I once ran across an alleged quote by Abraham Lincoln that I can't run down now, so it must be one of those fake Lincoln quotes. But it's a good quote, anyway. Very much to the point. It was something like "If we wait until we craft a tax law that is equally fair to every man, then we should never collect a dime of tax". You can pretty much imagine Abe saying that.
When the Republican controlled Congress passed the budget busting tax law known as EGTRRA back in 2001, it had automatic "ratcheting mechanisms". As the years went by, it would widen tax brackets, lower rates,and make tax credits more generous.
As a result, as of 2009, tax receipts are down over $165 billion from 2008, to around $865 billion. Which is a whole shitload of money. But apparently not enough. More revenue really is needed, and more spending needs to be cut, starting with the military budget that eats up almost all of the income tax receipts.
Where is the money going to come from? At least some of it needs to come from the bottom 50%. They make 14% of the income, and pay 2% of the tax. Most of them make less than $30,000/yr, so it probably isn't realistic to expect them to pay more.
That doesn't mean that the government needs to pay them, either. Not only did the bottom 50% only pay $20 billion of income tax, they also claimed $90 billion in refundable tax credits, most of which boils down to paying people to have children. If we eliminated the income tax on them entirely, and also did away with refundable tax credits, it would increase tax receipts by $70 billion in 2009 alone.
I think that it would be "fair", too (I put fair in quotes, since no 2 people have the same idea of what "fair" is). Also eliminate all of the non-refundable credits as well. That would raise the savings from eliminating tax credits to about $200 billion, plus almost another $100 billion if we eliminated all corporate tax credits
Just by eliminating tax credits, we could bring in an extra $300 billion/yr. Sounds fair to me, even though I've taken some of those credits.
If we took the additional step of returning tax rates on the top 10% to 1980 levels, that would increase revenues by another $175-200 billion. The top 10%, moreso than just the top 1%, have seen their share of income go up the most, from about 33% of total agi in 1980, to about 45% today. So they can afford more than ever. Raising their effective tax rate from 18% to 24% wouldn't be the end of the world for them.
Sounds fair to me.
So far, I've found maybe as much as $500 billion in tax revenues just by tinkering around the edges of the tax code a bit. Maybe another, better designed welfare program could replace the $90 billion in refundable tax credits.
But for crying out loud, is it really "fair" to fund the government largely with a tax that only half of the country has to pay? The 53% is becoming the 50%. Pretty soon, payers of the income tax will be a minority.
That's not fair.
