About Raising Taxes as the 'Solution' to the Fiscal Cliff...

About Raising Taxes as the ‘Solution’ to the Fiscal Cliff…

Economy • October 2012 • Views: 1,467

Charles Hugh Smith-About Raising Taxes as the ‘Solution’ to the Fiscal Cliff…

Raising taxes is the “solution.” Too bad incomes are declining. What will raising taxes do to household savings, spending and the economy?

We all know cutting Federal spending is politically impossible, so that leaves raising taxes as the only “solution” to the “fiscal cliff.”

Since most income tax revenues flow from household income, let’s look at some charts of the workforce and household income:

As a percentage of the population, the workforce has contracted to levels of the late 1970s.

As a percentage of national income, labor’s share is in a free-fall:

More…

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8 comments

Romantic Heretic Sat, Oct 27, 2012 5:37:27am

Um, maybe the people talking about raising taxes, like myself, are talking about raising them on people and entities whose income has been rising while their tax burden has been falling.

A little factoid I read once states that in the late 50s to early 60s jointly held stock companies carried thirty to forty percent of the tax burden in the West depending on which country they were in. By the early 90s they carried ten to fifteen percent.

Here's an interesting article from Business Insider on tax rates and the economy.

Personal observation: if you want to live and work in a country you have to pay for the privilege.

Dark_Falcon Sat, Oct 27, 2012 8:02:31am

re: #1 Romantic Heretic

Um, maybe the people talking about raising taxes, like myself, are talking about raising them on people and entities whose income has been rising while their tax burden has been falling.

A little factoid I read once states that in the late 50s to early 60s jointly held stock companies carried thirty to forty percent of the tax burden in the West depending on which country they were in. By the early 90s they carried ten to fifteen percent.

Here's an interesting article from Business Insider on tax rates and the economy.

Personal observation: if you want to live and work in a country you have to pay for the privilege.

The problem is that you can't raise taxes on those wealthy people high enough to avoid the sequester without causing capital flight and crashing the economy. Ways have to be found to cut non-defense spending.

andres Sat, Oct 27, 2012 8:38:54am

re: #2 Dark_Falcon

The problem is that you can't raise taxes on those wealthy people high enough to avoid the sequester without causing capital flight and crashing the economy. Ways have to be found to cut non-defense spending.

What's so special about defense spending that it's better for a kid die of starvation than to consider cutting programs from the Military?

I get the USA needs a strong military to defend themselves, but you also need to invest on your own people to get ahead. Jesus.

Also, we are not talking about raising taxes to take 50% of their income.

Dark_Falcon Sat, Oct 27, 2012 8:58:27am

re: #3 andres

What's so special about defense spending that it's better for a kid die of starvation than to consider cutting programs from the Military?

I get the USA needs a strong military to defend themselves, but you also need to invest on your own people to get ahead. Jesus.

Also, we are not talking about raising taxes to take 50% of their income.

Because we can't tax the rich and cut defense enough to close the budget gap without doing the nation great damage. Either we cut government programs or we raise middle-class taxes to pay for those programs. That's the choice.

Dark_Falcon Sat, Oct 27, 2012 9:03:52am

But on another note, I don't think Charles Hugh Smith should be taken too seriously. On his page is a link to buy his book Resistance, Revolution, Liberation: A Model for Positive Change (link included so that LGF gets credit for the traffic to Amazon.com). Books with a title like that and subject matter like he describes to be out in nutcase country. This other link confirmed it to me "Everlasting Seeds." That mix of "financial collapse" and "heirloom seeds" reminds me of Glenn Beck's brand of insanity.

researchok Sat, Oct 27, 2012 11:34:00am

All interesting comments but irrespective of CHS reputation, spendin cuts are a reality wil have to face.

If overspending and over paternalistic Europe understands that, we ought not put our heads the sand.

Raise taxes- sure. But as Obama also agrees, one way or the other spending has to be stemmed and kept in check.

andres Sat, Oct 27, 2012 11:38:32am

re: #4 Dark_Falcon

Because we can't tax the rich and cut defense enough to close the budget gap without doing the nation great damage. Either we cut government programs or we raise middle-class taxes to pay for those programs. That's the choice.

But it helps close the budget gap. As Jon Stewart noted in the segment I linked, a slight raise in the taxes of the 2% wealthiest people is equivalent as taking half of everything the Bottom 50% own. And the defense cuts, they also help close the budget gap! So, maybe a slight increase in taxes on the wealthiest won't do much by themselves, and defense cuts won't do much by themselves, but combined they certainly help.

What you are refusing to acknowledge is that, by denying any tax increase as insignificant, it's the middle class and the poor that will suffer the consequences. If both are added up (slight raise in taxes to the wealthiest and defense cuts), it makes social programs more sustainable. If neither are included, then the social programs will become even less sustainable.

andres Sat, Oct 27, 2012 11:40:56am

re: #6 researchok

All interesting comments but irrespective of CHS reputation, spendin cuts are a reality wil have to face.

If overspending and over paternalistic Europe understands that, we ought not put our heads the sand.

Raise taxes- sure. But as Obama also agrees, one way or the other spending has to be stemmed and kept in check.

Remember, Obama offered a 4-to-1 spending cuts to tax increases to the Republicans. He was rebuffed.

And when asked an hypothetical 10-to-1 spending cuts to tax increases, the whole crew of Republican Presidential candidates said no.

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