Republicans tell you that we have this fiscal cliff problem because the government spends too much. Democrats say the issue is tax revenues.
They’re both half-right.
Truly, the issue with the massive deficits and debt the U.S. government has created is in the very formula with which government spending arises.
In short, we’ve lost sight of why it is we have taxes.
As part of the social contract, dating back thousands of years, the people agree to give up certain freedoms in exchange for things like protection and the management of otherwise unmanageable resources.
In the old days, we had kings and fiefdoms and other monarchical, oppressive taxation systems. But then we created this thing called democracy. It was beautiful and wonderful because the people got a say.
Once a monetary system evolved and true governments came about, it became clear that in order to fund government, we’d need to pay for it somehow.
Hence the creation of taxes.
But governments, at least the U.S. government, doesn’t set up its budget based on its revenues like every other budget created by any one else for any reason whatsoever.
That’s because it controls its own revenue in the form of taxes. In other words, revenues can be whatever the government says.
This idea of “fairness” in taxation is entirely new, not to mention entirely fabricated by President Obama and the left. The government needs X dollars to function, then taxes should be Y. That’s how this system should work, it just doesn’t.
Obama’s leftist, wealth re-distribution notion that paying over a third of one’s income is somehow unfair (even though we have a progressive tax system) is inherently flawed.
That’s not how government works, nor is it how taxation ought to work.
But there are two major problems preventing us from having a system that actually makes sense. The first is that once budget allocations are made for programs, they’re nearly impossible to erase. If you spend the money, you get it again the next year, usually including a several percentage bump.
For years, the government has actually advertised for social services like food stamps because they hadn’t spent their full allocation and they were in danger of losing funding if they didn’t spend all of their allotments.
State government, for example, passes multiple-year budgets – usually biennial budgets. Taxes are based on the budget, not some arbitrary idea of fairness.
If the state has reduced its spending or increased its inefficiencies, taxes can go down. Likewise, if the state has drawn higher than expected corporate taxes or other fees, then income taxes can fall. This is happening right now in Wisconsin after Scott Walker’s brave budget lead to a (wait for it) surplus!
Property taxes work in a similar way. Local governments set budgets and then based on the value of your house, you pay a rate. It’s a progressive system that makes people with better houses pay more – usually these people are more wealthy. Everyone accepts this is how the world ought to work.
Then why doesn’t the federal government work the same way? Well, the first problem is they don’t pass budgets. The Senate hasn’t passed a budget since Barack Obama took office, so how can we possibly know how much we need? Without knowing how much spending we’re doing, we can’t know how much revenue to take in.
Likewise, our deficits are growing and our debts have burgeoned, something we don’t allow local and state governments to do. They have to have balanced budgets and their debts need to be below a certain percentage of their total revenues in a given time period.
Taxing along arbitrary lines allows the government to spend along those same arbitrary lines. It also precludes any sort of fiscal responsibility because there’s no guideline for budget-makers. That’s why, under the watch of Democrats, we have record debt, record deficits, and truly insane spending. By talking about taxing the rich, the left can obfuscate the reality that their view of taxation is an imaginary one. A canard.
There will be a resolution to the fiscal cliff, but because it won’t involve fundamental tax reform, it won’t solve anything related to our budget problems. What’s more, the Democrats admit that raising taxes on the rich won’t solve our deficit problems when 70% of those new tax dollars will go to new spending.
Democrats have no leg to stand on, no political ideology to point to when they talk about the “fairness” of the tax code because taxes are about balancing revenues and expenditures. They’ve shown no willingness to even begin to address that discrepancy and no plan they put forward can be taken seriously until that changes.