taxes, Americans, tax reform

Tax Reform Will Fail

By Andrew Witzel

Little has changed in the last 50 years in the United States in regards to government spending as a share of the overall economy. In 1969, the United States spent 26.6 percent of the gross domestic product. As recent as 2015, that figure only dropped to 26.4 percent of the gross domestic product. That figure,  compared to other democracies of the world, is nearly 7 percent behind other countries. The concept of taxing those that can afford it and not taxing those that can’t be seen in action in countries such as Belgium, Britain, Germany, Norway and the Netherlands. These countries increased the bracket that did not owe any taxes below a certain annual income amount. The idea with most of the GOP that slashing corporate and business taxes will benefit the middle class is, well, absolutely ridiculous.

For most of the 19th and 20th century, operated their economies using concepts from Wagner’s Law, named for the 19th-century German economist Adolph Wagner. The law states that government spending as a share of the economy will naturally increase as nations obtain more wealth and citizens demand better services. Public policy in other countries has supported this idea quite well evidenced by the formation of public health systems, social welfare programs and laws passed that benefit the average worker. Applying this law to the United States, it fails, miserably. Recent legislation, starting around the dot-com crash, has continued to benefit the small sliver of ultra-wealthy in this country while being sold as something for the average American. The reasons most Americans are averse to taxes and government is hard to understand or explain. It could be our individualism. Or it could be racial in that some believe, incorrectly, that social programs benefit minorities.

One of the shocking facts of the Republicans tax reform plan is that it will cost the United States $1.5 trillion over the next decade, or more than 0.5% of GDP. Most Americans are unable to visualize just how much $1.5 trillion represents. One hallmark of the plan, that has a lot of support from the GOP, is raising the exemption on the estate tax to $11 million. That would only help that narrow sliver of ultra-wealthy Americans. A counter-proposal to this would be raising the estate tax rate and cutting the exemptions to a level where they were in the 1970’s. Doing so would generate $1 trillion in tax revenue over the next decade if all other proposals in the tax reform plan stay the same. Doing the quick math, that would cost the United States only $500 billion over the next decade, a much more palatable figure. Increasing the upper tax bracket by 5% or more would wipe the cost out and turn the tax plan into something that creates a surplus. Two of the multiple reform proposals would completely wipe out the cost.

How is this not a no-brainer?

I’m a middle aged tech geek with a passion for computers, technology, politics and all the bits in the middle between 0 and 1. I am what could be considered a moderate progressive and like to consider all sides of a debate before taking a position.

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