Thanks to Robert Reich’s film “Inequality for All”, I can now say that consumer spending represents 70% of all economic activity. Raising sales taxes, or taxes on the middle-class in general, would therefore place a restraint on economic growth.
The problem with saying that taxes on the “Job Creators” would also hinder growth is that the money the wealthy have or make has little to nothing to do with the economy. In essence all they are saying is that CEO’s and entrepreneurs are being taxed for keeping wages low and creating enormous profits for their companies; which in turn earns them enormous compensation. The reason this has no economic validity is that the rich can only purchase so many items. They may have some of the most luxurious, expensive items that money can buy; but they only need so many cars. By eliminating taxes like the estate tax, which really only effects people with assets in excess of five million dollars, we are taking away any real opportunity to return a portion of our nation’s wealth into the hands of people who will spend it and create positive market activity. I am not an advocate of the redistribution of wealth at all. I believe people work hard, make intelligent decisions, and should be entitled to the fruit of their successes. However, I there should be some return of that success into the nation that enabled that person to thrive in at least a modest percentage.
The only way for our country to continue to grow is to expand the middle class. This can only be accomplished by making sure to pay higher wages to American workers to enable them to spend more of their income. To make this happen corporations will need to either increase their compensation or pay increased taxes on their profits. I believe a compromise could be struck that would enable corporations that pay higher wages be taxed at a much lower corporate rate than those who don’t (qualifying factors must apply, of course); but we would have to raise the corporate tax rate from its current level to be punitive to those companies that don’t comply. If we applied this tax on foreign conglomerates who import goods to us, it would begin to slow outsourcing as well.
As a nation we should also look at increasing the tax on capital gains to at least 20-22%. While this would lessen the incentive to invest your income, the idea of money making you more money that you still pay substantially less taxes on is quite enticing. This would lessen the incentive of compensation in the form of stock options, and would remove a loophole that allows people to escape paying the normal federal income tax rate. We should also look at creating additional tax revenue from financial players as this is where the money is, so to speak.
In an effort to be fair and balanced, some entitlement programs will need to be looked at as well. Raising the social security retirement age to 70, or even 75 with early retirement at 70 is one of the essential changes that will have to be made. Social security was never meant to be a retirement plan for people, it was created as a safety net to ensure as people neared the end of their lives they had enough money to survive on. Today, thanks to advancements in medicine and treatment of illness and disease, people are living much longer than they were in the late 1930’s. I believe that a 10 year phase-in would be critical, with people age 60 or older being exempt from the new policy. We also need to remove the cap on social security taxable income. We could place a tax on incomes above $250,000 at a substantially lower rate than on the first quarter-million, but still generate some Social Security funding. While this would be a drastic change from how people currently plan their retirements, the increased wages and opportunities to invest in their own retirements would give American workers a chance to have a great retirement. With the added benefit of making Social Security solvent for many more generations.
I could drone on about this for days, but I’ll save that for the comments and future posts. Good day, dear readers.