Taxes Won’t Get Us Closer To Fixing The Budget

Mark Laluan

An early episode of the cartoon series “South Park” has the protagonists, who are doing research for a classroom report on different types of business practices, run into a group of “Underpants Gnomes,” who claim to possess a clever business strategy.

The gnomes, who in the episode steal underpants from unwary children during the night, find profits through their business by stealing said underpants. The gnomes then skip explaining how stealing underpants is profitable and go on to make the assertion that the act generates wealth.

Proposals regarding increasing taxation to plug holes in the budget follow the same sort of “gnomish” logic: phase one—raise taxes; phase two—let it all work out somehow; phase three—profit!

Taxation is the government’s form of profit—without this revenue the United States would not only be unable to fund Social Security, but it would also be unable to fund other basic services such as national defense, subsidies to the arts and the federal interstate highway system.

The point where divergences in proposed policies begin is in the method of how these revenues are allocated. A more sensible policy that we could undertake before blindly increasing taxes is reviewing where we allocate the government’s revenues.

Reallocating existing revenues is more effective than raising taxes. If resources are currently being wasted in any government-mandated policy, then it behooves us as a society to lean on our government to divert monies to more sensible actions.

For example, instead of keeping students in California who speak Spanish as their primary language in English-only classrooms, it would be more effective for their benefit, and the pocketbooks of taxpayers, to transform those English-only classrooms into English as a Second Language classrooms.

Budgetary considerations should be made on the basis of pressing public needs and not limited by the stipulations of dogmatic ideology.

Sidestepping the possible quagmire of a policy debate based on the demonization or lionization of certain segments of society, on the face of it, the idea of increasing taxation on the wealthy in America would not solve our budgetary woes.

Let us for a moment assume that it would be possible to nationalize the wealth of the top 5 to 8 percent of Americans, who bear over half of the entire nation’s tax burden.

For a definition of wealth, we can accept for the sake of argument, President Obama’s definition of a wealthy household as one making more than $250,000 a year. Around 2.24 million U.S. households, which amounts to 1.9 percent of total households in America, have an annual income greater than $250,000.

Let us, for the sake of argument, ignore that not all of this wealth could be spent, as it is tied up in land, heirlooms, artwork and fixed property. In addition, let us ignore any liabilities, such as debt, that would detract from the wealth held by these moneyed forces.

As of 2010, the 400 wealthiest Americans, according to Forbes Magazine, have a total net wealth of $1.37 trillion. To be charitable, we will double this declared amount to include the wealthy that did not make the cut or assets that have not been declared by the wealthy.

This gives us a total of $2.74 trillion to pay for the federal budget for the fiscal year 2010-11 that wracks up over $3.55 trillion in total expenditures.

The total assets of the wealthy in America would only pay for two-thirds of the total expendables for one fiscal year of the federal budget and would not even make a dent in the $14.07 trillion of debt the United States has accumulated.

Thus, we come to the conclusion that adopting a policy of increased taxation for the rich would not solve our fiscal problems—even if we were to seize all their wealth to pay for our nation’s wants and needs, there would not be enough money.

In the post-war years of the 1950s, there was a gentlemen’s agreement between both Democrats and Republicans to pay down the deficit in times of prosperity and to spend what was necessary in times of hardship.

Already, the bipartisan National Commission on Fiscal Responsibility and Reform has shown that both Democrats and Republicans can work together to propose solutions to our economic problems.

We should not trust real-life versions of “Underpants Gnomes” to create tax policy. If one makes the claim that increasing taxes on the rich without reforming the way we spend and collect money would help, they had better justify that assertion with facts rather than raw emotion.