A $1 Trillion “Solution”
By Two Frustrated, Hard Working, Taxpaying Brothers from NY
Based on data from the Congressional Budget Office, the Sources of $2.5 trillion of Federal Tax Revenue for Fiscal Year 2007 were as follows (in billions):
Individual Income Tax $ 1,164
Corporate Income Tax $ 370
Payroll Taxes $ 870
Excise Taxes $ 65
Estate and Gift Taxes $ 26
Customs Duties $ 26
Here is an idea, instead of another one of these insane government ‘bailout/support’ programs that are probably going to cost more than $1 trillion, why don’t our elected officials do what they have been elected to do and look after the best interests of its people and implement a policy that for the ten month period effective March 1st through December 31, 2009 all of the above taxes will be cut in half (by reducing rates, not by offering lump-sum rebates).
If you hold all other factors constant, this would conceptually reduce government revenue by over $1 trillion but it would immediately put money in the pockets of every tax paying citizen. Opponent may say – what about the 40%-50% of the Americans who don’t pay any taxes? No that is not a typo — about half of all Americans net tax to Uncle Sam is $0. I would say to them, they too get a 50% tax break…50% of $0 is $0. More importantly, slashing these taxes will enable US companies to avoid further layoffs and build for future growth which will provide the fuel for economic expansion. Such a plan would also have the advantage of being targeted, timely and temporary – three objectives of fiscal stimulus that are hardly met by the existing Senate bill (approximately half the funds would be spent this year, while virtually all of it is assured to be a permanent ratcheting up in expenditures).
Many of those in the world of economics and finance have been hypnotized by the Keynesian view that leaving money in the hands of individuals and businesses will do nothing to stimulate the employment of unemployed resources. Well for the past year they have tried their way of fixing things and we are no better off than where we were so why not try thinking and acting outside the box. They may also say that things would be worse if they do not act – but isn’t putting $1 trillion back into the hands of those who generated this capital the best action the government has taken in a long time?
Opponents to this solution will also state the “tax rebate” of last year did not work and they are right. But it did not work because it focused on a lump sum and not a rate reduction, so incentives to work, save and invest at the margin were not altered and a tax cut is not a tax cut without reducing permanent tax revenues and spending.
The cost of this interim tax reduction would be no more than the cost of the latest stimulus package and would have the added benefit of giving Americans the freedom to choose how best to put their own resources to work – which to me sounds an awful lot like the principles our founding fathers laid out over 230 years ago. If we viciously guard our rights in some areas of our lives (such as religion) why shouldn’t we leave it to people to make their own economic choices?
Instead of taking our elected officials’ word that their recommended actions are in the best interests of all Americans, why don’t we poll every citizen in the US (ages 18 and above) which they prefer: the new financial rescue plan (“Geithner Plan”) AND the $789 billion stimulus bill being debated or cutting all taxes in half for the remainder of 2009.
Unfortunately a vote on a solution of this type would never find its way to the great American people as we at large, are not well or evenly represented at all. At best a small group of vocal and influential special interests stand to gain big time, while what remains unseen are the thousands of voiceless taxpayers, the millions of workers in other disfavored industries that will never get hired, the new resources that will never get created because we are busy providing funds to build bridges to nowhere.
We challenge our elected officials to prove us wrong and take this to the American people to decide. These are just some of our thoughts- but what the heck do we know – we are just average citizens who have paid more than their fair share of taxes over the past several decades. If it is true ‘Financial Stability & Recovery’ the government is looking for, they should Try Another Rescue Program!