“It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates.”
– John F. Kennedy (Yes, a Democratic president back in the Camelot days of the early ’60s wanted to slash taxes.)
This week’s post will make half of my readers indignant and the other half feel righteously vindicated in their thinking. I have no idea which half you are in. What is so controversial? Who pays taxes and why they should.
Research indicates that the top 1%/5%/10% are already paying the bulk of the income tax. Research also points out that the progressivity of tax rates, which climb relentlessly upward with income, surprisingly fails at incomes of over $10 million. This is an assumption because at that point capital gains tax and other tax-incentivized income comes into play that is typically not available to those of us with merely mortal incomes.
The next time we have a crisis and Democrats are in control of the White House and Congress (and after almost 50 years of observing political to-ing and fro-ing, I consider that a near certainty), the only alternative will be for the Democrats to introduce and pass some form of a value-added tax, which will not be accompanied by income tax cuts. Income tax cuts for the upper end of the income spectrum is just not on their agenda. They don’t understand the philosophical or economic reasons why that is something that should be done. I’m not asking them to here – that’s a debate for another day. I’m just saying that if Republicans don’t come to the realization of the situation, and introduce a VAT in a manner that they can live with, they’re going to have it shoved down their throats in a far more devastating and complicated manner.
If we don’t change things around then everyone better prepare for a slow recovery, followed closely by the Mother of All Recessions. I’m quite serious about that and will be writing about it over the next few weeks. Meaningless “tax reform,” which only messes around at the edges, will not keep us out of the next recession, which will likely be triggered from Europe.