Welcome to a discussion about the upcoming 5th Revolution in the US, which I’ve titled the “Revenge Revolution.” For more about the Revenge Revolution and the author, Entry #1. Periodically I write a “sense check” to assess whether a revolution in the US is possible or whether the entire exercise is based on a statistical aberration — i.e., a roughly 50-year cycle between major upheavals in the US Entry #476 was the most recent “sense check.”
BEGIN #479. The recent Republican rants in the House of Representatives about not raising the federal debt ceiling has stimulated other Republican supporters to make equally ill-informed and often comical comments about taxes and the economy. Many of these Republicans claim economics is nothing more than common sense and policies should be developed accordingly.
True, some aspects of economics are common sense. But many are not. Now, if the Republican zealots only applied common sense to many of their claims about how the economy works.
The following is a list of some of the more obvious uneducated, politically motivated statements about the economy. The list is in no particular order of importance.
#1 Claim. Everyone should pay taxes. Many people pay no tax at all, and that’s not fair!
#1 Response. Yes, some people pay no income tax, including a surprising number of wealthy people. Most of the wealthy who pay no income tax are likely Republican – e.g., Donald J Trump who paid no income tax for many years. Further, many corporations pay no income tax either, even those making substantial profits.
The claim that people don’t pay tax assumes income tax is the only form of tax. Apparently, Republicans have forgotten that sales taxes, usage fees, excise taxes, property taxes, et al are real taxes. Taxes other than income taxes are generally highly regressive. Since lower-income people spent a much higher percentage of their income, sales taxes become a greater proportion of income than high-income earners. Same with property taxes. While technically not a tax, lower-income earners also pay a higher percentage of income for FICA and Medicare.
#2 Claim. The US needs to cut back on payments for Social Security and Medicare. The programs are nothing but handouts.
#2 Response. The claim implies payments for Social Security and Medicare are not linked to any contribution by participants. Social Security and Medicare are insurance programs. One can argue whether the premiums charged are adequate and possibly should be increased for some groups – extending FICA contributions to all wages, for example. However, the programs are not without funding from the recipients.
When hard-core Republicans face possible economic consequences from tax changes, they seem to squeal like little piggies. When Trump was declared the winner in the 2016 presidential election, a longtime friend, and ardent Trump supporter, immediately sent out an email encouraging everyone to write their representatives in Congress and remind them to not reduce any payments for Social Security and Medicare. Let’s see if I get this right. Vote for Trump, a candidate who wanted to cut Social Security and Medicare, then immediately write House Reps and Senators to not Implement a major policy because their personal finances would be affected. What class in Logic 101 did I miss?
#3 Claim. The US can’t afford all the debt. We’re going to become like Venezuela.
#3 Response. Obviously, the Fox News talking heads have been the source of this information. For Republicans, the US debt only matters when a Democrat is in office. No Republicans squawked when Trump proposed a huge tax cut that every credible economic forecaster predicted would increase the deficit. I guess the cat got Republicans’ tongues. And the forecasters were right. Just four years of the Trump administration generated about 25% of the total national debt. The effect of the Trump tax cut continues to increase the deficit.
When reviewing the debt, one should look at total debt as a percentage of income and ideally as a percentage of wealth. For the US, at a minimum view debt as a % of GDP.
When you ask one of the “no-debt” zealots if they ever bought a house, most reply, “of course.“ Follow that question with, “Did you ever take out a mortgage?” The response is again, “Of course. Otherwise, I couldn’t afford to buy the house.” The final question, “What was the amount of the mortgage compared to your annual income?” The response is usually along the lines of, “Probably three times or more than my income. What’s the issue?”
Well, zealot, your debt, i.e., your mortgage, was far greater than your annual income. Why are you so concerned that the US government, which has a much lower debt relative to its annual income, is going to go broke? You’re the one who says the country should be run like a private household.
Also, mmm, zealot, why did debt as a % of GDP balloon under Trump? Did I miss another class in Logic 101?
#4 Claim. The tax rate is too high! The wealthy people pay all the taxes. There should be a flat tax.
#4 Response. What do you think the effective tax rate is by income group? What percentage of income is paid in taxes for lower-income groups, middle and higher-income groups? The tax burden is not just income tax but all taxes – sales tax, property taxes, etc. And don’t claim that renters don’t pay property taxes. Landlords pass the tax on to renters and likely more.
Gee, zealot, looking at tax burden by group indicates that the tax rate is surprisingly flat across all groups. Lower-income people pay a disproportionate amount of sales and property taxes as a percentage of income. The total for lower-income groups is almost 20% of income. The highest groups are about 30%. And these calculations were before the Trump tax cut which lowered taxes on the wealthy.
More to come. End #479.
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