Demanding to pay less and receive more is the new normal.
The colonial battle cry that helped form our nation: “no taxation without
representation” has morphed into the new taxpayer creed: “I want the government
to provide for all my needs while taxing me and regulating society as little as
possible.” What I will call the Amazon
effect has replaced all rational thought when it comes to Americans paying
their fair share to support a vibrant democratic society.
The Amazon effect permits the largest retailer in the
history of the world to plough all profits back into its business to avoid
taxes, and advertise a lower price for goods and services than a brick and
mortar store is able to charge. Down the
block is a family owned shoe store that has always carried my unique size with
excellent service.
I can now purchase
the shoes for 1/3 less on Amazon and have them delivered the next day. I
eagerly do so and the shoe store goes out of business. Amazon is costing me less and taking care of
all of my retail needs. Americans are
now asking, why can’t the government do the same and provide security, roads,
schools and social services with fewer tax dollars?
Unfortunately taxing authorities, unlike Amazon, do not have
the ability to provide more for less.
Taxpayers end up getting less for less. We conveniently forget that hard
choices must be made as to what societal needs will be funded and which will be
cut or eliminated.
Income taxes are at their lowest rates in years. But
Republicans have chosen to exacerbate the problem and are proposing to lower
taxes even more, bringing the corporate rate down to 20% from 35% and the
highest individual rate down to 35%, from the present 39.6%.
One of the newest conservative schemes to lower taxes below
the historic floor and to fund social services with less tax funds involves a
fascinating sleight of hand. It is
called “the block grant” and challenges the intelligence of the American
taxpayer. Pennsylvania’s citizens first
became acquainted with this plan when former Governor Tom Corbett offered
County officials less state funding for social services in the form of block
grants. In return, local officials had the discretion to spend the funds as
they felt appropriate for each county.
Lower taxes, less funding with less regulation and a greater burden
placed on the local government, the conservative dream come true.
The centerpiece of the most recent attempt to repeal and
replace Obama Care was, again, block grants. The proposed legislation called
for dividing up the Medicaid funds already committed under Obamacare among all
50 states, even those that had rejected the federal funds when they were first
offered. Under the block grant to each
state there would be wide discretion on how to spend down the grant. The problem is that those states that had
previously accepted Medicaid funds would now be billions below what they
previously received. More discretion
with far less funds did not strike the effected Governors as a good plan. While this plan has initially failed to pass
in the Senate, use of discretionary block grants to offset lower taxes and less
funds for social services are here to stay as long as Republicans control federal
and state elected offices.
Most recently, what are the Republicans up to? During the 2016 election they promised their
donors and supporters both the repeal and replace of Obamacare and tax reform
(lower taxes). The hope was to save tax
dollars on the former in order to implement the latter. The problem is the Amazon effect. Voters are all in for paying less taxes, but
against taking away a benefit they have received for almost 8 years from the
federal government. Taxpayers want more for less but elected officials cannot figure
out how to turn less tax revenue into health benefits that Americans are not
willing to surrender.
The second problem with block grants is that no rational
taxpayer believes that giving states discretion to spend Medicaid funds with
little oversight will increase efficiencies.
Many state legislatures are as tied in knots as our own Harrisburg crew
and cannot pass budgets let alone make intelligent choices on Medicaid
funding. More likely the block grants
would end up plugging other holes in state budgets having little to do with
social services.
Apart from block grants there are many other results from
lowering taxes that simply do not make sense in terms of sound governmental
policy. First, unless there are drastic cuts across the board, an impossibility
because of commitments to Social Security, Medicare and the military, income
taxes will explode the deficit. One estimate is that the proposed tax reduction
will add 1.5 trillion to deficits over 10 years. It is important to remember
that at the time of the last significant tax cuts, implemented by George W. Bush,
the federal government ran a budget surplus for several years in a row, while
today we are facing the largest deficit in the nation’s history.
Second, lowering taxes for corporations both at home and for
multinationals who have billions in profits parked overseas has never had the
desired effect. Instead of using the windfall to expand and hire, corporations
have used the tax savings to buy back stock or raise dividends.
Third, lowering taxes for the wealthy has never been shown
to increase productivity. Instead, the
savings are invested in the stock market, creating more wealth and asset
bubbles that eventually harm the economy.
Fourth, in times of war, Americans have traditionally recognized
that a tax increase was necessary to fund expensive military operations. The continuing 16-year-old undeclared war in
the Mid-East has been the exception. In
Iraq and Afghanistan 2.4 trillion dollars in taxpayer funds have been spent on
the hostilities without a tax increase to help defer the costs. Now, in
addition to the strain that war places on tax revenue, 2017 has saddled the
government with three large natural disasters, requiring billions in
unanticipated spending.
Lastly, the Republican plan to lower taxes will encourage
social unrest by increasing income inequality while decreasing funding for our
full blown national crises involving addiction, mental health and the cost of
higher education. This is especially true when low income workers realize the
lowest tax rate of 10%, currently in effect, is being raised to 12% under the
Republican proposals.
The Amazon effect may or may not be an appropriate model to
run a business. The Amazon corporation will either collapse under its own
weight or continue to grow and prosper and eventually return acceptable profits
to its stake holders. But expecting more
for less is no way for Americans to view their government. The economy is doing
well. The stock market is at an all-time high.
Inflation, interest rates and the unemployment rate are at historic
lows. This is the time to raise income
taxes, not lower them. Keeping the
sequestration in place with higher taxes will attack the deficit and permit our
most pressing needs to be addressed.
I am not one who believes that only the wealthy should be
taxed at higher rates. All Americans
with income, both earned and unearned should share the burden under a
progressive tax scheme, that charges more taxes as the income of a taxpayer increases.
It is time to show as much respect by paying our fair share to support the
public institutions and infrastructure that are the building blocks of our
democracy as we do for other symbols of patriotism. Standing tall against the
Amazon effect is more important for the future of America, than standing for
the National Anthem. True patriots will
support tax increases and know that they are insuring the health and welfare of
future generations.
