Taxes and the fiscal cliff

Tax

Ok, let’s be honest taxes are a necessary evil. Americans could not live as they do without taxes. You need taxes for any number of essential services from public safety to transportation to national security and yes, true safety nets as well.

Prudent taxes to pay for prudent necessary spending has never been the issue for most rational citizens. The problem is and always has been imprudent spending caused by people who either get caught up in the public, non-profit mindset when it comes to spending or by those who use their power to spend to curry favor with constituents they need to keep their job. All this is compounded by rationalizing that obligations created by spending are far in the future and given no one knows what may happen thirty or forty years in the future, it will all work out.

The most cynical among us, and sadly and reluctantly I am heading toward that outlook, conclude that politicians intentionally create dependency on spending for government programs to solidify their power and thus their ideology. After all, once dependent on government programs who will vote for a new approach requiring more individual responsibility especially if we are told that upper classes can afford to carry the financial burden.

Here are a few examples of insultingly stupid rhetoric:

On gradually raising the Medicare eligibility age:

“It betrays the bedrock promise of Medicare: that Americans who work hard and take responsibility all their lives can know dignity in their later years,” Mrs. Pelosi wrote.

Oh wow, it’s ok to raise the Social Security age, but not Medicare. And sad to say Mrs Pelosi, if Americans took responsibility all their lives this wouldn’t be a problem. Why is it ok for a 35-year-old with two children to pay for health insurance when it’s not ok for a 66-year-old to do the same? You seem to forget that under current law an individual who keeps working with employer based health insurance does not use Medicare while they are working regardless of age.

And then we have the proposal to modify the Social Security COLA so the future increase will be modestly lower using a chain-weighted CPI. This proposal draws this reaction.

“Republicans are proposing we cut that COLA increase of $21 a month on average, in order to be able to preserve the tax rates that millionaires and billionaires are paying,” said Rep. Xavier Becerra (D., Calif.).

Really Mr. Becerra? If you believe that you are a moron. If you are just trying to rally the troops with false information, you are reprehensible. Raising taxes on millionaires and billionaires (conveniently a synonym for an income of $200,000) has nothing to do with Social Security. And by the way, several states facing serious underfunding in their pension plans have suspended automatic COLAs until the short fall is closed. God forbid the federal government be so responsible or creative. Mr Becerra, with the growing older population entitled to ever-growing benefits supported by a proportionally shrinking younger population, who will pay for all those promises? Never mind I know, the millionaires and billionaires (all 400 of them). Here’s an idea, call Warren and ask him to leave his estate of some $40 billion not to the Gates foundation but to the federal government (or just pay the inheritance tax), perhaps that will help the COLA.

But of course, there are taxes and then there are taxes.  Amazingly sixteen democratic senators are seeking to have one of the new taxes in Obamacare “delayed,” a 2.3 percent tax on medical devices  scheduled to take effect January 1.

Sen. Al Franken called it a “job-killing tax”

The press, economists, Wall Street and even a growing number of the political opposition accept the fact that taxes must be raised on the wealthy, at least only the wealthy for now. Once that happens the trap has sprung. In our minds we have solved the problem, but of course we haven’t solved anything other than the political goal to make the majority of Americans more dependent on fellow citizens through wealth transfer and to cloud the real spending and liability issues.

Even as we grapple with this fiscal “crisis” more spending legislation is introduced weekly to benefit this group or that. No one asks what happens after taxes are raised on 2% of Americans and it makes no dent in the deficit. No one asks if the purpose of the higher taxes is to reduce the debt, why doesn’t some politician tell us the new revenue will be directed only to the Treasury Fund that is dedicated to do just that. No one asks why the stimulus spending wasn’t taken out of the federal budget after it was spent?

Don’t we have this all backwards? Shouldn’t we be adjusting our spending to levels comparable to what all Americans are able and willing to pay rather than raising taxes to generate more spending?

Exactly where are we headed? Surely thinking people don’t believe the Pollyanna stories we are told about deficits, taxes, entitlements, the 2% and the middle class … or maybe they do.

There is one thing you can believe though. We Americans of the 21st century are doing a great disservice to our children and grandchildren both in fiscal terms of taxes and debt, but more important in terms of missed opportunity, lost drive and initiative and the burdens of complacency and mediocrity. Higher taxes don’t make life better.

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