Saturday, October 31, 2015

The GOP's Voodoo Tax Plans

There is the saying that insanity is evidenced by doing the same action over and over again and expecting a different result than what has occurred innumerable times before. Under this definition, the tax plans being offered by the Republican presidential candidates are nothing short of insane. These lunatics ignore the fact that since 1980 forward massive tax cuts for the wealthy and big business have failed to generate the economic growth promised by GOP charlatans and carnival barkers. Instead, what we have seen is a massive transfer of wealth to the top 1% and stagnation or decline in wages and wealth for everyone else.  Moreover, to make their fantasy based plans work, massive cuts to Social Security and Medicare would be needed, thus sending more average Americans into destitution in their supposed golden years.   The New York Times lets loose on the GOP in a main page editorial today. Here are highlights: 

The Republican presidential candidates were full of tax talk at this week’s debate. But none has a tax plan coherent enough to be the basis of a substantive discussion, let alone one that could meet the nation’s challenges. Take, for example, the issue of how much revenue any plan would raise or lose.

All of the Republican plans focus on tax cuts, so losses are all but inevitable. Quick-and-dirty calculations of proposals from Jeb Bush, Donald Trump, Marco Rubio and Ted Cruz show red ink running into the trillions of dollars.

Yet the candidates assert, against historical evidence, that revenue losses from tax cuts will be offset by economic growth. Ted Cruz invoked the Reagan-era tax cuts as a model for success for his 10 percent flat-tax proposal. In fact, President Reagan raised taxes to close the budget deficit that opened up after he cut them in 1981. Ben Carson offered his muddled proposal for a tax equal to 15 percent of gross domestic product, saying it would be appealing to everyone once he “put all the facts down.”

The tax proposals from Jeb Bush, Donald Trump and Marco Rubio, while not as fantastical as those of Mr. Cruz and Mr. Carson, all make big and broad cuts, mostly to benefit the wealthiest Americans, including an end to the estate tax, cuts in tax rates and enhanced tax breaks for investments. The only way the Republican candidates could ever pay for such large tax cuts would be by slashing big spending programs, namely, Medicare and Social Security.

All of these candidates deny fiscal reality. In the next 10 years, revenues will need to increase by 40 percent simply to keep federal spending even, per capita, with inflation and population growth. Additional revenues will be needed to pay for health care for the elderly, transportation systems and other obligations, as well as for newer challenges, including climate change. And interest on the national debt will surely rise because interest rates have nowhere to go but up.

In light of these needs, taxes have to go up. The reality is that income tax increases can be prudently imposed only on the wealthy at this point, because only they have had meaningful income gains in recent decades.

The Democratic candidates have acknowledged this and have called for high-end tax increases, while keeping proposed tax cuts targeted on low- or middle-income Americans. They have also called for new taxes on financial transactions. Most important, their tax plans are part of broader economic proposals to raise wages, including support for a higher minimum wage, unions, expanded profit-sharing and employee ownership.

Responsible policy for the near term demands tax increases on individuals and sectors that can bear them. There is no room or rationale for across-the-board tax cuts, no matter what the Republican candidates say.

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