We Deserve the Government We Pay For

The President and congressional Republicans are negotiating how to soften tax increases when tax cuts expire January 1st. The tax increases are highly regressive; lower income people will face a net higher tax burden that their higher income neighbors.

Hasn’t all the consumptive power of tax cuts been pretty much squeezed out of the economy? Maybe it is time to raise revenue by raising taxes, rather than the dubious Beltway argument that by cutting taxes revenue is increased.

Just as cutting taxes encourages economic behavior that might be considered oriented towards consumption, raising taxes encourages behaviors that might be considered oriented towards investment, prudence and thrift. People might choose to work more to pay their taxes (and keep the same standard of living) or make economic decisions that shelter income from taxation. It might be interesting to base taxes, not on how the income was earned, but where income is spent by percentage.

It really depends on the political theory of the age. While using tax policy to promote a social good there is a need to move from encouraging consumption to encouraging investment. For example, change the tax code to make buying a home a true investment rather than the consumption of housing.

An examination of policies that encourage thrift (which has been a dirty word of recent), the notion that money saved is not being used to pump the engine of consumption.

All citizens have a stake in government because they pay taxes. Social programs are a typical scapegoat largely because taxpayers view those receiving benefits as receiving something that was not earned. Citizenship is an entitlement that is earned by birth alone and not service. Social programs are often under-allocated, diminishing the welfare of the population at large.

It used to be that our government funded the military for only basic purposes. Over-allocating money and resources for defense has become such a habit that defense could be seen as an entity that creates a government to provide resources to consume but excuses and a rationale for such large military expenditures. We are still preparing for World War II – our alliances and focus proves this.

Communism isn’t what it used to be. Neither is capitalism. Ethical failures fuel challenges to the belief that markets are good at determining value. Markets don’t require perfect information to function, but those who pass off tainted information and products skew the marketplace so that market values can be doubted, then markets can falter and fail.

We deserve the government we pay for. The French government recently increased the highest marginal tax rate to 75%. The French raised taxes to avoid bankruptcy and social unrest, due to large running deficeits and a high cost social contract with its people. The government of the United States must be prudent with tax dollars, but it needs enough to pay its debts, and provide for the well-being of its people.

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One Response to “We Deserve the Government We Pay For”

  1. Mark Oehler Says:

    Nicely said. The financial types talk about how things regress to the mean over time (rates of return, etc.). I am expecting that taxes will do the same (be increased, particularly for higher incomes) to align more closely with historical numbers. It will, unfortunately, may be a wild ride getting there. At least, we need (as a country) to stop going so much in the red each year.


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