Sunday, February 20, 2011
Econorama: Revenue vs. Expenditure Goofiness
Econorama: Revenue vs. Expenditure Goofiness: "It's hard to believe that we had a budget surplus when George W. Bush took office in 2001. Government revenues came largely from three..."
Revenue vs. Expenditure Goofiness
It's hard to believe that we had a budget surplus when George W. Bush took office in 2001. Government revenues came largely from three key areas accounting for 92% of the total :
48% from individual income taxes, 34% from SS related receipts and 10% from corporate income taxes.
So what happened on the revenue side?
................................................................................................................................
Well, in 2001 and 2003 the president and congress enacted personal income tax cuts. Note the timing. The first round right after the general election of 2000 and the second leading into the 2004 general election. What a fortuitous coincidence for those running for new office or re-election.
Anyway, the controversial part was the tax cuts for the wealthy - loosely defined as individual earning over $200k or households over $250k.
When you contemplate a substantial reduction in revenues generating 48% of the total government receipts, its easy to predict a problem. Regardless of trickle-down economics (wisdom), the wealthy are not the job creators whose actions bring prosperity to the rest. No, they are driven solely to increase their personal wealth. There is never enough money to satisfy the cravings of those who can never stop amassing as long as there is still money and things out there that is not yet theirs. Particularly in the financial sector where nightmarish financial products of no social worth are created to generate fees and bonuses. I'm not sure these amassors buying BMWs, Audi's, yachts from other rich people, paintings, foreign luxurious carpets and other such status symbols do all that much to stimulate the economy. Heck, the Fed has done enough for the "revenue side of the rich" through TARP, the AIG bailout and propping up the stock market. QE handouts bringing the "borrow almost free from the Fed and lend to the Treasury at up to 4%" show that the Big Banks still vitally need recapitalization to fuel their greed.
{{{ Update #1 - President Obama broke his election pledge by agreeing to extend the temporary tax cuts for the wealthy. Thanks to congressional pressure }}}
{{{ Update #2 - it appears that personal income tax revenue receipts now only account for 41% of total revenues. What a shock !!! (sure) }}}
Let's go to the second highest source of government revenues at 34% - Social Security & related receipts.
It is ludicrous that an individual earning $10 million pays the exact same Social Security tax as someone earning $106,800. The normal tax rate of 6.2% is only applied against the first hundred thou or so.
Gee, I wonder if it might not be a bad idea to raise that just a tad?
Merely increasing the tax base to the first $200 or $250k would resolve the funding concerns almost right away. Seems pretty basic to me. Or you could get imaginative, skip the small fry elite and re-institute the 6.2% on incomes above $2 million a year. Keep in mind that these people ultimately will get their benefits just like everyone else - but always the maximum allowable. Much fairer than selling out the young generation and other future victims.
Finally we hit the third highest government revenue generator, corporate income taxes.
We all know about Exxon paying next to nothing and GE paying 3%. We all know that corporate tax attorneys run rings around the the tax collectors and have secured friendly legislation through lobby power and campaign contributions. We all know about directing profits to low taxation rate countries.
We all know that big corporations have two mantras : 1. Evade and avoid federal taxes at any cost. 2..Treat non-executive employees as balance sheet liabilities instead of assets.
So there is the mindset of this government revenue contributor.
...............................................................................................................................
When you utilize common sense in examining the situation with what constituted 92% of revenues as late as 2001, is it really any wonder that we are in such a budget and deficit crisis?
This really doesn't even address the spending side of the equation, which will be confronted in a later piece.
- The Mental Detector
48% from individual income taxes, 34% from SS related receipts and 10% from corporate income taxes.
So what happened on the revenue side?
................................................................................................................................
Well, in 2001 and 2003 the president and congress enacted personal income tax cuts. Note the timing. The first round right after the general election of 2000 and the second leading into the 2004 general election. What a fortuitous coincidence for those running for new office or re-election.
Anyway, the controversial part was the tax cuts for the wealthy - loosely defined as individual earning over $200k or households over $250k.
When you contemplate a substantial reduction in revenues generating 48% of the total government receipts, its easy to predict a problem. Regardless of trickle-down economics (wisdom), the wealthy are not the job creators whose actions bring prosperity to the rest. No, they are driven solely to increase their personal wealth. There is never enough money to satisfy the cravings of those who can never stop amassing as long as there is still money and things out there that is not yet theirs. Particularly in the financial sector where nightmarish financial products of no social worth are created to generate fees and bonuses. I'm not sure these amassors buying BMWs, Audi's, yachts from other rich people, paintings, foreign luxurious carpets and other such status symbols do all that much to stimulate the economy. Heck, the Fed has done enough for the "revenue side of the rich" through TARP, the AIG bailout and propping up the stock market. QE handouts bringing the "borrow almost free from the Fed and lend to the Treasury at up to 4%" show that the Big Banks still vitally need recapitalization to fuel their greed.
{{{ Update #1 - President Obama broke his election pledge by agreeing to extend the temporary tax cuts for the wealthy. Thanks to congressional pressure }}}
{{{ Update #2 - it appears that personal income tax revenue receipts now only account for 41% of total revenues. What a shock !!! (sure) }}}
Let's go to the second highest source of government revenues at 34% - Social Security & related receipts.
It is ludicrous that an individual earning $10 million pays the exact same Social Security tax as someone earning $106,800. The normal tax rate of 6.2% is only applied against the first hundred thou or so.
Gee, I wonder if it might not be a bad idea to raise that just a tad?
Merely increasing the tax base to the first $200 or $250k would resolve the funding concerns almost right away. Seems pretty basic to me. Or you could get imaginative, skip the small fry elite and re-institute the 6.2% on incomes above $2 million a year. Keep in mind that these people ultimately will get their benefits just like everyone else - but always the maximum allowable. Much fairer than selling out the young generation and other future victims.
Finally we hit the third highest government revenue generator, corporate income taxes.
We all know about Exxon paying next to nothing and GE paying 3%. We all know that corporate tax attorneys run rings around the the tax collectors and have secured friendly legislation through lobby power and campaign contributions. We all know about directing profits to low taxation rate countries.
We all know that big corporations have two mantras : 1. Evade and avoid federal taxes at any cost. 2..Treat non-executive employees as balance sheet liabilities instead of assets.
So there is the mindset of this government revenue contributor.
...............................................................................................................................
When you utilize common sense in examining the situation with what constituted 92% of revenues as late as 2001, is it really any wonder that we are in such a budget and deficit crisis?
This really doesn't even address the spending side of the equation, which will be confronted in a later piece.
- The Mental Detector
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