Progressives have been at a disadvantage for decades on tax policy. It’s difficult to compete when the opposition’s only ideas on tax policy are to reduce taxes. Progressives are always the bad guys who want to raise taxes. I have a new idea for tax policy that should work well for Democrats and counter the normal GOP talking points.
We always try to budget spending for a fiscal year, but why not budget revenues too? The government never knows at the beginning of a fiscal year what their revenues will be because revenues come in on an ad hoc basis. If you budget your revenues, you can control if your budget is in deficit or surplus depending on economic conditions. The beauty of what I am about to propose is that it works for any tax plan.
So how do we fix the amount of revenues the government takes in any fiscal year? Let’s take the most outrageous wet dream tax plan the GOP could ever hope for: a 1% flat tax. Now the GOP would argue a tax like this would unleash the ”growth fairy” and the “confidence fairy” and the economy would explode upward and the growth in the economy would give us much more revenues than our target. We’ve all seen this movie before and we know how it ends. Let’s say we are naïve and we think, well, maybe it’s possible. Okay, we’ll try it but if it doesn’t work an immediate graduated tax with adjustable marginal rates on the top 40% of income earners and all corporations is imposed. At the end of the fiscal year you compare revenues actually collected to budgeted. If they balance, you do nothing. If you have a surplus, you could rebate taxpayers, pay down the debt, or do additional spending. If you are in deficit you set the adjustable marginal tax rates to make up the deficit and you impose the tax. If you have an emergency, such as disaster relief, you could increase the revenue budget to pay for it in the current year or spread it out over several years.
The beauty of a tax plan like this is that it doesn’t hammer the middle class or the poor if the rosy growth protections don’t materialize. The GOP can’t call for spending cuts because the revenues are designed to support the spending budgeted. It encourages investment in the US because the only way the corporations and high income earners don’t get hammered is if they get the economy growing fast enough to generate sufficient revenues. In fact, the lower the taxes on the middle class and the poor the greater the incentive for the corporations and high income earners to grow the US economy. The taxpayers who could most afford to absorb a big tax increase are the ones who pay it.
The best part of all is that we don’t have to listen to the GOP whine about how high taxes are strangling the economy and how we have to cut spending to make room for tax cuts. They get to try out their wacko ideas and if they don’t work, it will hammer the “Job Creators” who never seem to create jobs. That why I call it the Put Up or Shut Up Tax
I would appreciate any suggestions to improve my concept or if you see anything I’ve missed. Any ideas how we could get a grass roots movement going to get this considered would be appreciated.
Photo from Joybot licensed under Creative Commons