What Is Sound Tax Policy for the US?

This is my first posting in a while, so apologies if it’s a little rusty.

I am writing to “think out loud” about new tax policies of the Obama administration. The first thing I would like to say is I don’t like high taxes anymore than the next guy. In fact, selfishly, I would like to pay as low taxes as possible. However, I think that many conservatives do not realize how bad the financial state of affairs in this country really are. I think there is a gross underestimation of the financial woes of this country. Even after many documentaries and books have been written about the terrible condition of the economy and balance sheet of the US, it would seem very few people are willing to recognize that our economy is in terrible shape. Perhaps we are all desensitized. Perhaps words like “terrible” don’t mean anything. I really don’t know. What I do know is I certainly would not want to be in charge of tax policy! Talk about damned if you do, damned if you don’t. I think it’s weak logic for anybody to really think about the traditional “lower taxes to create an environment of long term economic development” angles as anything but nonsense in this time. I also think it’s simply conservative ideology to defend the arguments along the lines of “every man for himself” as a basis for low taxes.

I’m not sure raising taxes, in any form, on anyone, is the right answer. I don’t know. I do know that from everyone I’ve heard from that decries tax increases, I have not heard a good answer for producing enough revenue for the USA to pay for what the USA commits to paying. And let me be specific. Debt commitments, military commitments, medicare commitments, social security commitments. Countless soft and hard “guarantees” such as FDIC and its equivalents in many areas of our financial and commercial markets which are going to be relied upon big time. We cannot pay for the things we have already committed to, let alone the commitments that are as yet forthcoming.

The USA as an entity resembles General Motors. It is saddled by commitments, it is divided by internal politics, it is marked by a history of “management theory of the year” initiatives, and few if any pretend to know how to make it healthy.

Things are going to get worse. I guess my main point is, while some of the tax proposals I’ve been hearing don’t sound great, I’m waiting to hear something else that sounds anything like the USA being able to pay for its past, present and future commitments, especially without even more leverage. In the absense of credit (like printing more “treasuries”), the only way to get more cash is to increase revenue, which for governments by and large means raising taxes. I suppose I’m having a hard time finding fault with President Obama’s progress so far. His tax proposals are a far cry from the highs this country has seen. To me, between backing all the financial institutions while our credit system gets “less unhealthy,” funding all our existing commitments, and helping soften the very real pain of a terrible economy, some tax increase is not only inevitable but, on the balance, a fairly healthy response. I don’t know what serious alternatives there really are, and it is frustrating to hear conservatives chastise President Obama for raising taxes, when there aren’t any credible alternatives being proposed.

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