Friday, January 26, 2007

Get the US out of Debt Now!

I am not trying to be fair, just to find a way to pay for what we're spending until we don't owe hostile countries trillions of dollars. It's going to be painful paying off debt, just like it was for you working extra to pay off your credit cards. It's going to take many, many years of surplus to get out of debt (like 50!). According to the Laffer Curve, taxes only start to discourage work when they pass 50% (like in the late 1970's when the highest rate approached 70%! ). The maximium rate in the best economic decade in US history (1990's) was 39%, effective rate was much less because of the deductions. Relatively fiscally responsible Republican presidents like Reagan and Bush 41 signed tax increases rather than going into extreme debt. The top 2% paying 60% of taxes is misleading - they pay that percentage because they make so much more - comparing incomes of billions vs thousands. If the current progressive income tax rates discourage work, why do you suppose millionaires work? If you make $2 million a year, pay 39% tax after deductions removed, take home $1.2 million, that is still successful. There was a great article by conservative Ben Stein last month on billionaire Warren Buffett talking about how he pays a lower effective rate than his secretaries to. Since you probably won't read it, here's a quote with the gist:
Let us count some of the low tax rates that most rich people now enjoy: Their tax rate on capital gains -- in many cases a huge part of their income -- is often only 15 percent, less than half the top rate on earned income. Their rate on income from tax-exempt bonds, of course, is zero. As for Social Security, the amount of income that is subject to the payroll tax is $94,200, so much of their total income is untouched. Let rich people who depend on capital gains be taxed like those who depend on earned income from their jobs, and we'll have more tax equality.
I think that for the sake of our fiscal health and national security, the US must pay down debt - do you agree with that? Moving forward, I believe we have 2 fundamental disagreements: 1) I believe we must cut spending and raise taxes on the rich to get out of debt - you believe spending cuts will accomplish this goal, and taxes should remain at current rates or be cut further. 2) I believe we should be unfair to existing rich people - You believe we should be unfair to future generations of Americans.