Congress Must Focus on a Better Tax System
As most economists have noted, the United States needs to both increase taxes AND lower spending. Which of these tactics is more effective is a hotly debated topic between Democrats and Republicans, but it is now clear we need a combination of both in order to repair this economy.
Let’s take a look at our funding first. Obviously, the tax cuts of the past decade have been a mistake, and any pundit who says otherwise is spouting propaganda. Outcries that taxing the rich beyond their current reduced rates will harm economic growth are flat out lies. Many of America’s richest do not accumulate their money from income, but from trading stocks and other financial instruments. These profits are not taxed as income, but as capital gains, which only has a taxation rate of 15 percent. Thanks to loopholes like this, our wealthiest citizens often pay a far smaller percentage in taxes than their middle class counterparts.
The U.S. would also do well to incorporate a value-added tax, or VAT, which is an important source of revenue for almost all the other countries on the planet. VATs are similar to sales taxes and are far more efficient than income taxes. America could implement a VAT of only 5 to 10 percent, and drastically reduce income tax rates, while generating more funds to pay off the national debt.
On the spending side, we must be realistic about which expenses are truly impacting the people of this country. Expensive and unnecessary wars are a major money pit in our current budget. Defense spending has its place, but we are currently squandering both money and human lives: thousands of lives and billions of dollars have been lost. Even though we are gradually seeing an end to these military confrontations, they are not coming fast enough. We absolutely have to put a stop to this drain on our budget.
Procedural changes to how money is allocated and spent will help prevent problems in the future. Implementing mandatory pay-as-you-go rules, which force any increase in spending to go alongside tax increases or spending cuts elsewhere, would help prevent future deficit spending.
In order to put our federal government on a new path, we will need to look at all areas of the federal budget. By understanding and considering the options in these areas, we can support elected leaders from both political parties who want to do the right thing, and design a plan that helps us live within our means.