The Grown Up Tax Bill: Sorry, Grown-Ups Are Out of Stock
Dear Martian Central Bank: could you please send us some Grown-Ups?
Scott Galloway recently sketched out a common-sense set of tax reforms that would go a long way to reducing the widening federal deficit. There's just one Catch, Catch-25: it requires Grown-Ups, and Grown-Ups are out of stock, and have been for a long time, as it seems they're no longer being produced. The Grown Up Tax Bill.
I confess that to say this is to admit to being delusional, but Galloway's suggested tax reforms seem self-evidently common-sense, which means there isn't a snowball's chance in Heck any of them could possibly be enacted. Common-sense has zero value in today's cultural void; the only thing that has any value is what's acceptable to those holding the levers of power and wealth.
If wearing our underwear on the outside of our clothing is acceptable to those holding the levers of power and wealth, then that is a slam-dunk to be enacted regardless of its impracticality and absurdity.
Those holding the levers of power and wealth all have luxury penthouses in FantasyLand, where they can peer down at all the little people doing whatever little people do--go to work, pay taxes, get takeout because they're exhausted, watch the latest bingeable entertainment, and so on.
There are two core industries in FantasyLand. One is corruption and the other is borrowing or creating however many trillions of dollars it takes to keep FantasyLand looking tidy. Oh, wait--I guess there's only one industry because borrowing or creating trillions of dollars to blow on keeping up appearances rather than on increasing efficiency and productivity is the ultimate form of corruption.
Here are thumbnails of Galloway's requires Grown-Ups, oops, dang, we're plumb out of Grown-Ups tax reforms:
1. Increase compliance with existing tax laws. Sounds fair, right, because us little people don't have $500/hour experts to pore over the tens of thousands of tax-regulation pages to find loopholes. (Spoiler alert: there aren't any for us little people.) But nope, increasing compliance via audits is out because rich people might have to pay the taxes they owe and that is a mortal sin against all that is sacred in the status quo.
So forget pressuring wealthy folks to pay the taxes they owe, that requires Grown-Ups, and there aren't any in stock. We do have plenty of self-serving billionaires, will they do in a pinch? No? Well then, shucks, we can't help you fellas.
2. Reverse the $30 million estate tax giveaway. I'm sure this helps all the little people who would suffer catastrophic declines in their family's welfare if they could only pass along $5 million tax free. I mean, come on, that wouldn't even cover the beachfront getaway bungalow on Hanalei Bay, never mind all the other nice things. To pay any estate tax is an affront to decency.
Imagine, forcing us to stash the wealth in do-good hidey-holes, a.k.a. philanthro-Capitalist Foundations. What is the world coming to?
3. Put some teeth back in the Alternative Minimum Tax for incomes above 5X median household income ($80,000), i.e. $400,000. The original motivation for the AMT was public outrage that wealthy taxpayers paid zero taxes while those of us earning a fraction of their incomes were paying through the nose.
Look, I get that $400,000 doesn't go very far these days, but it is 5X median household income, and those collecting $400K in income should be able to pay at least what the household making $80K is paying.
Remember, the AMT isn't an extra tax, it's a means to collect some tax from people making a lot of money who would otherwise be paying little or nothing.
If you end up owing AMT, you did good. Pat yourself on the back. If you'd paid 40% of your income in taxes like us self-employed stiffs, you wouldn't be paying any AMT.
4. Since corporations are "citizens," then tax them like "citizens." Yes, I know all the arguments that corporate taxes are "double taxes" because shareholders pay tax on dividends, and maybe there's a common-sense way to deal with this, such as deducting dividends paid to shareholders. And I've often said here that I favor a low corporate flat tax rather than the convoluted unfair mess we have now.
But hey, if corporations have all the privileges of "citizens," then shouldn't they pay taxes like "citizens"?
5. OK, cup your hands and I'll pour liquid iron into them. In other words, I'm going to brace myself and reprint Galloway's last reform, means-testing Social Security payments as the common-sense way to avoid slashing the payments to all beneficiaries when the bogus "trust fund" (another FantasyLand invention) runs dry in a few years.
Galloway's summary: "Phasing out benefits for those with more than $150,000 of non-Social Security income would save an estimated $600b to $700b over a decade." I know, I know, I paid into the system all these years.
Yeah, so have I, so let's set up a little Excel macro and run through every beneficiary's SSA account and adjust each year's SSA taxes paid for inflation so each years' SSA taxes paid is in today's dollars, then add the average short-term Treasury yield rate in each year to the running total, and then we'll have a total of what each beneficiary paid in, with interest. Once we add the employer's half, we have a grand total of all monies paid into SSA and the interest that would have accrued if it had actually been in a Trust Fund rather than a bogus make-believe flim-flam.
After these funds are paid out, the SSA payments stop: we paid back what you put in with interest, so we're done paying you. Wouldn't that be fair? Given that the SSA payroll tax percentage was a lot lower in the old days, many beneficiaries would discover that their contributions plus interest only lasted a few years.
So what's common-sense? What's fair? That's open to discussion, but the money running out isn't a matter of opinion: it's the real world, and a deep recession will bring that date forward.
OK, I hear you: what about slashing and burning all that gummit waste? The biggest budget items just begging to be slashed and burned are 1) Medicare, 2) Medicaid, 3) the Pentagon and 4) interest paid on all the debt we've borrowed to put off having to act like Grown-Ups.
Rounding up a bit because rounding down simply isn't common-sense, here are the big budget programs:
Social Security: $1.5 trillion
Medicare: $1.2 trillion
Medicaid: $1 trillion
Pentagon: $1 trillion
Interest paid: $1 trillion
TOTAL $5.7 trillion
total federal budget: $6.8 trillion
Everything else: $1.1 trillion
As this chart shows, healthcare, Social Security and interest on the debt account for 81% of expected spending growth. Throw in increased Pentagon spending, and you pretty much have the whole enchilada.
All those who reckon they can slash and burn Medicare, Medicaid and the Pentagon, line up here for your suicide mission. You're facing entrenched special interests with unlimited lobbying budgets and politicians with a desperate, crying need for millions in campaign contributions--not later, now, as the election cycle is now permanent.
Yowza, look at Medicare: OK kids, define unsustainable:
Yowza, look at Medicaid: OK kids, define parabolic:
Dear Martian Central Bank: could you please send us some Grown-Ups? Any size or appearance will do as long as they're real-live Grown-Ups who manage to do difficult things no matter what obstacles are thrown in their way, even if everyone is upset and whining and throwing a tantrum: how dare you even enter FantasyLand, etc.
Arigato, Big Guys, or well, Little Green Guys. We sure do need some help here, because we're flat out of Grown-Ups, the shelves are bare, they're on order but production must have ground to a halt, as we're still out of stock.
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