President Obama was swept into office for his second term partly on the promise of raising taxes on the wealthy. He accomplished some of that in the fiscal cliff deal. But the,dollar for dollar cuts to spending Republicans clamor for doesnt work the way they want. We have gotten $2.50 in spending cuts to every $1.00 of extra revenue, so Republicans are right. Cuts and revenue should match dollar for dollar. Closing loopholes would be a goid start.
If Congress can fix the tax code by getting rid of decades of deductions, exemptions and other give aways, they could actually lower taxes and balance the federal budget. From tax free saving accounts to deductiond fir gifts to charities, these uncollected taxes amount to a giant pile of stealth government spending. Some deductions come by accident, unintended consequences of adjustments to the tax code. Lobbyist fought for many others and many wealthy industries benefit from it.
In 2012 tax breaks totaled more than $800 billion or about 1/3 of the federal revenues. Thats more than the government spends on Social Security, Medicare or National Defense according to the CBO. Cutting these on full would go a long way to closing the federal deficit, $1.1 trillion.
Most federal revenues come from personal and corporate income tax. Payroll taxes fund Social Security and Medicare. Most originally came from taxes on luxury items such as tabacco, spirits, sugar and throughout the 19th century they came from tarriffs on manufactured goods that were imported. The income tax was introduced during the Civil War and did not become permanent until the 16th Amendment was ratified in 1913. During WWII income tax became what it is today, a mass tax on the moddle class.
The payroll tax is 15.3% and all earners pay it. The 12.9% Social Security tax only applies to wages below $87,900 – meaning that a $25,000 a year earner pays a higher effective tax rate than somepn making $250,000, because most of the $250,000 is exempt. Investment income and employer benefits, which accrue disproportionately to high income eaeners go completely untaxed. People who live off of inhereted wealth pay no pay roll taxes at all.
At one point John Boehner agreed with President Obama that tax reform and a limted rate increase could generate almost $1 trillion and reduce the debt. He and the Republican party pulled the offer from the table when the President and the Democrat party won $600 billion in the fiscal cliff deal. Republicans are standing behind the mantra of no more tax increases. So I guess the fiscal watchdog Republicans dont want to lower the National debt.
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