An Adult Conversation

Let's have an adult conversation about the U.S. budget and the GOP's proposal, as presented by Rep. Paul Ryan - (R), Wis. (Here: http://www.msnbc.msn.com/id/42420995/ns/politics-capitol_hill) Mr. Ryan is correct on many points. Medicare and Social Security need to be revisited. Programs that seem like entitlements (e.g., TANF) and unnecessary law enforcement agencies (ATF, DEA, etc.) are slashed and cut. This is a good move and a good start because it demonstrates the Republican willingness to do the politically-unpopular thing in order to balance the budget. The unmature part is the steadfast adherence to the Republican mantra of "no new taxes." This did not work for Reagan or Bush, Sr., who both had to increase taxes after promising to keep taxes low, or cutting them. If an adult is comfortable with reality, then the talk of raising taxes or changing tax rates are important to the discussion. Here, the Republicans refuse to "get adult"; at the very least, they are as adult as the Democrats, who refuse to contemplate politically-unpopular cuts. Let's look at some numbers. According to the federal, Office of Management and Budget, the projected tax revenues for the fiscal year of 2012 ("FY2012") is $2.6 trillion. The percentage of contribution breaks down as follows: (1) 45% from income taxes; (2) 35% from payroll taxes; (3) 12% from corporate taxes; and (4) 9% from other taxes, such as excise and estate taxes. Some quick math reveals that, of the $2.6 trillion: (1) $1.170 trillion will come from income taxes; (2) $910 billion will come from payroll taxes; (3) $312 billion from corporate taxes; and (4) $234 billion from other taxes. The Congressional Budget Office points out that most corporate taxes are passed to consumers, so, in effect, the citizens of the United States bear most of the burden. This is probably a fair assumption to make, for the most part. The problem with the tax system is that it bleeds working families of their wages. A wage is what you earn for your labor, and does not include money received from interest, rent, or other sources of income. From basic economics, the more you take from wages, the more a worker must demand for wages to remain at a subsistence level. If you raise wages, you pass the cost of production to the consumer. So, a higher tax on wages means higher costs and prices, and hurts competitiveness. Conservatives take this to mean that higher taxes are bad. This is a fundamentally incorrect assumption because this applies only to taxes on wages. The same cannot be said for income in the form of rent or interest. Taxes on value are what we consider "capital gain" taxes, which apply where an asset gains value, but where no actual labor has been expended to obtain that increase. These taxes apply to land, stocks, and any other kinds of investment vehicles whose value increase and decrease without labor. You can increase and decrease taxes on these commodities and not affect wages. Further, the price of land is relatively inelastic, as it is one of the few remaining commodities with tangible value. By not discussing raising certain taxes, such as non-wage taxes, conservatives are failing to appreciate other ways to make up the deficit that will not hurt the working class. This failure is a failure of leadership. Consider the following. The contiguous United States (not including Alaska and Hawaii) is comprised of 2,959,064 square miles. Assuming that 50% of this is owned privately, then 1,479,532 square miles is owned privately. There are 640 acres in a square mile, which means that 946,900,480 acres of property are owned privately. A tax of $100 per acre would result in $94.7 billion in revenue. Even if only 50% of property owners paid this, that is still $47.35 billion. If you pushed it to $1,000 per acre, that's $473.5 billion. Also consider that only 67.4% of Americans own the home they live in. That mean that 33.6% of Americans do not own land. Land ownership in the United States is disproportionately shifted towards the filthy rich, with Ted Turner owning an estimated 2 million acres of land (about 1/3 of the entire state of Vermont). With all of that land in the hands of the exceedingly rich, it is surprisingly difficult to develop the country without great cost to the public. Passing a tax on land ownership would "encourage" the wealthy to dispossess themselves of vast tracts of land, and open that land to public development. The price of land drops; the price of housing drops; and the average citizen benefits. Raising or lowering estate taxes will not affect wages or the price of goods. Sales taxes on non-essential inelastic commodities like cigarettes and alcohol also do not affect wages. The federal government needs to explore these alternatives to balance the budget. So, let's talk like adults, and discuss what taxes we can raise.