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Saturday, April 9, 2011

A Modest (Admittedly Confiscatory, Politically Unworkable) Proposal

So the federal government staggers on, tentative budget agreement in hand. Amidst all the partisan bickering over whether to slash 20 billion or 38 billion or 60 billion dollars from the 3.8 trillion dollar federal budget, congress has (unsurprisingly) focused comparatively little on the revenue side of the equation. We think they should.

One thing about the US tax system: It is unfair. Although ostensibly progressive, the rich can afford all manner of tax shelters, and the recent revelations that megalithic corporate "citizen" General Electric pay NOTHING in taxes puts the lie to any claim of equitability. Any real tax reform will close these and other loopholes (hence the "politically unworkable" part of today's title, but a boy can dream).

Also, frankly, unfair are the current tax brackets of the federal system. And we don't mean unfair to the poor, either, but to the relatively well off. Under the current system, the top individual income tax rate is 35%. This rate kicks in once one's income hits $379,150. Now, we hardly feel sorry for the poor soul who has to squeak by on $250,000 a year. But how fair is a system that taxes that relatively well-off person at the same rate as the even more well-off person making twice as much? Or five times as much? Or ten times as much? We should have more tax brackets.

How many more? Well, why put a limit on it? After all, with simple computer programs and a massive database, it seems fairly simple to introduce a system whereby the Fed could collect. . . well, as Marx once opined, "From each according to his ability" and give "to each according to his need." (Yeah, we know: Unworkable, blah blah blah). In other words, if the budget is $3.8 trillion, then the government needs to raise from its citizens (human and corporate alike) $3.8 trillion. Tax rates could simply reflect the percentage of national income each person receives.

To illustrate a slightly simpler version of this idea: Imagine the top 1% of American "citizens" (among whom, remember, we include corporations like GE) receives 20% of the nation's wealth (a reasonable and possibly conservative assumption). They should then pay 20% of the country's expenses: $760 billion. A lot of money? Well, yes. But even if these costs are divided among only 1000 entities (and we suspect there would be more), we're talking $760 million per entity. GE can certainly afford it.

The next 1% will have earned a slightly higher percentage of the remaining national income (say 21%), so they would divvy up 21% of the remaining expenses (about $638 billion): Again, a lot of money, but still significantly less than the top 1% would have to pay and presumably divided among a larger population of payers. And if we could cut some expenses like, say, the pointless war in Afghanistan, all these amounts would shrink considerably. By the time we get to the lowest-income citizens, the individual tax bill would probably amount to pennies.

Utopian wool-gathering, we know. But it's a starting point. Perhaps not in the real world, but we have to start somewhere.

Federal Budget 2011
"G.E.'s Strategies Let It Avoid Taxes Altogether"
Income Inequality in the United States

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