Progressive Values, Part I: A FairTax System

I will be doing a series over the next few weeks called Progressive Values.  In it, I will present the case for a progressive point of view on all sorts of different issues, including: Taxes, Education, "National Defense", the Financial Sector, and Transportation.

Warning: the rest of this post is about taxes, so here is a Beatles song to get you through:


Since George W. Bush became president, the US government has not raised enough tax revenue to fund its programs, and the US National Debt is currently over $14 trillion (trillion - that's twelve zeroes after the 14!). The tax system as a whole is regressive, with Warren Buffett and Fortune 400 members having a lower tax rate than their secretaries.  In addition, many corporations like GE pay little to nothing in taxes.

Since the 80's, however, the average Americans' income has stayed the same, and they have had to contend with rising costs of housing, education, food, transportation, and childcare.  If you are already rich, it is easy to invest your money and earn even more money.  But if you don't have very much right now, it's hard to even pay your bills, not to mention get ahead and save money.  The United States is one of the richest countries in the world, we can do better than that!

Education and Transportation, or lack thereof

Warren Buffett makes it rain!  Read on to see why I posted a picture of  Buffett...

I was reading the Star Tribune, and I saw a few articles that caught my attention.  On the same page of the paper, there was an article about how the Republican-dominated MN Legislature wants to cut the state's higher education budget and the K-12 and Pre-kindergarten budget. (Sidenote: The higher ed bill is sponsored by Michelle Fishbach, no relation to Michelle Bachman.  What is it with this state and people named Michelle bach-something?)  Now, this was not in today's people, but these same Republicans also also want to cut funding for public transportation.

Never mind that the wage gap between educated and uneducated workers is increasing.  Never mind that education in schools is supposed to prepare the next generation of workers.  Never mind that early education provides the highest return on investment of any public spending.  Never mind that the University of Minnesota's research helped create Minnesota's thriving Medical devices industry.  Never mind that public transportation system allows people to get to work and contribute to the economy - and is in fact supported by businesses!  No, these things aren't important, right?

Republicans say that cuts such as these are necessary to close the state's $5.1 Billion deficit.  Horse shit.  What we need to do is reform the tax code so that the wealthy pay their fair share.  By his own admission, Warren Buffett pays a lower percentage of his income in taxes than his secretary does.  Buffett even bet $1 MILLION that no Fortune 500 CEO pays a higher percent of their income in taxes than their receptionist.  So far no one's taken his bet.  And over in New York, billionaire residents of a luxury building pay more than their janitors.

Why does this happen, you ask?  Well for starters, much of wealthy people's income is capital gains, which is taxed at 15% no matter how much money they make.  In addition, hedge fund managers are often allowed to defer their income, allowing them to earn compound interest on his money before paying taxes.  Don't ask me why on that one.  Rich people like Buffett also can take advantage of all the deductions in our tax code - mortgage interest, business travel, etc.  In addition, though Federal Income tax is generally progressive, state and local taxes are heavily regressive - the poor pay a much higher % of their income on sales and other local taxes.

Well, that was a long post, but if you're confused just remember this:

We can afford and must provide good public education and transport services - we just need billionaires to pay their fair share of taxes!

Mark Dayton's Minnesota budget: Taxes

Several days ago, Minnesota Governor Mark Dayton, (who did NOT take six months to be sworn in, - I'm looking at you, Al Franken!)  released his proposed budget for the state of Minnesota.  Here's a summary of his budget:

• Through increased income tax and property taxes, the richest 5% of Minnesotans will pay an additional $4 billion
• Education: Increased funding for K-12 education by $37 million, mostly to fund more full-day Kindergartens
• Early Education: Funds a quality rating system for early child educators
• Health Care: Eliminate eligibility for MinnesotaCare for people making over $20,000 and raise the surcharge on health care providers
• State Agencies: Reduces state workforce by 6%
• This is not a part of the budget, but Dayton is also proposing $1 billion for new public works and construction spending.

Keep in mind that Minnesota currently is $6 billion in debt, and Republicans currently control both houses of the Minnesota legislature.  Since it's getting late, tonight I'm only going to talk taxes.  I'll try to make some more posts in the coming days about the other parts of the budget.  So here goes:

I have to give credit to Dayton for having the guts to raise taxes, which is never a politically popular move.  Despite what republican politicians say, lowering taxes is among the least effective ways to stimulate the economy.  For proof, check out this table from the nonpartisan Congressional Budget Office!

As you can see, tax cuts to lower/middle income people come in with a multiplier of .6 to 1.5, tax cuts to high-income people have a multiplier of .2 to .6, while on the high end "Purchases of Goods and Services by the Federal Government" has a multiplier of 1 to 2.5.

So what do all these multipliers mean?  Basically, if you want to stimulate the economy in the short run (which god knows we need right now...), a tax cut is among the least effective ways to do it, while increasing government spending is the best!  In addition, it's hard to argue that the richest 5% of Minnesotans will be seriously hurt by a tax increase.  Cry me a river, and buy one less yacht.......