Cutting the Crap on “Smaller Government” and Taxes

Given things I heard over the weekend, I feel like there’s some crap cutting to do with regard to taxes and tax rates. It seems that the right wing propaganda machine has propped up the idea that, somehow, high tax rates led to bigger government during the post-World War II era. It kind of goes along with the silly idea I heard on Real Time last week, in which it was actually said that the size of government increases based on spending. Of course, that Libertarian crap was spewed by the editor of “Reason” Magazine, which is the least reasonable magazine I have ever read.

The size of government, first of all, is based on what the people (you remember them, right?) want the government to provide and the size of the population and geography it has to serve. It’s just not “reasonable” to expect “smaller government” these days, given that the population has doubled in 50 years, the level of mobility has increased significantly and the level of service needed has grown.

Think about it; we have double the population and we want them to provide us with a basic safety net should the economy melt down and we want them to enforce regulations that keep the marketplace safe for us because, the fact of the matter is, despite claims to the contrary, private markets don’t police themselves. And let’s be real here; the same people who constantly whine and cry about the size of government also want most things government does to be privatized, which actually costs more. Not only that, but these same people just love to pump money into the military, even when we’re not in the middle of a war they started.

Put simply, to expect “smaller government” at this point in time begs two questions; the first is, smaller than what? The other one is, which functions do we, the people, think are essential and can’t be cut significantly? If the answer is “most of them,” then the issue of “smaller government” is basically moot; if you believe that keeping the food supply safe is important, then it doesn’t make any sense to not fund that function fully enough to be effective. If you believe drugs should be illegal (which is the one area where I think we should cut), then your whining about “limited government” is hypocritical, to say the least. If you believe we should enforce workplace safety laws, then we should enforce them fully, and not just create an artificially low tax base and pretend that it’s all we can “afford.”

In other words, over the years, we as a society have decided that we want the government to fulfill a great many more functions than it fulfilled earlier and the population that government needs to serve has grown significantly. That means the government needs to collect and spend more money to function these days than it did when we didn’t expect the government to do anything but organize armies to fight wars. I mean, come on; we can’t touch Social Security, Medicare and Defense, according to Republicans, yet they seem to expect us to cut the budget by about 30 percent in order to run a surplus and pay down the massive debt they themselves caused. This is the dilemma they have foisted on us, folks; they have convinced many people that we “can’t afford” much of anything and they have convinced us we’re “broke” and can’t afford to do anything that most other countries with less money seem to be able to do, with little or no problem. Think about it; since most of the budget is untouchable, that means we have to cut about 80 percent from every part of the budget that is not those things.  Is that reasonable to anyone?

Well, let’s join the real world for a minute, shall we?

Our economy thrived during the post-War era, and while some on the far right claim that it was in spite of the fact that the top tax rate was 91 percent until 1962 and 70 percent after that, I’d argue that it was because the rates were so high.

And I have evidence to back it up. First of all, the growth rate placed us into the stratosphere; we became the richest nation in the history of the world. One reason for that is, the government had enough money to do more things; they directed the building of the infrastructure that made us great. But keep in mind; almost no one actually paid that much, and we know this because that was when the “Alternative Minimum Tax” came into existence. The AMT was created because Congress was concerned by the fact that so many extremely rich people weren’t paying anything, even with a 70% top tax rate. However, even the fact that they avoided taxes was good for us, because of the nature of tax deductions. In order to lower their tax rate, the rich were required to invest in things that grew the economy.

Compare that to now, when someone making $500,000 pays the same income tax rate as someone who makes $50 million, and when people making $50,000 per year pays a higher tax rate overall than those making $50 million, when payroll taxes are taken into account, and when someone can make $50 million in a year and pay themselves in such a way as to avoid taxes altogether by doing nothing more than paying themselves in company stock or some other nonsense. Not only that, but many of those individuals and corporations in the $50 million range can send all of their money offshore and pay nothing. They couldn’t do that back in the 91% era.

Just to give you an idea just how messed up our tax code is, do you realize that, if an American moves to Europe, they are expected to pay US taxes on their money, but if an American billionaire moves his wealth to the Caymans or the Bahamas, they don’t?

The tax code back in the post-War era had its problems, to be sure, but when compared to the tax code Republicans have concocted during their time in charge, it was a lot better than it is now. It started with the pressure Carter felt to reduce the top rate to 50 percent, and then Reagan’s asinine decision to reduce tax rates to roughly half that. That started the country on the march to massive deficit spending, which Bush 41 and Clinton fixed somewhat with some much-needed tax increases, but which Bush exacerbated when he instituted even more tax cuts at the same time he invaded and broke two countries. Since Obama and the Democrats raised tax rates a few years back, the deficit has gotten much smaller, but it has a way to go, still, because this isn’t the same government we had in the 1920s. We, the people, need a government that can protect us from the excesses of the markets, and we need to collect enough to pay for it. That means higher top tax rates, higher caps on payroll taxes like Social Security, and a tax premium for those who can easily afford it.

A tax system ceases to be “progressive” when the average burger flipper pays a higher tax rate than Mitt Romney, which we have seen with the few tax returns Romney bothered to release in 2012. It’s time to return to progressive taxation and stop screwing what’s left of the middle class. Create more jobs, increase the minimum wage to at least $12 an hour, increase the Social Security cap to at least $500,000, add an extra 10 percent to those who make more than $1 million, regardless of how they make it and get rid of the loopholes that allow people to put money overseas and avoid US taxes. That will solve the deficit problem and possibly even start paying down the debt.

Of course, in order to do any of that, we will have to stop letting Republicans get elected, which means we have to stop blurring the line between them and Democrats, who largely aren”t evil.

Click here for reuse options!
Copyright 2015 The PCTC Blog