In parts 1-4 in this series, we outlined in lengthy detail a proposal that would have a reasonably high probability of keeping the United States in strong fiscal/financial standing if implemented. This proposal is not the only way to achieve that end, but in my own mind, it is the best way to get there. Any proposal meant to get the U.S. Deficit under control for the long term will face significant criticisms from both sides of the political aisle. What I'm going to do is address 3 hypothetical questions that might be raised by a liberal and a conservative that come to mind when viewing this proposal. At the end, all sources will be listed.
Liberal #1:
Your proposal raises income taxes considerably on those who can least afford to pay. How do you justify this?
A: Presently, 47% of the population pays no federal income taxes - this is a widely known fact. While we would in fact be raising federal income taxes on that group, we would simultaneously be reducing their tax burden through payroll taxes - thus helping the 'working poor'. In fact, the payroll tax rate would fall from over 9% to 2.5% under my proposal; offsetting part of the income tax hike. Additionally, employers would have zero responsibility for providing health care for this class of individual, and the 'mean' employer has seen their overall tax burden fall through this proposal. In the aggregate, this proposal has reduced barriers to hiring the working poor, enabling them to have greater economic mobility. Bear in mind however that part of the reason they would have to pay something under my proposal comes back to an all too familiar phrase - we can't afford for them to not pay anything through Federal Income Taxes.
Liberal #2:
Under your proposal, someone like Mitt Romney will pay a lower proportion of his income in taxes than someone earning $40,000 a year at a job. How do you justify this?
A: This has a two part response.
1) This proposal would raise taxes on Mitt Romney, per his tax return.
2) One of the major pillars of this proposal is that it looks to encourage investment and entreprenuership. Through investments, Romney is providing capital to firms and businesses. This capital allows firms to hire, to invest in R&D, to open new factories, to start new wings of the business, develop new technologies, etc. If the firm employing the individual in the question did not have capital, they would not be able to hire them. A pro-growth policy must encourage individuals to invest and start their own businesses by instituting lower tax rates for them.
Liberal #3:
By stripping away or reducing so many Federal Agencies, you also reduced the number of jobs. Are you worried about the economic impacts?
A:
1) The jobs that have been stripped away were largely funded on borrowed money. Funding these jobs has the same effect as borrowing money to give away in a lottery. The reality is that all government jobs are funded by A) Taxation B) Deficit Spending C) Inflation.
In the long run, these jobs that have been eliminated would cost more than any multiplier effect - because the size of the interest on the deficit would wipe out their impact.
2) Barriers to hiring have been reduced; as the marginal cost of labor has shrunk, so will the demand for said labor.
3) Crowding out Effects. The link is a simpler explanation of the impact of high, sustained long term government spending on private investment.
Conservative Issues
While a Democrat would approve of many of the over-arching themes (reduction in military spending, increase in taxes on the 'rich', the liberal slant on social issues, the national health care plan) and likely find issues with the details/execution, a Republican would be upset about three key themes:
1. Military Spending Reduction
As noted in part 3, when accounting for inflation, this plan proposes higher levels of spending on Defense than at any point in the 1970's; an era where we were engaged in Vietnam for the first half of the decade.
2. The National Health Administration
As noted in parts 2 and 3, the U.S. spends more per capita than any other nation in the world on health care, with middling results. Aside from that, I am not a physician. I care more about getting value from our health care system then who is the provider.
In this link, single payer issues are addressed at a length that this article does not have time to address.
3. Taxes
From the Bush to the Romney to the Palin to the Ron Paul, each major republican archetype is going to have trouble swallowing a tax hike. There are 2 major reasons why my proposal institutes a tax hike:
1) Deficits. This proposal reduces nearly 20% of Federal spending while instituting a single payer health care system. While that's a substantial reduction to be sure, the fact remains that a net 33% reduction in Federal spending from present would be needed, just to prevent any tax increases being required; that would still leave Americans facing the health care issues that they do today. Bottom line: The deficit chasm is so wide, that it is virtually impossible to do through spending reduction alone. This proposal tries to close the deficit chasm, while simultaneously provide meaningful health care reform AND change the tax code. Which leads to...
2) Efficiency. This proposal tries to raise taxes in a way that will have minimal disruption on the overall economy.
A) A large portion of the tax increase comes through marijuana, prostitution, divorce and dead folks.
B) Without credits and deductions in place, profit maximization now becomes the name of the game, as opposed to engaging in tax reduction behavior.
C) Reduction in taxes that businesses pay.
D) Reduction in obstacles to hiring.
E) Encouragements for investing and entreprenuership.
Sources
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