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Your take on taxes
Let's have it out on the President's budget plan. He wants to cut the deficit in half by the end of his term. Some of it is a deficit he inherited because of massive war spending. Some of it is a deficit he just created by passing a $787 billion stimulus package. The people the President will lean on are individuals and businesses making at least $250,000 a year. He'll let the Bush tax cuts for those people expire at the end of 2010. Now, the question is: is this smart or fair policy?
I had a conversation yesterday with a friend who's pretty upset about it. Her and her husband make right at $250,000. They're certainly doing fine financially, but her point was that their job situation is just as precarious as anyone else's at the moment. Why should they have to shoulder an extra burden when they didn't get any benefits from the stimulus plan and when they didn't live beyond their means in the first place?
The two sides of this debate are well defined in the comments section of a story on Boston.com today.
Here are a couple comments from one perspective:
It's sickening that people who spent years getting their education, establishing their careers, and working very hard are now being literally punished for that and have to defend their somewhat comfortable lifestyle.... There is no incentive to be successful any more.
This country has just seen the largest destruction of personal wealth in history as a result of the compounding effects of the left for universal home ownership and the right for unregulated companies. A person making $200K in Massachusetts is not really all that wealthy given the burden the governor and legislature is placing on them at the state level.
And a couple people giving another perspective:
Ever since Reagan, the wealthy have grabbed an ever-increasing share of this nation's wealth, leading to our current economic mess. Obama should not only let that last Bush tax cut for the rich lapse, he should increase their taxes even more, and include the capital gains of the wealthy under the income tax rates.
I have no problem with taxing the wealthy, they've gotten more than their fair share of tax cuts in the past, time for the rest of us to get a little breathing room. They have more than enough.
It's a debate as old as government itself. But this particular situation is just about unprecedented. So, what's your take? And is a tax increase on businesses and people with some money smart policy when we're trying to lift the economy out of recession?
Two points:
1. It sure is a questionable time to be increasing taxes on anyone. I understand that President Obama wants to decrease the budget deficit, but one would think that a tax increase is the last thing we need.
Since 1960, the top marginal tax rate has decreased from 94% to 35% today thanks mostly to JFK and Reagan's tax cuts. In fact, under Reagan, the top marginal rate was 28%. While tax rates have fallen, however, tax revenues have hovered around 8% of GDP throughout the period with very little volatility. Tax revenues don't vary on account of tax rates. Thus, we should have the lowest tax rate possible.
Unlike tax rates, federal spending has increased by 150% since 1960. If you want to point fingers as to why the budget deficit and national debt are so big, point towards the expansion of the federal government.
2. Increasing the capital gains taxes to match income taxes is the most ridiculous argument I have every heard, especially in this climate. Obviously, the person you talked to was an idiot who was simply interested in playing a game of class warfare.
First of all, the government is now trying to breathe some confidence into the markets. There is tons of money sitting on the sidelines, fearful of the recent market terror and uncertainty. Why would we want to give them an extra incentive to stay on the sidelines by raising the capital gains tax? Even Obama has stopped talking about raising the capital gains tax, because he knows that it would be an idiotic move right now.
Secondly, in my opinion, there shouldn't be a capital gains tax at all, as it is triple taxation. The investor takes after-tax income (tax 1) and invests it in the market. Then, whichever company he decides to invest in, the company's income is taxed at 35% for corporate taxes (tax 2). Finally, the capital gains tax is slapped on (tax 3). Should investors really be triple-taxed?
