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June 11, 2008

Cut That OTHER Spending!

-- by Dave Johnson

This post originally appeared at Speak Out California

For decades people have been hearing that government "spends too much." They have been hearing that it's spending cuts that we need, not tax increases. They've been hearing that most of the government's money is spent on "waste, fraud and abuse." They've been hearing that it mostly goes to welfare, for people who won't work and sit around all day. They've been hearing that taxes are too high, the highest in the world, the liberals who run the world only want to tax and spend, etc. And no one has been reaching the public with the facts.

And after decades of this here is a surprise: people think the government spends too much, that we need spending cuts not taxes, that the money goes to waste, fraud and abuse -- and welfare and stuff like that. Who would have thought?

But ask for specifics like, "What specifically would you cut and by how much?" and you'll get a blank stare. Try that question on a conservative politician some time and you'll get the same blank stare. (Usually accompanied by an exercise commonly known as "the run-around.")

OK, occasionally when an elected official is faced with no choice but to cut or raise taxes you'll get an answer. We saw this recently when the Governor spelled out drastic cuts in schools and other government services -- the actual stuff that our taxes pay for. The public didn't like that one bit. They want that "other" spending to be cut instead. (Of course, the Governor also came up with that weird scheme to borrow from next year's lottery revenue. So what happens next year when we have to pay the bills and don't even have the lottery revenue because that went to this year's budget??? What do we borrow on then?)

Things might be changing. The public might slowly be coming around to understanding that taxes really do need to be raised -- at least as far as a temporary sales tax increase. The Public Policy Institute of California recently released the results of a survey titled Californians and Their Government. (The full PDF is here.) According to the summary,

Solid majorities of residents (58%) and likely voters (62%) oppose the governor’s plan to raise revenue by borrowing from future lottery earnings, but majorities of residents (54%) and likely voters (57%) favor a temporary increase in the state sales tax if the lottery plan fails.
And, according to the press release,
The potential temporary sales tax increase is the only tax increase included in the governor’s revised budget. Asked whether they believe tax increases should be part of his plan, residents are split (48% yes, 46% no), although the percentage favoring tax increases has risen sharply since December (30%). [emphasis added]
Of course, this doesn't get the budget solved. It's a start but as for real-world solutions today, the public still isn't ready to face facts. This may be because no one has dared explain that there isn't really some "other" spending yet to be cut. Also from the press release:
Californians fail budget math quiz — Page 12
When asked which area gets the biggest share of state spending, only 20 percent of residents correctly identified K-12 education. Asked where the biggest chunk of revenue comes from, only 32 percent give the correct answer: personal income tax.
Let me leave you with a few suggestions for helping solve the budget mess:

Proposition 13, an initiative that was sold as keeping little old ladies on fixed incomes in their homes, cut both residential and commercial property taxes. How about bringing commercial property taxes back to market rates?

Oil companies don't pay a "severance fee" when they pump our oil out of the ground to sell back to us. How about they pay for the oil before they sell it back to us?

How about we ask the wealthy to pay sales taxes - the same sales taxes that the rest of us have to pay - when they buy yachts and airplanes? And how about we ask the wealthy to pay their fair share of other taxes as well?

If you are talking to friends and family about the budget, point out that when Governor Schwarzenegger -- who solved previous budget problems by borrowing -- tried to balance the budget without raising any taxes he had to cut schools, health care, parks and much more, and still find ways to borrow. He is a Republican, not a "tax and spend" liberal, so if there were ways to cut "other" spending he would have done that.

There is no other spending to cut because it takes money to rin a government and provide the services we want and need. "The line at the DMV" is an example because if you cut DMV spending the line you hate just gets longer.

Take a look at the Next 10 site and consider how you would revise the budget.


Click through to Speak Out California

Posted by Dave Johnson at June 11, 2008 6:32 PM

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Comments

Dave said: And how about we ask the wealthy to pay their fair share of other taxes as well?

From FactCheck.org:

The top 1 percent in 2005 were those households with income of at least $307,500, and they got 18.1 percent of all "comprehensive" income, which includes all cash income plus the cash value of such benefits as Medicare and food stamps.


As for taxes, CBO calculates that the top 1 percent paid 27.6 percent of all federal taxes, including:

* 38.8 percent of federal individual income taxes
* 4.0 percent of federal social insurance taxes (Social Security and Medicare)
* 58.6 percent of corporate income taxes (indirectly, through stock ownership)
* 5.5 percent of federal excise taxes (on such things as gasoline, tobacco, alcoholic beverages and telephones.)

Now I know you are talking about California Dave, but I have to ask: If one percent of the people paying over 27 percent of taxes does not meet your definition of "fairness" what would? This number has steadily increased from 17% since 1993. What should the target number be? What's "fair"? How much of other people's money do you feel justified in laying claim to?

Posted by: Billy at June 12, 2008 6:33 AM

We have a progressive tax system. That means that the people who benefit the most from the infrastructure that we build pay more in return. That infrastructure - legal, physical, intellectual - is WHY those few are receiving SO MUCH of the benefits of the system WE, the People built.

And the REASON we built up that infrastructure is so WE can benefit, not just a few people.

I'm curious why a person would spend time advocating that rich people pay lower taxes -- to be made up by the rest of us. Is this your day job?

By the way, you are referring to TAXABLE income, which is not total income. It is income after all the tax breaks are applied.


Posted by: Dave Johnson [TypeKey Profile Page] at June 12, 2008 7:21 AM

I'm curious why a person would spend time advocating that rich people pay lower taxes -- to be made up by the rest of us. Is this your day job?

Where did I advocate that? You however, have advocated raising taxes on the "rich", and I've asked what your definition of "fair" is. If someone makes $350,000 (the top 1 percent in 2005 were those households with income of at least $307,500), how much of that would you have the government take?

And no, this is not my day job at all. Nor am I in the top 1% of wage earners. I work very hard and support a wife and two children. I happen to think that the government is a poor steward of money, and bristle at the suggestion that the problem is that the government has not taken enough money from people.

Posted by: Billy at June 12, 2008 10:27 AM

Well in America the government IS the people. Which makes your "government vs people" argument sound kind of funny when you think about it.

Taxes - first of all I would seriously hike up the corporate tax. The reason we have corporations at all is to serve the people. We set up the infrastructure upon which they operate, and we did this so we could enjoy the benefits of the wealth created.

Then I would add a surtax on top of all taxes to the point where the budget is balanced plus 10% of the debt is paid off each year. After a few years this would have the effect of LOWERING taxes below where they are today.

I would like to bring back the top rates at 90-95%. History shows this was what triggered the best growth in the economy, because it limited concentration of wealth, putting more money into the hands of consumers.

Posted by: Dave Johnson [TypeKey Profile Page] at June 12, 2008 11:03 AM

Well in America the government IS the people. Which makes your "government vs people" argument sound kind of funny when you think about it.

Ok. If it makes you feel better to think of it as people taking earnings by force from other people instead of "government", feel free. I'm picturing 50 people knocking on the door of one to tell him "we have voted and we all agree it's fair for us to take 95% of your earnings". Me? That doesn't help.

Taxes - first of all I would seriously hike up the corporate tax.

This is an interesting point. Seriously hike up taxes on businesses who provide jobs, and then wonder why all the businesses are sending jobs overseas? I think when you heavily tax an activity, you'll get less of it.

Posted by: Billy at June 12, 2008 2:23 PM

So yo're one of those "taxes are theft" people. I get it. You want to live alone on an island. Cool.

As for the idea that taxes hurt jobs - you don't understand that taxes are on profits, which are not a cost. Profits are calculated AFTER you pay wages. You hire exactly as many people as you need, no more, no less. You do that regardless of the taxes. (I've been there, done that.)

As for outsourcing, well that is a different problem. There are ways to fix that. For example, if goods come from a country with low wages, you impost a tariff at the border so the cost of the goods will match what they would cost if produced here, which removes the advantage gained from slave labor. We already ban goods made by children or forced labor, and we used to fund out entire budget with tariffs.

There are a number of other things I would do as well to bring corporations back under public regulation and control.

Ask yourself, why do we even allow corporations? If they are not benefiting US, then why should we let them exist?

Posted by: Dave Johnson [TypeKey Profile Page] at June 12, 2008 2:57 PM

So yo're one of those "taxes are theft" people. I get it. You want to live alone on an island. Cool.

That's twice you've mischaracterized my position or claimed I said something I didn't say.

As for the idea that taxes hurt jobs - you don't understand that taxes are on profits, which are not a cost. Profits are calculated AFTER you pay wages. You hire exactly as many people as you need, no more, no less. You do that regardless of the taxes.

Dave, if you (or "the people") take money from a business, that's less money the business has to re-invest, expand. Even if your argument holds with regard to wages and jobs, you have still removed incentive for businesses to operate in the US.

For example, if goods come from a country with low wages, you impost a tariff at the border so the cost of the goods will match what they would cost if produced here, which removes the advantage gained from slave labor.

Lower wages of course do not mean slave labor. I'm sure you know that. I've worked with companies outsourcing to China, India, Mexico. Could not be further from slave labor.

There are a number of other things I would do as well to bring corporations back under public regulation and control.

Again making doing business inside the US less attractive.

Ask yourself, why do we even allow corporations? If they are not benefiting US, then why should we let them exist?

Dave, if corporations don't benefit people by providing goods and services people want, then they won't exist. This question is not meant to be inflammatory, I'm really curious - do you consider yourself a socialist?

Posted by: Billy at June 12, 2008 4:53 PM

For whose benefit do you think we have corporations at all? Obviously the point is so that the public benefits or we wouldn't allow them, wouldn't grant them limited liability, or any of the other things we do to enable them.

If a corporation decides to move outside of the US, we just don't let them BE a corporation anymore, and hand that job over to other managers. That's a simplification of course, but we, the people are in charge here and you are talking about an extortion scheme. The mobster says we play along or something bad will happen to us. Well, that's isn't how laws and public benefit operate here.

We are a huge market, and everyone in the world fights for access to us. So WE have some power here, and WE can set up the rules under which the corporations operate. For OUR benefit.

As I said, why else would we allow them to exist at all, if not to benefit US. This country isn't about a few people getting vastly rich, it is about ALL of us benefiting. The country was founded BECAUSE of a few powerful corporations trying to push us around so we fought back and took over.

Posted by: Dave Johnson [TypeKey Profile Page] at June 12, 2008 5:07 PM

"Billy": How do you plan to pay for Mr. Bush's War, if not with taxes?

Posted by: Ray C. at June 13, 2008 9:39 AM

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