taxes, also.    But, maybe some leadership will emerge in Washington to do what is best, as opposed to doing what is popular, for a change.

rohal
rohal

Clearly, capital gains rules need substantial revisions.  Ceos should not be able to use them to reduce taxes on the stock options they are granted by their company boards as these are essentially commissions.  The compensation of hedge fund managers and investment bankers should also be viewed as commissions and be taxed as ordinary income.

Mortgage interest tax deductability should be limited to the first $300,000 of mortgage only.  Finally, there should be a minimum tax that all corporations have to pay.  It is unacceptable that 30 major and profitable corporations be able to use loopholes to pay no income taxes.  In addition, corporations should be fully taxed on all world-wide income, and not be able to hide it offshore.

Lastly, the grants paid to the oil and gas industry and to agrobusinesses should be eliminated.  All future grants and breaks should be directly tied to domestic job creation (only for full-time permanent jobs).

MyView
MyView

I think it is a good idea to be unafraid of this so-called 'fiscal cliff'. Once tax rates have reverted back to where they were at the 1990's levels the Congress will pass subsequent tax cuts for those earning less than $250,000 per year. No "conservative Republican will vote against such a  bill, if they want us to pay for more tax breaks for the wealthy they can put it in a separate bill.  (Realistically the tax cuts should be greater for those earning less than $45,000/year. After all consumer spending  makes up 75% of the economy.  And poorer people spend all their money, they don't hide it in foreign accounts and just sit on it, they put it back into the economy) Once the spending cuts go into effect the Republican "conservatives" will be facing big cuts to things in their states and of course if the message is made clear to the local populace that it is the fault of the Republican so-called "conservatives" who are just really servants of the rich, there will be a backlash against the Republicans and inroads can be made to recapturing those voters who used to be strong Democrats until the race divisiveness occurred during the 1960's and '70's .

FanEnough
FanEnough

The extremely low rate of commenting on this article suggests that most readers quietly understand that Mr. Schmitt wrote this article in gest.

prioripete
prioripete

yeah, but it's a bottomless cliff!

usresham
usresham

THE QUESTION IS HOW TO GET OUT OF THE FINANCIAL MESS. 

 IT WILL BE  A SLOW PROCESS BUT DO WE HAVE A SOUND AND BALANCE PROCESS?  

FISCAL CLIFF IS GOOD OR BAD ONLY PUNDITS CAN TELL BUT THE FACT IS WHEN THE TWO POLITICAL PARTIES ARE NOT READY TO COOPERATE PEOPLE WILL SUFFER IN SHORT AND LONG RANGE.

FISCAL CLIFF SEEMS TO BE BETTER FOR THE NEAR FUTURE. GROVER'S STRANGLE HOLD ON REPUBLICANS WILL BE BROKEN.

Libertyship46
Libertyship46

People like you always talk as if nothing ever happened in the economy from 2001 to 2008. We had a booming economy and about 5% unemployment. There was a housing bubble created by people like Barney Frank who were determined to push houses on people who couldn't afford them, but the economy was still booming. I don't know how many people would trade the 5% unemployment we had under Bush for the 7/9% (higher, if you take the  "U-6" number of total unemployed people) we have now. Yet the Bush years were "oh so unfair," right? The Bush years were just terrible, yet it was one of longest stretches of prosperity even though we were also fighting two wars. People actually had jobs and careers, not chronic unemployment and dispair. Yes, things are SO much better now and going off the fiscal cliff will make them better, right? If you really believe that, I have a bridge to sell you in Brooklyn.

JimTemple
JimTemple

I think going over the fiscal cliff is great because it will force people to look at where we are, as a country, financially. Right now, with our debt the way it is, if we're downgraded by Moody's, the interest rate on our loans will go up.  Has anyone really thought about what a 1% interest rate increase is on $1.5 trillion?  Do the math, y'all, it aint pretty.

Gooms
Gooms

All you need to know about this article is a description of the institute the author is associated with: "The Roosevelt Institute is a progressive non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt by developing progressive ideas and bold leadership in the service of restoring America's health and security".Nuf' said.........

skandiarecluse
skandiarecluse

RE: "It sounds like an impending disaster, but in reality, we’ll wake up on the morning of Jan. 3 and life will be unchanged."

Jump off the top of the Empire State building...as you pass the 100th floor "so good so far, we're flying man",

Pass the 80th floor, "Still flying Man. This is great, Like a bird"

Pass the 60th floor singing 'Free Falling'

Pass the 40th floor singing 'Kumbiyah M'Lord, Kumbiyah'

Pass the 20th floor " It is just like Inception, man, look at those cars get BIG. This is great!"

Pass the 10th floor . . . . .singing "I'm a believer"..

MaureenSteele
MaureenSteele

     Enough with the media scare tactics!  A nation with newly recognized great wealth of natural gas along with high petroleum production and low taxation is well positioned to successfully address it's debt!

AnnRowe-Fisher
AnnRowe-Fisher

the states have until December 14th, 2012 to not have Obama care in their state!  It was an a little more time to get their shit together!  Most Republican Governors will probably say NO!!  Remember some will face re elections in 2014!!  Individuals should have a right, though!  When your employer does not give benefits and you make too much to get food stamps, Obamacare would be a blessing!  Think part- timers!

kurtbrindley
kurtbrindley

To me, taxing people for their effort, their production, for their contributions to society is insanely schizophrenic. The only sane way is taxing their consumption. Find a way to make it progressive and tax us for what we spend, not earn. Bring some sanity to this country.

em4rtz
em4rtz

@dobermanmacleod I'm sure they already have a clean energy technology but the oil companies will never let it surface.. at least until they've sold every last drop. 

Symsmith
Symsmith

@PRob38......... They have already spent the money...the Bush Administration...wasting a generous Surplus...running after Phantom Oil...in Iraq...not enemies.  They beat-up Clinton during his first term, as they attempted to do with President Obama.  If the Republicans ever expect to remain a Contending Party, they will have to dismount their "High Horse".  Much of the taxing matter is a reflection of Campaign Funding.  Insurance Companies. and Oil Companies, and others,  are "Piggy Banks" for campaign enterprises.  We must find a more direct way to finance campaigns, or otherwise a manner to place "representatives"...in our Legislative Bodies.  Why should we countenance and insurance industry with a better than 33% Overhead, while Medicare operates under 5%? The Army is a Governmental Operation, why should not the Healthcare System, and "Army" against disease ans infirmity?.  The Military of course is another "Funding Mechanism".  We must cure that as well. The outcry usually emits from the Ox which is gored!!!

tallgrrl
tallgrrl

@PRob38 And why don't we have any money?  Because Bush spent it all.

PRob38
PRob38

@DeweySayenoff what moves the economy is not me and you buying a pack of gum or a pair of jeans, what moves an economy is risk of capital and rate return of capital. in other words you need "people" with money to spend it on things that make them more money. with out individuals or institutions making large investments in terms of airports, bridges, new machinery etc the economy will continue to blow. as far as congress goes or this president (i can't understand how this president does not get the blame for this awful economy) they won't drastically overhaul the tax system because our financial sector is depended on an idiotic tax system that makes accounts, lawyers and insurance salesmen rich. we need growth, we need to lower taxes not raise them we need to deregulate not over burden we need to reduce unemployment benefits and we need to eliminate the income tax for people making less then $250k and the top rate should be 10% and everybody pays the VAT but Dewey that aint gonna happen.    

Ol'Bob
Ol'Bob

@Mace - that's the Republican goal - eliminate the middle class and have only two groups to worry about - the rich and the poor.  And the poor, you know, aren't anybody who's anybody, so you don't really have to worry about them, now do you?

rickw4s
rickw4s

@66garrett You're exactly right that no one wants fewer govt benefits and no one wants to pay more in taxes.  

Keep in mind that with the Great Recession, we needed to maintain or increase govt spending while getting less govt revenue (taxes) (due to lower incomes or loss of jobs).

Yeah, if only there were "leadership" in Washington.

rickw4s
rickw4s

@rohal In principle, I agree with you.

But in California or New York, a $300,000 mortgage doesn't buy you much.

I like the idea of taxing dividends at a lower rate  (as an incentive).  But only the first, say, $25,000 per year.

I like the idea of taxing capital gains at a lower rate (as an incentive), but only the first, say, $25,000 per year.

worleyeoe
worleyeoe

@rohal Um, why don't we make it so that everyone pays taxes. It does not matter what income level you are at, $1 or 1,000,000, you should pay a progressive tax. As such, let's end the EIC, which is egregious in terms of its adverse affects on ensuring people do not depend on other peoples' taxes. I agree, though, more should be done about corporations, but again this can be said about the entire tax code. All Obama wants to do is tax the rich to pay for ObamaCare, which is scandalous.

worleyeoe
worleyeoe

@FanEnough Um, no he didn't. It's quite obvious he understands that something significant is going to be required to bring these two opposing sides together to put America on the right path financially.

JimTemple
JimTemple

The easiest way out of it is growing the economy.  What the Democrats are proposing are short term fixes that accomplish little but make them feel good.  The fact is, if you put one million people to work, who do not have a job now, you take one million off unemployment, get them paying taxes, increase economic growth and therefore GDP, and cut the deficit.  If one million people pay $100 taxes per week, that's $100 million coming into the treasury per week more than we have now.  Those are purposefully low figures so that no one accuses me of padding the figures.  Imagine, if you get 2 million, etc.

akpat
akpat

@Libertyship46 The problem was that the booming economy was based on borrowed money and cheap products made abroad. Sooner or later it had to burst.

RaviPG
RaviPG

@Libertyship46 You have conveniently ignored to mention the major consequence of the Bush economic policies: The Great Recession from which the United States and the rest of the world is still endeavoring to recover!

Smiling1809
Smiling1809

@Libertyship46 The prosperity was built on bad loans, people living off credit, and people buying homes they could not afford. It was fake prosperity, just like in the 1920's before the Great Depression. We had an entire country living beyond their means on borrowed money. This is what economic crisis are made of. The are almost always inevitably preceded by people living large on someone else's dime and financial institutions doing things they shouldn't. You shouldn't confuse fake prosperity with a good economy. 

I don't think Bush was some horrific monster or a bad guy. I just teach economics and put a great importance on understanding things as they really are. I don't think the economy is really a reflection on either President. When the economy goes bad, it really is on the backs of consumers and private business decisions. The government has some ability to help correct it, but there isn't a magic bullet, other than time that can completely heal a broken economy. Booms and busts are a normal part of the business cycle. There has never been a severe recession/depression that did not take quite a bit of time to come out of. 10 years is often the minimum for severe economic crisis. The Great Depression took longer than that, and it took incredible amounts of government spending and a war to get us out of that mess. 

JimTemple
JimTemple

You're correct, I don't believe Bush gets enough credit, considering what he inherited (he didn't cry and blame Clinton which will be proven to be a bad thing, considering our sitting President) and then came 9/11. 

The joke has been that, if Obama thought he inherited a bad economy from George Bush, wait until he has to deal with what he inherited from himself.

skandiarecluse
skandiarecluse

"Parachute? Who said anything about a Parachute?"

SamuelClemens
SamuelClemens

@kurtbrindley By all means let's have true tax reform. It is schizophrenic to only use one kind of tax instead of another.

First, uncork FICA and let the rich support Social Security rather than defacto duck this most regressive parallel income tax. Second, let's tax all income equally at the same set of rates on earned income and unearned income (capital gains and dividend). Let's call this the set of flat tax rates. Then lets put in a low consumption tax (VAT) largely to reduce the desire to tamper repeatedly with income taxes and catch a bit from those most adept at avoid income taxes (with rebates to prevent it from being entirely regressive). Then let's get serious and put in wealth taxes where the money really concentrates. First, the inheritance tax must have a much greater bite to increase social mobility and foster meritocracy in order to reduce the drag from the established Feudalistic economic aristocracy (consider the upper class twit who just lost the last election, even the Repubs can't stand him now). Then we need to tax where the money literally is: financial transactions. Financial transactions like a consumption tax have the virtue of taxing where the action is.

At that point we will have a country that actually acts as if it were truly the wealthiest nation on earth, no just home to the most greedy economic elites in the world.

jason024
jason024

@kurtbrindley Sure...then the consumption tax will need to be considerably higher to make up for what is lost. Now the problem is how to we not make it regressive? Any consumption tax such as sales, gas etc is regressive.

PRob38
PRob38

@tallgrrl i think Bush also spent all your brain cells that should be your excuse. 

akpat
akpat

@PRob38 @DeweySayenoff It is the pack of gum bought in the hundreds of millions that powers the economy, not the odd Ferrari.

akpat
akpat

@JimTemple Growing the economy is far more diffcult than its sounds. It requires an unraveling of the policies of the last few decades, in other words bringing home manufacturing and corporations taking less in profit and paying more to workers.

usresham
usresham

@JimTemple  Our problem is structural problem. After Clinton, the whole structure got truncated /twisted. Supply side did not like surplus in the hands of Gov. They preferred a 'free lunch' for the rich in the name of creating job. Coupled with this were two expensive wars. If we are fair look at what happened to job market. Despite free lunch to the rich we started loosing jobs, they started exporting jobs for better profit. Congress helped by facilitating job exporters by allowing them deductions and keeping the profit there. Most of the conventional jobs have gone. They are not coming back and if they do we can not compete. We need to create high tech, high skill jobs and work force for that. What we need is two track approach, a short and long term. 

To pay $100/ week tax and survive we need to create jobs paying $50K-$60K annually. Who will create these jobs? Infrastructure is the best and fastest way to ramp up the industries- steel, aluminum, coal, cement which are sitting dormant. Aerospace, high speed trains and cyber technology can  follow. We don't have money to jump start the economy. Rich should give their fair share and do their patriotic duty. They will get the break again in next 5 years.

RaviPG
RaviPG

@KimberlyGistCollins @Libertyship46 While governments cannot totally avoid the occurrence of recessions, they however can soften their adverse effects by pursuing policies that prevent "people living large on someone else's dime and financial institutions doing things they shouldn't". Canada, among a few others, is one country that had strict control over banks's reserve ratios and also on how much mortgage money people could borrow against the value of their homes. The limit of 2 1/2 times one's annual income was strictly adhered to. Canada did suffer from the recent recession but not as badly as the US.

kurtbrindley
kurtbrindley

@SamuelClemens Seems a solid approach to me, SC. Though, like I said about, I just have natural reservations regarding taxing income and the rewards of our labor.

kurtbrindley
kurtbrindley

@jason024 I agree and I said so in an opposite way in my initial comment "Find a way to make it progressive..." There are ways to not tax consumption on the poor without having an overall VAT that's painfully high. From what I read, VATs are much more efficient and effective at collecting money for the state. I'm no tax expert. I only know what I read about it. There are a lot of good ideas in this thread, particularly the Fair Taxers.

I just think it's inherently a bad idea to tax (punish?) the rewards (income) of one's labor and productivity. It seems wrong, naturally so.

kurtbrindley
kurtbrindley

@MrStylz @kurtbrindley 

"Create" havoc?  Ha ha, that's funny MrStylz.  Good one.

A VAT may create too much revenue, perhaps, which would be a concern, I grant you, but the havoc in the economy was created long, long ago.

LawrenceP.Bansbach
LawrenceP.Bansbach

@worleyeoe, you are incorrect. It's not class warfare at all, but the first step in reversing the redistribution of wealth from the poor and the middle class to the already wealthy, which accelerated under Reagan. During his administration, the top 1% doubled their income, and most of the rest either saw a marginal increase or, in the case of the bottom 20%, saw a decrease in wealth. That resulted from dropping the top tax rate from 70% to 28%, raising the minimum rate from 11% to 15%, and increasing payroll taxes. The disparity has only increased since then.

worleyeoe
worleyeoe

@usresham You are sad. You have no idea what you're talking about outside of your first sentence, which was absolutely correct. America's structural problem has everything to do with pushing the government ahead of free enterprise to create jobs. To whit, the following things are structurally unsound:

Government spending across the board, tax policies, immigration, education. So there is no one silver bullet, especially acting like raising taxes on $250K above which is expected to bring in $68B a year is going to change anything. All Obama wants the money from the rich for is to pay for ObamaCare, which is nothing more than class warfare.

Smiling1809
Smiling1809

@kurtbrindley @MrStylz Actually, it would tax lower income people disproportionately. The lower and middle classes spend a far higher percentage of their income on taxable goods. The rich would still be paying too few taxes for their income level.