I'm serious!
Now is the time for tax cuts.
For a while the US was THE world's economic superpower. Now it is still a superpower, but a superpower weighed down by 5 heavy anchors (taxes) that are making it extremely difficult for the US to compete in an intensely competitive global marketplace.
These anchors/taxes need to be removed - now!
- The financial services industry tax
- The health insurance industry tax
- The military industrial complex tax
- The oil industry tax.
- The savers tax
Update: It seems some reading this diary hear Conservative talking points. That is the opposite to my intention. This is more of a way for Progressives to frame economic arguments against conservatives. For example for profit health care is a "tax on the US economic system" when other countries using single payer can provide their citizens with better outcomes for less.
In today's competitive international economic environment it is imperative that each nation attempt to eliminate inefficiency and waste within its economy. Failure to do so results in a nation that can not effectively compete, a nation handcuffed by its inefficiencies.
To this end I propose 5 major tax cuts, 5 tax cuts that will fundamentally improve the workings and efficiency of the nation's economy. This is a first draft of this concept so it is a bit sparse on details. If it strikes a cord then a lot more "detail" can easily be added.
1. The financial industry tax. Banking/finance should, by definition, be an "intermediary" function, a way to bring buyers and sellers of capital/savings together. That is the role banking and finance played for a long time, as a small but essential subset of the economy.
Somewhere along the way that role changed. Instead of being a small subset of the economy, banking/finance became a major part of the economy. It is time to shrink the role of banking and finance.
How? Just a few brief ideas
- End too big too fail. Put limits on bank size. This will, among other things, reduce monopolistic fee setting by improving competition.
- Tax "carried interest" as income
- Increase the tax rate for incomes over $1 million to 60% (nicely catching large bonuses)
- Get the banks back into holding more mortgages (and shrinking Fannie and Freddie).
- Limit high frequency trading
2. The health insurance tax. As it stands now the US spends far more on health care than any other nation of the planet (and gets worse outcomes to boot). This is clear evidence that the system is acting as a drag on the economy.
The US spends 16% of GDP on heath care, most of it on for profit medicine, funded through health insurance. Since no other industrialized nation spends more than 10% of GDP on heath care I submit that the US economy is encumbered with a "tax" equal to at least 6% of GDP (roughly $850 billion a year).
This "tax" is the result of a number of factors but chief among them is the cost of running a for profit health insurance system. It has been estimated that 20% of health care costs are "taxed away" by bureaucracy. Not to mention the amount of time and effort spent by businesses on health care issues (insurance rates etc).
Institute a single payer health care system (Medicare for all) along with an increase in medical school enrollment and an increase in higher income tax rates (specialists are paid too much - tax it back).
3. The military industrial tax The US spends close to 50% of all military expenditures worldwide. While one can argue about a "valid: military expenditure level, surely no one thinks it is a good idea to pay for military expenditures with money borrowed from your largest competitors/enemies. As it stands now if the US cut military expenditures to zero it would still have a budget deficit, so by that reckoning all military expenditures are made with borrowed money. sustainable ... I think not.
Then there is the ongoing problem of going to war. When you have the world's biggest military it is hard not to "use it" whenever a possible situation comes along (otherwise why have it). I submit that the military budget could be sliced in half over 5-7 years while still providing superb defense.
4. The oil industry tax. The US with 5% of the world's population uses 25% of the world's oil. Now in and of itself such a fact may not seem important - so what Americans use a lot of oil. BUT, as opposed to past times when the US used to be self sufficient in oil, the US now imports roughly 50% of its oil.
Each month approximately $25-30 billion leaves the country to go to overseas suppliers. This $25-30 billion each month is a clear and obvious "tax" on the economy. It is a massive and unnecessary leak of funds from the US to overseas suppliers. Every single barrel of oil not consumed is a barrel that does not need to be imported.
Now if this $300 billion of oil per year were being used to create products for sale, or export this might be reasonable. BUT ... for the most part this oil is being wasted. American vehicle fuel economy is horrendous when compared to other developed nations, nations that too must import the fuel they use. These other nations understand that oil, as an imported good, is too precious to be wasted. Americans erroneously still treat oil as if it were a good that they are self sufficient in.
To reduce the impact of this massive tax on the economy (and a significant portion of the trade deficit) domestic oil prices need to be increased. Now some will claim that this is actually a tax increase, and technically it may even be one ... but to be honest we need to look at the overall impact on the economy.
Artificially low energy prices subsidize waste (bad for economic efficiency) and fail to reward innovation and investments in energy conservation (good for economic efficiency). Higher prices will reduce the trade deficit (extremely important), reduce the need for military protection of oil supply lines, and stimulate the development of energy efficient technologies. It is likely that over time the actual spending on oil in the economy will actually decrease (higher prices offset by lowered consumption).
5. The savers tax. You are probably thinking "saver's tax?", say what! But the Greenspan approach to stimulating the economy with low rates (now followed by Bernanke with his own ZIRP) is a way to make borrowing cheap and saving useless. That is an explicit tax on savers that robs them of an ability to make an adequate return on their invested/saved funds. The only reason you only get .5% on money loaned to the US government for 2 years is that the Fed has been flooding the market with money, forcing down rates (excess supply pushes down prices - Econ 101).
It is time to end heroin addiction of low interest rates. We are now at a state where even with ultra low rates people will not borrow. They simply can't borrow. They have reached the end of their rope. That the economy is stalled even with $5 billion a day of government stimulus and zero interest rates, should indicate to any reasonable observer that the game is over. More and cheaper debt will no longer work. The parrot is dead.
Conclusion:
What we are seeing is a daily preoccupation with economic numbers, with stimulating the economy, with this or that tinkering. This simply will not work. What is needed is fundamental restructuring. The entire economy is stalled because it is exhausted. 30 years of growth through any means has papered over the increasing addiction to low rates and stimulative policies to artificially boost demand. It is now time to enter rehab ... and yes there will be withdrawal symptoms. Sorry, but there is no free lunch.