The USA speaks on raising taxes

[ShannonH]

This entire debate is the same major distraction that the US has had for decades, which is basically deliberating over an issue of implementation and pretending it's a moral stance.

Raising or lowering taxes can raise _or_ lower revenues. It could raise revenues short term, but decrease them in the long term. It could raise both, or lower both. The big problem, that someone else already stated, is that it's not just about taxes or spending, but both. The budget is ridiculously out of balance and as evidenced by the recent credit downgrade is just continuing to get worse. There's a lot of rhetoric but so few people are actually looking at the numbers.

So right now, the tax revenue/GDP is 27%; with the anticipated rise in spending due to the aging population and increased debt interest, this is looking like (according to the Obama administration) it could rise over 1.5x and hit ~43%. This is assuming the same economic growth we've seen in the past 10 years, which is probably too optimistic, so it could be even higher. What you're looking at is a tax/GDP even higher than France's; while this doesn't sound immediately shocking, consider that this is just to maintain the current level of government programs that exist in the US today, and that France absolutely dwarfs the US in their level/quality of social programs (although they are having spending problems of their own right now.)

The US needs to treat this seriously, but since you are in a constant election cycle all politics is focused on the next 2 years, so even 14 years is too long-term to hear any real solutions.

I brought this up in another thread, but before you start thinking that socialized medicine is expensive and the US has an open-market in medicine, you should know that the US spends more per-capita on healthcare than Canada does. This is a huge bureaucratic/economic/political/corruption issue, and not just something you can dump more money in to. Just watch a little daytime TV and see the number of ambulance-chasing lawyers advertising if you want a sense of just how much waste is there right now

 

[dandelion]

It isnt just medicine. If there is plenty of money around then people do not care about waste. If some people have plenty while others have none, then those with the money (and probably power) still do not care about waste. The US is the worlds greatest energy user per head. This is not sutainable.

In the UK the level of private borrowing to buy houses had reached the point before the recent crash where it had begun to look unsustainable. There was not enough money in the UK to lend and it relied upon imported foreign money. This was a matter of concern to the bank of England. Luckily, the US crashed the world economy, so this steady rise in borrowing stopped. If it had not been stopped by this intervention, then the risk was that it would have stopped anyway. Any interruption in the money supply would cause the property market to halt. If it became clear that prices could not go on rising, then the assumptions behind all that buying start to unravel. It could no longer be assumed that whatever you spent now, you would be guaranteed a profit any time in the future if you had to sell. The property bubble would burst and everyone would be left with staggering unrepayable debts. This still hasnt happened, but it is what lies behind the fact that UK official interest rates are zero. Should mortgage loan rates start to rise, there will be a wave of defaults and all hell will break loose. How is this situation in the US?

All that mortgage money has been contributing to growth. The nation has had mortgage fueled growth for decades and has become used to it. This is going to stop. It has already stopped since the crash, but the government is waiting for it to resume. Since it was destined to crash anyway for one reason or another, it isnt going to. How stands the US on this one?

The UK plan to pay off its debt is to wait for growth. In the meanwhile, it will continue to borrow. If no growth arrives, what happens? How stands the US on this?

No growth, no way to pay off the debt. It cannot rise forever. There will be a default. Just a question of time. Unless someone can explain where there is an out.

It is argued that spending creates growth. Taxes soak up money and reduce growth. So raise taxes and try to cut the debt, and trash growth. Or cut spending and thus trash growth, and tax take will go into a downward spiral. All nations on earth are overborrowed. They were all running on the edge before along came this bank induced crash. Can anything keep the balls in the air, or should we now be moving on the debate to the best way to manage world bank collapse and what implications these defaults will have for us all. I suppose its fairly simple. If all debts are repudiated, then whoever lent that money will not get it back.

So thats why the price of gold is skyrocketing, because people believe banks are unsafe. The BBc said today the inter bank lending rate is rising again, which means banks do not trust each other, and industry which is now amassing cash rather than investing it, prefers to lend directly to other companies rather place it on deposit in a bank even though at a higher rate.

 

[Officer5633]

Hey everyone, here is a solution no one has mentioned...

Think LONG-TERM for once. Instead of everyone thinking of the national debt, and the yearly deficit, raising/cutting taxes, and killing programs and all this nonsense, think long-term.

Chart a course for the country to be on for the next 30 years, instead of 1 or 2.

Chart long-term tax strategies, like introducing a 10% VAT (national sales tax), phased in over 10 years, that could add $1 trillion per year in revenue.

Implement a more progressive tax schedule (10-15 brackets, higher rates for rich people), or a progressive estate tax (that starts at estates valued at $1 million). This could easily raise $500 billion per year in revenue.

Increase the capital gains taxes to historical levels (closer to income tax rates). This could also, easily raise at least $250 billion a year in revenue.

Lower military spending over the long-term, to sustainable levels. This is around 1.5-2.5% of GDP, instead of 4.9% today.

Increase long-term investments!! A goal of having 75% of the country attain a Bachelor's degree by 2040 is a goal that can be met. More grants, more funds to teachers, schools, etc. R&D investment, massive amounts of it- to keep the US competitive with Korea, China and Japan.

Pass a Universal Health Care law, so every citizen has quality healthcare, and lets US businesses become more competitive globally. Also, it will dramatically reduce the inequality between the rich and poor when it comes to medical care (rich get great care, poor get crap).

Create incentives to manufacture. This could be tax incentives, increased tariffs, buy-America provisions in legislation, adjustments to trade deals, reworking of NAFTA, etc.

We need to think long-term to solve our problems. Nothing happens overnight. I'd have a hell of a lot more confidence in a country that has a long-term course, rather than changing every couple years with a new President. Let's all set tough goals to work towards. We can do it.

 

[Thedrewbert]

Why is it never mentioned that even if we do cut spending, we MUST keep taxes high in order to pay down the deficit? We must be taking in more in tax revenue than we are spending.... simple math. So that means taxes are going to have to go even higher

 

[KTF40]

Why isn't the Republican party listening?
23 Polls Say People Support Higher Taxes to Reduce the Deficit



23 Polls Say People Support Higher Taxes to Reduce the Deficit | Capital Gains and Games

Cause Democrats are the party that makes decisions based on poll numbers and how they can get the most votes.

Let's simplify this debate

Current revenues are about 15% of gdp (keep in mind, unemployment also plays a role in why this number is so low). Historically, it is about 18%. Bruce Bartlett: Are the Bush Tax Cuts the Root of Our Fiscal Problem? - NYTimes.com

Current spending is about 25% of gdp and is expected to increase significantly in the coming years. Historically, it is about 20%. PolitiFact | Rand Paul says federal spending has risen to 25 percent of GDP

With that said, it seems quite clear that we have both a revenue and a spending problem. However the bigger of the two issues is clearly government spending. Even if you were to decrease unemployment to normal levels and eliminate the Bush tax cuts upon the rich, you would make no real progress in solving our debt problems as we would still be running on a deficit. Even if you cut discretionary and military spending in a reasonable fashion, you're still not making any progress. The only way to make progress is to reform the major entitlement programs which make up the majority of our fiscal budget. All that other stuff comes second.

 

[B_enzia35]

Well thought out, KTF.

 

[Jason]

With that said, it seems quite clear that we have both a revenue and a spending problem. However the bigger of the two issues is clearly government spending.

Fully agreed that there are two parts to the problem. The bigger is indeed spending, but a big part of this is spending on debt interest, and this is something the USA is pretty much stuck with.

IMO taxes have to go up, and go up well in excess of the worst nightmares of most in the USA. The type of tax that will do most to raise revenue while choking off the least demand is sales tax. Think European levels, ie 20-25%, with tax on gas taking its price up to European levels, around $10 per gallon. At the same time the USA needs cuts well in excess of the worst nightmares of most. The defence budget is bigger than any other nation on earth and has to be cut. The key is BOTH more tax rises than any Democrat dare suggest and more cuts to revenue than any Republican dare suggest. At the moment both US political parties are telling voters what they think voters want to hear.

Plan B is quantitative easing, devaluation, inflation. I think this will be a big part of the solution precisely because politicians won't tell their voters the truth and will be forced into it. But it will destabilise the US$ - it is messy.

 

[D_JuanAFock]

Fully agreed that there are two parts to the problem. The bigger is indeed spending, but a big part of this is spending on debt interest, and this is something the USA is pretty much stuck with.

IMO taxes have to go up, and go up well in excess of the worst nightmares of most in the USA. The type of tax that will do most to raise revenue while choking off the least demand is sales tax. Think European levels, ie 20-25%, with tax on gas taking its price up to European levels, around $10 per gallon. At the same time the USA needs cuts well in excess of the worst nightmares of most. The defence budget is bigger than any other nation on earth and has to be cut. The key is BOTH more tax rises than any Democrat dare suggest and more cuts to revenue than any Republican dare suggest. At the moment both US political parties are telling voters what they think voters want to hear.

Plan B is quantitative easing, devaluation, inflation. I think this will be a big part of the solution precisely because politicians won't tell their voters the truth and will be forced into it. But it will destabilise the US$ - it is messy.

Gas prices in the US can not, and will not, hit the EU prices of $10 a gallon. Why? Because the average americans commute is twice as long as the EU's and we dont have a substantial public transportation system for most of the country.

The average driving distance for somebody in the UK, the country with the longest commute in the EU, is ~8.5 miles (BBC NEWS | UK | UK commute 'longest in Europe'). Meanwhile, the average american drives 16.5 miles to work (Money: New benefit: help with commuting costs - US News and World Report). Additionally, there is generally a LOT less shops and groceries within walking distance of your home. Having gas at $10/gallon would mean the average low income person will be spending roughly 1/3 of their paycheck on gas each week, if not more.

 

[dandelion]

Gas prices in the US can not, and will not, hit the EU prices of $10 a gallon. Why? Because the average americans commute is twice as long as the EU's and we dont have a substantial public transportation system for most of the country.

You have this back to front. The reason the commute distance is twice as big is because gas is half the price. People take this into account when deciding where to live and work. Its win-win. The government gets more tax, the people spend the same because they are only travelling half as much, they spend less time doing it and use less imported gas.

The average driving distance for somebody in the UK, the country with the longest commute in the EU, is ~8.5 miles (BBC NEWS | UK | UK commute 'longest in Europe'). Meanwhile, the average american drives 16.5 miles to work

This depends what you are talking about. 10 million people out of 60 million live around and work in London and most travel to work on public transport, not by car. The distance issue is mainly a time one. From where I live, people still commute the 50 miles to London, by train. At one time a lot of railways in britain were closed down, but those that survived have boomed with modern commuting. Outside London and its influence, public transport has been greatly in decline and still is, people travel by car.

Additionally, there is generally a LOT less shops and groceries within walking distance of your home.

Yes, but this is just organising things assuming cheap car transport. What happened before cars?If gas prices go up people will adjust. All the more reason to get started on this process, becuse it is inevitable anyway.

The key is BOTH more tax rises than any Democrat dare suggest and more cuts to revenue than any Republican dare suggest.

Except that republicans are not necessarily in favour of revenue cuts in their favourite areas, and equally democrats also have views on what it is appropriate to tax. The present situation is a tacit compromise between the two not to cut spending and not to raise taxes. Also, on health care at least, The US free market system is ridiculously expensive. Hard to say whether this same 'bells and whistles' approach to the military might be justified by a requirement to have a capability greater than the UK (ie to invade countries), but each serviceman seems to cost the US twice as much as the UK.

 

[D_JuanAFock]

You have this back to front. The reason the commute distance is twice as big is because gas is half the price. People take this into account when deciding where to live and work. Its win-win. The government gets more tax, the people spend the same because they are only travelling half as much, they spend less time doing it and use less imported gas.

Not necessarily. The farther away from the city, the less expensive the place is to live. If you force people to live closer, then rent becomes more expensive both because of a sudden increase in market demand and because there wont be enough supply. Additionally, what do you propose be done for those that are just stuck living too far away because prices rose too quickly and now nobody wants their property?

This depends what you are talking about. 10 million people out of 60 million live around and work in London and most travel to work on public transport, not by car. The distance issue is mainly a time one. From where I live, people still commute the 50 miles to London, by train. At one time a lot of railways in britain were closed down, but those that survived have boomed with modern commuting. Outside London and its influence, public transport has been greatly in decline and still is, people travel by car.

"It said seven out of ten people outside London travel to work by car..."

What you are talking about here though is like looking at New York City here in the states, sure there is one location where public transportation (or walking) is the primary method of getting to/from work. Problem is, at least for the US, most dont have the opportunity to commute in such a way, while there apparently is a way in the UK (which is my primary argument about gas prices being unable to rise to the same as in the EU)

Yes, but this is just organising things assuming cheap car transport. What happened before cars?If gas prices go up people will adjust. All the more reason to get started on this process, becuse it is inevitable anyway.

The problem is, this country is built around cheap car transport. We have been building and maintained this way of life for the last hundred years. All of our cities, residential areas and places of business are organized around it. There is no feasible way to change that without it being a horrible situation. If you make gas $10 a gallon and argue for restructuring... what are you going to do with the massive rise in unemployment because many places are going to shut down? Entertainment, travel, housing, everything would be a giant mess and it would take decades to fix.

There are lots of people already struggling to get by without having to pay 3x the cost to travel to and from work.

 

[B_enzia35]

Wait, America being built around personal private transportation is a problem?

 

[D_JuanAFock]

Wait, America being built around personal private transportation is a problem?

When you are talking about nearly tripling gas prices as a tax, yea that would be a problem

 

[D_Percy_Prettywillie]

This is another example of something that seemingly works for the UK being unfeasible in the United States.

Take Springfield, Missouri; this town was set up as a grid and doesn't really have a "central commerce downtown." Grocery stores and gas stations are all over the place. It takes more than half an hour to get to one side of that town to the other in the morning, traveling by interstate. It's not uncommon that people will live on one side and work on the other (based on the location of the best paying jobs.)

There is a public bus system... but it's pretty abysmal. It runs infrequently, has infrequent stops, and doesn't run on Sundays. Aside from that there is no form of public transportation. Even hailing a cab is fairly difficult (and expensive once you have found one, usually after calling one to come pick you up.)

This is about as typical as an American city of more than 100K gets. It wasn't designed to implement mass transit and rather than build up as in the case with St Louis, Chicago, or Kansas City, this town expanded out. It was designed and has been furthered on the notion that gasoline would be cheap and readily available forever. While I know that isn't the case (and certainly the people of Springfield know it), suddenly inflating the price of gas to $10 a gallon would more than less cripple the local economy.

An average wadge in that city is about $8.50 an hour for people in commercial services, just to give you some idea. If we were to match the UK's prices on gas for similarly sized areas we would also need to increase the amount people make from said entry level and low paying jobs to make the transition realistic (rather than apocalyptic) and raising the minimum wadge is no easy task.

Land mass alone should be the end of this conversation anyway; it should be more of a luxury expense to drive places in the UK. If you drove from the Northern most tip to the southern most tip you'd barely cover half the distance from North Dakota to Texas. Thanks our infrastructure we have more area to cover in our every day lives and matching what we pay per gallon to what people in the UK pay per gallon is simply unrealistic. By the time we're paying ten dollars a gallon the UK won't have gasoline at all.



JSZ

 

[Drifterwood]

If anyone was smart, they would seek to raise revenue, which is subtly but significantly different from raising headline tax percentages.

 

[travis1985]

When you are talking about nearly tripling gas prices as a tax, yea that would be a problem

Objections were few when they did it with cigarettes.

 

[deleted213967]

Objections were few when they did it with cigarettes.

Are you being facetious?

I fail to grasp the analogy:

• Fewer than 18% of American smoke. Far less in California. Yet just about everybody depends on gasoline for transportation. A tripling of the gasoline tax (don't hold your breath for too long) would affect everyone, rich, middle class and poor, the latter being hit the hardest.
  
• Cigarettes are poison: they kill nearly half-a-million people in the US every year. Tobacco, not gasoline, is the leading cause of preventable death.
• The US is not the Netherlands. This country is vast and not nearly as densely populated, and its workforce is more mobile. Most folks need gasoline to be affordable so that they can afford commuting to work.
  

 

[DevonTexas]

I truly don't understand why we can't slash spending by 100's of billions and raise taxes by perhaps, just 5%. Especially since 48% of American's don't even pay taxes.

 

[w1952tq]

you know the USA is like a big hairy ball sack. full of sperm and hard to get out of the shaft.

 

[conntom]

Lazy people, like the unemployed?

I know more than a few people who will actually state how they HAVE to start looking for a job because their benefits are running out.

What does that tell us?

 

[conntom]

If anyone was smart, they would seek to raise revenue, which is subtly but significantly different from raising headline tax percentages.

We can raise revenue by getting people back to work, by using the forever on food stamps population here to do the jobs mexicans come here to do. We can start making things in this country again.

We have a lot of ways to raise revenue.

Combine that with some spending cuts and getting O out of office and we can get this country going again.

And, a little isolationism wouldn't hurt either.