Wednesday, July 13, 2011

A Raise in Taxes, My Eye

Here's a scenario:

Dad is sitting at his desk figuring out the family budget for the year to come. He's pleased to discover he's flush. He decides to share the wealth by giving his son Johnny a bonus on top of his allowance. Johnny is thrilled to pieces. Dad's also curious to see what his son will do with the extra money. Will he save it? Invest it? Spend it to start a lemonade stand? Share some with his baby sister, who isn't old enough for an allowance yet?

A few years pass. The family stays flush, so Dad keeps giving Johnny his yearly bonus, though honestly he hasn't paid any attention to what the kid does with it.

But then comes a run of bad luck. The family car breaks down, and repairs are expensive. Then the hot water heater springs a leak. That's another two thousand bucks. Dad is reviewing his budget and figuring out where to make cuts and how he can perhaps find some extra revenue. He considers Johnny's bonus.

"Johnny," Dad says, "Money's a little tight, so even though you'll still get your allowance, I need to pass on giving you the bonus this year."

Johnny's lower lip trembles. "But Dad!"

"I know. I've already cut some other things. It wasn't enough. The bonus has got to go."

Johnny starts throwing a tantrum.

Dad is surprised. "Well, good lord, son," he says. "What were you spending it on anyway?"

Johnny blubbers: "A football ... some new CDs ... a catcher's glove ... a ballcap ... "

"So you've just been spending it on stuff for yourself?"

"Well, my other football was getting old, and I also play first base, so I needed a new catcher's glove for when I play that position, and--"

"Okay, son. Try to see it my way. I would use your bonus money to pay for things that benefit the whole family. You know: the roof over our head, food, clothing--"

"I don't care! It's not fair!" Johnny falls down on the floor and screams and kicks his feet.

End of story.

This, to me, is exactly what's going on in Congress right now as the two parties posture and use their manufactured "debt ceiling crisis" as a way to push their own agendas. Let's not get into all the political details (because they could fill a book), but one thing that's on the table is Johnny's bonus. Johnny's bonus equals the tax breaks given to wealthy Americans when the economy had a surplus. The surplus is now gone, and we have an eye-popping deficit. One solution being floated (as part of a package of cuts and other measures to save money and bring in more revenue) is to rescind the tax cuts for the wealthy (ie, take away Johnny's bonus).

It is part of a perfectly rational solution to me, when we are also looking at cuts across the board. In fact, if we are willing to take away Johnny's bonus, we may very well not have to cut or make any drastic changes to Social Security and Medicare--programs that impact ALL Americans, not just Johnny. These programs are also on the table.

Adding to the confusion is that Johnny is now saying that if you take away his bonus, his ability to start up a lemonade stand, make some money for the family, and perhaps employ a friend or two to boot, will be gone. Never mind that he's had the bonus for several years and did no such a thing with the money.

Now you may find it to be a false analogy to call Johnny's bonus equivalent to a tax break. But in effect it is. The govt is letting the wealthy keep money it didn't used to let them keep. That equals more money in their pockets. It was a gift from the Bush Administration when the US had a surplus. By saying "sorry, the surplus is gone, so we need to start taxing you again on x" is not really a RAISE in taxes. They are just taking away a "bonus" tax break that is no longer a fiscally sound thing to keep in place.

But, the GOP are calling it a raise in taxes so that they can add to it that old chestnut (which is in and of itself an arguable adage): "You don't raise taxes in a recession. That's a job killer."

Folks, even Ronald Reagan raised taxes when he saw a need. So did the first George "Read my lips, no new taxes" Bush.

We need to get real and stop the pissing contest.

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