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Monday, March 11, 2013
The surpluses created by the Clinton administration helped to justify the Bush tax cuts passed by Congress in 2001. However, the Bush tax cuts were to be in force for 10 years, even during deficit years. Well-managed corporations and households would never plan with such conviction.
At that time, I thought it would be sensible to make the 10-year life of the tax cuts contingent on the continuing health of the economy.
If there was a simple system to increase tax receipts during deficit years and reduce taxes during surplus years, while not affecting other parts of our tax laws, it would be worth considering. I believe there is a way to accomplish that.
Think “deficit surcharge” and “surplus credit.” Every fiscal year results in either a surplus or a deficit, which is made public. If the surplus or deficit exceeds a certain range, taxpayers would pay a deficit surcharge, in the case of a deficit. In the event of a surplus, taxpayers would earn a surplus credit.
The deficit surcharge, expressed as a percentage, would be added to the tax bill of each taxpayer. The surplus credit would be a percentage of the tax bill, which would be used to reduce the tax due. The percentages can be set each tax year based upon the previous year’s deficit or surplus.
All taxpayers, regardless of tax bracket, would apply the same percentage; our tax brackets are already progressive.
This suggestion should be acceptable to both parties. If enacted, when a deficit surcharge kicked in, Congress could blame the automatic surcharge; it was enacted by a previous Congress. When a surplus credit is enjoyed by taxpayers, Congress could take credit for passing a realistic budget.
This suggestion will encourage many taxpayers to become better-informed voters. Complaints about taxes, or tax rates, are meaningless.
Citizens should be more concerned with how their taxes are spent. Taxes, like death, are inevitable; they are what one pays for the privilege of living in a community.
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