Sunday, July 31, 2011

The Real Problem With The Bush Tax Cuts

Over the last few years the Bush Tax Cuts have become the great bogeyman of the left. Indeed they are correct that Bush's tax policies have had a negative fiscal impact, but not for the reasons that they commonly hold. A close look at the hard numbers show that the problem is not that the "rich aren't paying their fair share of taxes," but rather that a record number of Americans are paying no federal taxes. According to CNN and Yahoo News, this number has approached 47% of tax payers. And in spite of Bush reducing the tax rates for higher tax brackets, their share of total contributions have steadily increased.  According to the Tax Foundation, in 2008 the top 1% earned approximately 20% of national income, while being responsible for the payment of nearly 38% of taxes.
While the figures are fairly straight forward, their implications are up for debate. Personally I believe that having a growing number of Americans not contributing to the government services that they enjoy will increasingly have a negative fiscal and political impact. To address our growing fiscal ills, taxes may have to be raised on upper income brackets, but without expanding the tax base to include at least some of the net tax consumers, this will barely dent our national debt. And on a broader level it will further erode civic involvement. Common sense and basic economics dictates that those who do not pay for goods and services will have little or no incentives to:

1.  Economize their use of the said goods and services.

2. Ensure their efficient and cost effective production and distribution.

3. Control the growth of government spending.

4. Increase their personal productivity (through education, hard work, saving and investment) in order to afford their desired level of consumption.

5. Vote for fiscally responsible candidates.

But it's always easier to master the use of empty sound bites rather than lean about and apply accounting and economics to current affairs, so keep on ranting about the "greedy rich" rather than the out of control inflation of government spending.

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