With tax reform coming down the pike from the Trump Administration, we are hearing that middle class income tax cuts are coming. And of course with them, comes the financial bonanza of the tax cuts for the higher levels of income. And while I do identify myself as a Democrat, I am not a spend to the moon Democrat. Some programs need to be reformed, some need to disappear, and some need to continue as it has been in the past. But this tax cut should be scrapped.
Here are some highlights using the Federal Individual Marginal Tax Rates for selected years, adjusted for inflation according to 2012 dollars (all tax rates using single person unless annotated):
The lowest rate is 20%. $0-$19053 in income gets you that rate. $50,000 in income gets you a 26% tax rate. $100,000 in income gets you a 38% tax rate. $250,000 is a 62% tax rate. $500,000 is a 75% tax rate. $1,000,000 is a 89% tax rate. And finally an income of $1,905,344 is in the 91.0% tax rate. In 1950, the American debt is $256 Billion.
20% is the lowest tax rate. To get into that rate, you earn less than $15,513. $50,000 is a 30% tax rate. $100,000 is a 43% tax rate. $250,000 is a 65% tax rate. $500,000 is an 81% tax rate. $1,000,000 is a 89% tax rate and finally, a 91% tax rate for people earning over $1,551,311. So from 1950 to 1960, the tax rates have gone up on people. And yet, many people remember those years as a golden age for America. In 1960 the debt is $290 Billion. Only $34 Billion in debt is accumulated. But yet, we aren’t trying to close that gap.
A 14% tax rate for people who earn under $2,959. $50,000 is a 28% tax rate. $100,000 is a 42% tax rate. $250,000 is a 58% tax rate. $500,000 is a 68% tax rate. Anybody earning over $591,737 is in the 70% tax rate. Less tax rate levels and the people earning huge amounts of money get the tax cuts. Not saying that it wasn’t needed, but in reality, the huge income earners were catered to in this decade. National Debt is $380 Billion. The $90 Billion in debt that was added in the past decade isn’t worried about and taxes are cut. Cutting spending isn’t a viable political option.
No income taxes if you make under $6,409. $50,000 is a 30% tax rate. $100,000 is a 49% tax rate. $250,000 is a 68% tax rate. Income over $301,760 is in the 70% tax bracket. Tax rates actually rose during the decade. Yes, there was a energy crisis and the Cold War was in full effect, but we effectively raised taxes during the decade. The National Debt is now $909 Billion. The energy crisis of the 70’s and the political turmoil of the Cold War are looked at as the major factors. But yet, still hardly anyone on both sides of the political spectrum are worried about the increase of the debt.
A 15% tax rate if you earn under $34,167. 28% tax rate if you earned over $34,167. (A 33% Bubble Rate for people that earned $44,900 and $93,130 to recapture the revenue from upper-income taxpayers had saved by applying the 15% tax rate). The 80’s were a great decade for tax cuts. In 1982, the top tax bracket went from 70% to 50%. In 1987, the top tax rate went from 50% to 38.5%. In 1988, the bubble rate was instituted and the top rate went from 38.5% to 28%. Here you have the makings of deficit spending. Tax revenue is going down just due to the cutting of the top tax rates. The government is still spending more and more to subsidize programs, businesses, and individuals. In 1990, the debt has exploded to $3.2 Trillion. So during the Reagan years and his fiscally great administration, the debt more than tripled. And yet, we hear about how unfair the tax system is but nothing from the people that would become deficit hawks.
A 15% tax rate if you earn less than $34,999. A 28% tax rate for those that earn $50,000. $100,000 in income is a 31% tax rate. A 36% tax rate for those that make $250,000. Over $384,457 in income gets a 39.6% tax rate. In 1991, congress added the 31% tax rate. In 1993, the 36% and 39.6% tax rates were added. The additional tax rates were added in the hopes that it would help increase revenues to combat the deficit. Didn’t really help. But it did give political talking points to those who whine about the tax rates going up and the need to slash government programs. The debt is totally out of control now. It is up to $5.6 Trillion. This is funny. Basically the one President that held office for most of these years and vilified by the GOP for his economic policies and sticking cigars and his mole ridden penis where they shouldn’t be, did not even double the National debt. It is still a serious even perilous problem, but at least the growth of the debt is slowing down.
A 10% tax rate if you make under $8,818. 25% tax rate if you make $50,000. 28% if you make $100,000. 33% if you make $250,000. 35% if you make over $393,421. In 2001, the tax rates were cut by 0.5%. In 2003, the tax brackets were changed to 6 brackets and lowered by at least 2%. In a decade, the amount of marginal income taxes you pay have decreased by 3%. What that means is that the government is taking in less than what was expected and yet inflation is going up. Prices for upkeep are going up, and more deficit spending. More stupidity by our elected leaders. $13.5 Trillion is the debt now. Basically we ran up the debt 2.5 times during the decade. Invasions of Iraq and Afghanistan help with that. A severe depression starting in 2006 also cause economic problems for the country. And the deficit hawks are mostly silent when these things are going on. Imagine that, politicians looking out for their own political careers.
The same rates and basically the same amount of income to qualify for those rates. The debt is $16.7 Trillion. The economy is out of freefall. The war on Terror is in it’s second decade and will never end. Reforms seem to be what can help one party or the other. The debt is projected to be $22.4 Trillion in 2020. Nobody is being serious about trying to slow that down. Each political party is entrenched in their decades old rhetoric on how to stop the debt from growing. But neither is right.
People are arguing that we need to cut the rates. OK. Here is what I am going to say. Take a look at what is happening. The government is spending more than it takes in. I think that everybody can agree on that. The question is how we can eliminate $500 Billion per year from the federal budget. That is tough. 7% of the FY18 spending is on interest of our debt, so that cannot shrink. 25% of FY18 spending is on pensions that have been promised. We need to stand by our word. That hurts our ability to spread around spending reductions.
It is estimated that we will spend $1.21 Trillion on medical care in FY18. That is 28% of the budget. Some sort of reform is needed here. We need to figure out how to cut $200 Billion from this budget. And yes, I know that is going to hurt services available to people. And yes, I understand that it will hurt rural areas more acutely than urban areas. But if you are serious about reducing the debt, you cannot grow the economy fast enough to catch up with the spending that the country is doing. So we need to find areas to cut. Here is one of those areas. Prescription drug negotiations for Medicare and Medicaid should be happening for the government. Cut the growth for reimbursement spending, so that stays at the same level. And yes, that is a cut in spending, not just holding the costs the same. Prices go up and you pay the same amount, you are cutting the costs of your spending.
Another place where we could cut spending is the military. Let’s be honest. China is the 2nd largest spending country on their military and they are at about $500 Billion. The United States is at $880 Billion. We all know that there is waste in this budget. I wouldn’t cut it to the bone, but eliminate $130 Billion from the defense budget to get it down to around $750 Billion per year. If a service says that they don’t want a weapons system like the F-35 or the Osprey, then stop spending on it. The Military Industrial Complex gets way too much money for political reasons. We can eliminate some of that waste and actually to some cost analysis for what we need to have on the battlefield. 21% of our budget is spent on defense. President Trump has said that NATO members are now spending 2% of their GDP on defense, so we should be able to cut back a little bit there. Close a couple more bases in Europe. That helps eliminate spending on things that we do not need.
So if we find the savings in those two budgets that I have pointed out, we are spending $330 Billion less than what is in the budget. We have already addressed over 75% of the budget. Next up is Welfare. I do agree that there has to be some reforms, but not draconian measures. The budget calls for $400 Billion to be spent on Welfare. The future projects that the government will spend more on welfare. So we need to have less spending on welfare in the future. That is where the economy can help. If it continues to grow, eventually the spending on Welfare will decrease. But we would cut Welfare spending by 10%. That means $40 Billion would be saved. And yes, people will feel the crunch that are on welfare. But we need to all feel the pain of stopping the debt from growing larger.
We are at $370 Billion in savings. If we stop now, the debt only grows by about $150 Billion per year. But let’s not do this half-assed. Let’s go all the way like the deficit hawks want. Next up is Education spending. At 3% of the total budget, it receives $120 Billion. If the GOP had it’s way, this would become $0. And we would save $120 Billion and almost balance the budget. We know that would be a bad idea. But let’s trim $12 Billion off the budget and find areas where we can save money like eliminating any federal money to going to charter schools. You want your child to go to a charter school, pay for it out of your own pocket. The public school systems of most states need help and any money being siphoned off of that problem just hurts everybody. So with the $12 Billion in savings, we are at $388 Billion. Still need $112 Billion to balance the budget.
And finally here is the point of the post. Increase the marginal tax rates of individuals. A millionaire is not going to miss a little bit of money that needs to go towards taxes. And in conjunction with that, eliminate the special tax rates for investment income and the special tax breaks for corporations. Let me put it this way. If you bring in $1,000,000 in income for a year, you are charged 35% at the current time. That is $350,000 for your marginal tax rate. If you change it to 37%, that is an increase of $20,000 in taxes for them. In 2015, there were 500,000 people in the United States that had an annual income of a million dollars or more. So if you take the 500,000 people that have an income of a Million or more and multiply that by the $20,000 tax increase I would propose to try and balance the budget, you would get 500,000 X $20,000 or $10 Billion.
Increase the tax rate on the $500,000 income earners by 1% or to 36%. There are 1.4 Million people that earn that annual income. That is an extra $14 Billion in tax revenue a year that would help with the deficit.
With just those 2 small adjustments we raise $24 Billion in revenue. With that extra revenue, combined with the cuts that I would make we are at $88 Billion for the deficit in FY18.
If you increase the rest of the marginal income tax rates nominally, you can have the deficit eliminated or it become so small that if the economy does pick up like the politicians have promised, then you could actually start paying off some of the deficit. You would spend less than the previous amount on subsequent interest payments. Imagine that. The future would look better for America and your children. The economic uncertainty would be lessened and then finally people would feel better about their future. You can believe in an America that looks like it’s best days are ahead of it. That is how you get the American people to start believing in their leaders again, not by the bluster that they spew.