What If We Just Raised Taxes? - Editorial Commentary - Thomas G. Donlan - Barrons.com

Q&A: What If We Just Raised Taxes? - Editorial Commentary - Thomas G. Donlan - Barrons.com:

Responses to some of the questions raised in the comments on the article:

Q: Have zero interest rates, bank bailouts, tons of Federal spending and the promise of another federal entitlement done anything to move us closer to accepting reality?

A: People feel 'entitled' to things they don't have to earn or pay for.

I was astonished to hear a friend tell me how many of his US friends felt 'entitled' to health care - without having to pay for it.

Clearly the average Chinese doesn't put this burden on his or her society.

So, the US goes for the 'Greek solution'. As the Greeks blame the German's for exporting to Greece, the US blames the Chinese currency manipulation (i.e. Chinese shipping goods to the US).

So, to make the US economy grow, the Chinese have to increase the value of their currency since they are out-investing and not squandering so much on entitlements. Seems like we're moving further and further from any kind of reality.


Q: What about the US considering a one-time asset tax to reduce the deficit? This tax could be levied on people with assets of $5 million or more with all revenues from the tax going to deficit reduction. And it would have the effect of "clawing back" from all those who benefited from the financial engineering of the past 10 years.

A: How about a tax on all government paid pensions (State, Federal, Local) over $40,000 a year of say 90%?


Q: Like most of my friends, I am paying a total tax rate 58 % of my earned income. This 58% total tax rate includes:
a) 33% federal income (I get hit by AMT)
b) 10% state and local income
c) 5% sales (assume I spend 30% of my take home with a local sales tax of 9)
d) real estate tax (equals about 10% of my gross income).
Add all the above taxes and you see that most of us are paying about 58% of our gross in total taxes.

A: You were kind enough to omit the extra costs employers must pay to support government mandated programs. (some estimate the employee's salary is only 1/5 of the employer's actual cost for the employment).

You also omit the 'transfer costs' built into supporting Medicare and Medicaid, where private payers pay more so M & M can pay less, etc.


Q: The elephant in the room is defense spending.

A: Clearly you don't like to think of Medicare, Medicaid, (and maybe mandatory health insurance) as a big animal; but, clearly they dwarf defense.

And, at least defense spending isn't run as an unfunded entitlement in which young people are made to pay for the old with the (at best hope) promise that their will be another young generation to fund their benefits.

All the talk is to tax the young more to pay benefits to older people that they didn't have to pay anywhere near the same costs for themselves.

Is this fair?