In this post, I’m going to make the case for higher taxes. Yes, very popular subject. At the end, I will share what my 12 year old grandkids have to say—ahh, from the mouths of children.
The case for raising taxes encompasses concerns for social justice, economic stability, and environmental sustainability. When governments implement progressive tax policies, they are able to reduce income inequality, fund essential public services, confront global challenges, and invest in natural climate solutions. While the idea of higher taxes is vigorously resisted among several constituencies, the benefits to the common community far outweigh the perceived pain of the wealthy elite. In 1944–45, individuals who earned more than $200,000 per year were taxed 94% of their income above that amount. Under Eisenhower in the 1950’s, the corporate tax rate was 90%. In a 2021 White House study, the wealthiest 400 billionaire families in the U.S. paid an average federal individual tax rate of just 8.2%. The average American taxpayer in the same period paid 13%. Corporations are currently taxed at a flat 21% rate. It seems to me there is a lot of room between 8% and 90% that would significantly help us address our challenges.
In short, raising taxes is morally and pragmatically justifiable given the potential impact on equity and sustainability. Let’s get started with a few facts:
US Debt: 34 Trillion
US GDP: 28 Trillion (Yes, debt exceeds GDP)
Revenue: 5.0 Trillion
Expenses: 6.5 Trillion (Yes, expenses exceed revenues)
Annual Deficit: 1.5 Trillion
Major Sources of Spending: (about $1 trillion each for 5 areas)
Social Security: $1.0 Trillion
Medicare: $944 Billion
Interest on Debt: $875 Billion
Defense: $860 Billion
Medicaid: $805 Billion
Total: $4.5 Trillion
As you can see, these top five line items consume almost all the revenues coming into the government. All other expenses are financed by borrowing more money and adding the resulting deficit to the debt, including:
- Veteran affairs
- Housing
- Education
- Social Services
- Transportation
- Research
- Training
I don’t know about you, but I don’t want to give up my social security and Medicare, and I don’t see much chance for cutting defense given the state of the world right now. We have no choice about paying interest on the debt, and that number is only going to grow with rising interest rates and larger debt. Am I missing something here, or does it seem rather apparent that we need to increase taxes, not reduce them?
As an individual, if I had a total income of $100,000 per year and expenses of $130,000 per year, I would either have to work another job or cut expenses. If my expenses consisted entirely of housing costs, food, health care, transportation, child care, and education, I would look for ways to increase revenues instead of decreasing expenses. A decrease in any one of those essential expenses would only trigger a downward spiral for me and my family.
If I look at the budget from a national perspective (nope, not qualified as an expert in this area, although I did study economics in graduate school 50 years ago), my sense is that we need to invest more in affordable housing, education, social services, research, transportation, and training. Indeed, we should be spending more on all the line items that are currently being funded by deficit spending, AND we should explore cuts in the top five items that currently eat up all our revenues. The only way to be able to achieve anything close to a balanced budget, however, is to raise taxes. Got any other ideas??
It seems to me that there is no better time to start thinking differently about how we spend our money. Addiction rates of all kinds are rising. Educational performance is declining. The gaps between rich and poor are widening. Climate change is rapidly accelerating. Nuclear weapons are proliferating. And our infrastructure is crumbling. What is the government’s current role in all of these problems? To act as an insurance company with a military and to pay interest on our ever increasing debt.
The plus side indicates an even better reason to act now. Our economy is remarkably strong. Inflation is declining, business investment is growing, job growth is expanding, and wage increases are outpacing inflation. In addition, consumers are experiencing more confidence in the future and more positive feelings about current economic conditions. Yet, sadly, Trump holds a 22% advantage over Biden, whom voters feel would do a better job of handling the economy. Oy.
So let’s hear the perspective of the children who will inherit all the messes we have created. My grandson, always full of answers, says, “Why not just flip the revenue and expenses, i.e. create a 1.5 trillion dollar surplus each year, instead of a 1.5 trillion dollar deficit, and invest the extra money in solving systems instead of reacting to symptoms?” Yes, his comment got a little editing help, but it’s essentially what he said. My granddaughter, on the other hand, always full of questions, asks: “Why are we spending so much money outside of the country when we have so many problems at home?” Color me biased, but I think Ezra has a good solution, and Annie raises a legitimate question.
Let me address each. Yes, Ezra, you are exactly right, but creating a surplus instead of a deficit can only be achieved through higher taxes. Personally, I’m glad our government serves as an insurance company. Indeed, I wish it would do even more – for example, provide universal health care and regulate drug companies. I’m also glad that we still have the most powerful military in the world, even though I think there are multiple ways we could reduce spending on defense. I also believe we should be investing a lot more in education, mental health, housing, child care, climate change, transportation, etc. That can only happen if we raise taxes. So, Ezra, great solution if only you could get Congress to act.
Annie, you raise a great question. The reason we spend money outside our own borders is because America still serves as the best hope for maintaining the rules-based world order established over the past 75 years. Our alliances have precluded Russia, China, Iran, and North Korea from being more aggressive than they already are. Unfortunately, the most populous countries in the world are moving away from a liberal democracy:
China: 1.4 billion people
India: 1.4 billion people
United States: 336 million people
Indonesia: 281 million people
Pakistan: 252 million people
Nigeria: 236 million people
Brazil: 220 million people
Bangladesh: 168 million people
Russia: 140 million people
Mexico: 130 million people
Xi has consolidated control in China. Modi has become increasingly Hindu-nationalistic, Trump could be our next president; and, in Indonesia and Pakistan, military dictators took over control of their governments.
Clearly, we need to continue to invest in our relationships in Latin America, Europe, Canada, Mexico, Africa, and Asia if we have any hope of preventing catastrophe or apocalypse. So, Annie, it’s a good question you raise and one that needs to be addressed honestly and transparently. We need to address all the problems in our own country AND invest in our alliances around the world.
I’m hoping we can find a way to do all that is required at home as well as abroad to ensure a safe and productive future for our planet. I’m hoping we can begin to take seriously the values of fairness, equality, sustainability, responsibility, and stability that make it possible for democracies to thrive. I’m also hoping we will start listening more closely to our children. And, yes, we need to raise taxes and invest in democracy-loving governments. May it be so.
Also published on Medium.
[…] of research and reflection in our lives. I was sharing with him how I had used AI for my last post on taxes to make sure I had not missed any critical points in making my case. Steve asked me if I had […]
Great idea, never gonna happen, but I agree!Thanks Ricky