The ‘Fiscal Cliff’

We’re being warned of the ‘fiscal cliff’, the date that mandatory cuts happen in our federal budget.  Half of these cuts will come from the Department of Defense, which currently receives about 18% of all federal spending.

Obama’s demanding that ‘the rich’ pay their ‘fair share’ of taxes.  Of course, ‘fair share’ is never defined.

It could easily describe when those making, for example, 10% of all income pay about 10% of all taxes.  Of course, this would mean giving massive tax cuts to those who have the highest gross income, since according to the IRS (2009 numbers), the top 1% (the one’s we’re supposed to hate so much, according to the Occupy movement) earns 17% of income while paying 37% of taxes.  The top 5%, who earn 39% of all income, pay nearly 60% of the total tax burden.  (source)   The left tends to argue that tax breaks will ‘give’ most money to the richest.  But this has to be true, since it’s the richest who are paying the most in taxes!  A flat tax rate would simply mean that someone making twice as much income would pay twice as much in taxes.

But no, Obama’s goal, as he’s said, is redistribution. (‘…at a certain point you’ve made enough money’).  Some people, according to the left, have too much money; have stolen it from an allegedly static economic ‘pie’, so that others don’t have as much.

Now, of course those at the very bottom, people who are barely earning enough to survive on, should be helped.  People who are unable to provide for themselves should have some kind of provision so they don’t end up on the streets.  We’re better off, of course, if that provision comes from private charity, but in some cases, the government needs to step in.

The best way, though, to to help the most people isn’t to make them dependent on government.  It’s to create an environment in which as many people as possible are able to provide for themselves.  It’s to create an economy which is growing, and allowing more & more people to earn enough that they have a stake in funding the necessary functions of government.

The left wants to punish ‘the rich’, which has been defined as anyone making more than $200,000 a year, $250,000 for a couple, by allowing the Bush tax cuts to expire for them.  Instead, I’d propose a 1 year increase of 1% in taxes on those earning more than $1 million or more, with a surcharge of 20% for those in the entertainment industry earning over $1 million, and a 25% surcharge on trust fund disbursements when the fund is worth over $1 million.  Since Republicans have been stabbed in the back a couple times on ‘if you raise taxes, we’ll cut spending’ (Reagan; Bush I), I’d make these tax increases contingent on spending cuts of at least $125 billion in real dollars.  Since George Soros & Warren Buffet are so keen to see their taxes increased, maybe we could surcharge them 50% each.  Of course, Buffet would have to pay what he already owes, first.

Now, we’ve raised taxes on ‘the rich’.  But balancing the budget will take more than just increasing revenue.  A fuel tax increase would be extremely regressive, and experience shows us that raising taxes too far results in less revenue coming in, as people start shifting their assets around, or move.  According to the UK Telegraph, over 2/3 of millionaires left the UK after a top tax rate of 50% was instituted.  The result was lower revenue.  A proposal here in the US would institute a tax on anyone renouncing their citizenship, but that seems to be an attack on our liberties, and a claim that people’s money really belongs to the government.   With the budget deficits we’re seeing, and the national debt that’s growing at a massive rate, the federal government will never be in the black again, even if these tax increases didn’t change behavior, and the promised revenues really materialized.

So what do we cut on the spending side of the equation?

First, I’d like to see the Carter-era Departments of Education ($71 billion) and Energy ($24 billion) eliminated completely.  I’d pull the US out of the United Nations (total spending on the UN was over $7 billion in 2010).  This puts us at about $103 billion of my proposed $150 billion.

We can cut subsidies to businesses of all kinds, slash foreign aid to hostile countries, and cut the Defense Department by 10% including closing many of our bases overseas.  Many of our men & women in uniform aren’t appreciated by the locals anyway.

So it seems that a combination of slight tax increases coupled with massive spending cuts would be a great solution to the ‘fiscal cliff’.  Instead, Obama wants unlimited power to raise the debt ceiling without consulting Congress, another bloated stimulus package, and huge tax increases.  It’ll never work.  Unfortunately, Republicans have become so weak, they’ll probably go along with it.

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