In a move bold and radical by the standards of Washington political gridlock, President Obama yesterday called for comprehensive tax reform. In so doing, he has given Congressional Republicans the rope with which they may choose to hang themselves.
Everyone from Paul Krugman to Rush Limbaugh can agree that the U.S. tax code – weighing in at around 10,000 pages it is the third longest in the world, after India’s and Britain’s – is a mess, shot through with loopholes, incentives, and exemptions: $1 trillion worth each year, according to the President’s bipartisan deficit reduction commission, which released its preliminary findings a couple of weeks ago. The gist of the President’s remarks is that the tax code could be simplified by removing these loopholes, broadening the tax base, and lowering both corporate and personal income tax rates. [click to continue…]
Benjamin Franklin said, “Of two things you can be certain: death and taxes.” What was true in the 18th century is somewhat less so in 21st century America, at least where taxes are concerned. On this day, April 15, when most Americans are either submitting their annual tax returns or struggling to request extensions of the deadline, it is appropriate to consider the current state of taxation. It is widely reported that 47 percent of Americans pay no federal income tax, a number that has increased dramatically under the Bush and Obama presidencies. Yes, the members of this 47 percent remain subject to withholding for Social Security (pension) and Medicare (post-retirement health care) contributions, but they are exempt from personal income taxes. This obviously increases the burden on those who do pay taxes, but a far more important consequence is the establishment of a more or less permanent class of people who feel free to demand ever-more generous services from government knowing that someone else will pick up the tab. As a people we have already grown used to fighting wars in which other people will serve and die in our place, and we now have a society in which the demand for services is increasingly disconnected from any notion of responsibility to pay for them. This can’t help but erode the notion of what it means to be a citizen. [click to continue…]
In yesterday’s New York Times Janet Yellen, President of the Federal Reserve Bank of San Francisco, is quoted as predicting a slow drop in the U.S. unemployment rate, now 9.7 percent, to 9.25 percent by the end of this year and 8.0 percent by the end of 2011. This is pretty anemic in view of her forecast of 3.5% GDP growth this year and 4.5% next year, a robust performance for a mature economy, though she attributes much of this growth to reduction in inventories rather than growth in sales. Ms. Yellen doesn’t foresee a return to peak economic performance and a corresponding drop in unemployment until 2013. The cause, she says, is clear: an increase in business efficiency and labor productivity, which she says, “is here to stay.” [click to continue…]