Forum Post: A Prescription for Uncle Sam

If we want to fix the mess we're in right now, we're going to need the government to do two major things; make the rich and big business pay their fair share through tax reform, and then allow it to take back certain necessary parts of society in the interest of using our tax dollars efficiently.

As far as revenue is concerned, the current system needs major changes.What we have right now is essentially a maze of Swiss cheese comprised of differing federal, state and local taxes. I choose that analogy because the ordinary guy who plays by the rules and pays his taxes when they come due no matter how onerous gets lost in the maze and finds his bank account half empty by the time it's over with because of burgeoning property taxes, obscure little rules, etc. while the millionaire or large corporation has the option of hiring a lawyer (or posse thereof), finding every single hole in the tax code, and proceeding to drive a Humvee through it.

What does this have to do with you? If you hear the words "progressive taxation" and immediately think "Shit. There goes my savings..." then it has everything to do with you. When most people think of taxes they think of property taxes, gas taxes, sales taxes, etc. that never seem to go down or go away and look like a really nasty way of nickel-and-diming you out of your hard-earned money. And, in fact, they probably are: consumption and property taxes tend to be among the most regressive forms of taxation and you are right to want relief.

Here's how tightening the tax code and even modestly raising federal income taxes on a national level may help you out: the types of taxes that I outlined above are generally administered on a state and/or local level to directly subsidize hospitals/schools/roads/etc. in your neighborhood. Nobody likes them, but they're a necessary means of balancing state and local budgets when federal grants can't keep pace with community reinvestment. Put simply, if administering and maintaining a top--flight high school costs $80 million per year and your district only gets $50 million from the federal and state governments, that extra $30 million has to come from somewhere.

If the wealthiest Americans and corporations paid out the actual nominal tax rates upfront to both the feds and the state governments (for those states with income and corporate taxes), then it might well be possible for everyone from the working class guy to the upper-middle class guy to have their cake and eat it too. More money in the federal coffers equals more money that the feds can give to state and local governments for things like schools and roads, and thus less money these governments have to raise on their own. This then means that many of the most onerous state and local taxes (including the hated property taxes) would stop going up and in certain cases might even go down without any reduction in services provided.

What people need to know is that real tax reform won't hurt them a bit if they've been playing by the spirit of the law and not the letter; closing loopholes and "redistribution of ill-gotten gains" or however else they're going to see it posted here is simply a catchier way of saying that we want to put the letter of the law back in line with the spirit in which it was enacted. Now, if you've gotten accustomed to working the loopholes and looking to pay as close to no taxes as possible, then that should be a scary prospect. If, on the other hand, you've been doing things the right way all along you should welcome us; if everyone else starts paying their fair share the way you already do, that actually translates to less civic and financial responsibility for you.

I would argue thus that we should go back to higher income taxes on the very top earners, and on top of that institute campaign finance and lobbying reform. Now I know that a whole bunch of you are going to object to this on the grounds that it's a waste of money, that no matter how much you put in you'll still get very little back out. That's not necessarily simply a function of spending, however; it's a function of efficiency.

The problem isn't specifically that government is spending too much; it's that we're seeing so little return on what we're spending. The current system has Uncle Sam shelling out tons of money in subsidies and tax breaks and lucrative contracts and then getting so little in return that taxpayers like you start getting pissed off and demanding there be an accounting for your money. Then once you get that account you see the amount of it that gets lost to inefficiencies in the system you just want to walk away from the feds altogether.

If we start taking a look at our defense budget for real we'll probably find all sorts of contracts that are late and over budget, or simply more expensive than training and maintaining your own people. If you look at the Lockheed Martin fighter jet flap it probably would have been cheaper to train a team of engineers and build the prototyping equipment they'd need. If we take government-subsidized private firms and consolidating those operations in-house, we have a start right there; if we stop giving crazy tax breaks for companies doing R&D and moved those operations back in-house the cost of funding the labs and paying the people would probably be less than the lost revenue. The same goes for mercenary firms like Blackwater; we already have trained, disciplined soldiers capable of providing security; why should we pay a private firm to provide less qualified people at a net loss to the taxpayer?

Slow down and actually take a look at whether or not we actually need to be handing out 90% of farm subsidies; ten to one we're subsidizing agribusiness conglomerates who really don't need it. Rather than directly paying subsidies we should encourage the breakup of large corporations like Monsanto (and a consequent revision of IP and patent law to put an end to the seed patenting game) and buy up surpluses from small farmers to store in a national food bank for use in natural disasters like Hurricane Katrina. As a rule, paying a private company to provide a service is more expensive than providing it oneself. The same goes to private insurance companies; what you have right now is runaway inflation of health insurance costs because nobody's challenging companies for jacking up the market. I do believe that a public option would be able to provide satisfactory care levels at affordable rates and still turn a tidy profit for the taxpayers.

Finally, if we want to avoid further asset bubbles of the sort that caused the 2008 collapse we need to restore Glass-Steagall and really begin regulating Wall Street. Part of that regulation will be enforcing real penalties for violations, including fines of hundreds of millions of dollars. Those fines will provide the government yet another source of income beside our taxes, and thus mean that the government will be able to do more with less of our money. In sum, a strong government does not have to be bloated and inefficient, and if we give Uncle Sam a less anemic revenue stream and allow him to do certain things for himself instead of relying on corporate contracts you'd be surprised at the results you get.