I am a big fan of the Economist and even though they are Left leaning for sure, I enjoy reading their insights and learn something almost daily from them. But even I was surprised when I read the following post outlining a road map for the US that is very close to something most Conservatives could embrace if they took the time to look at the proposals with an open mind.
The article starts by saying it’s insane to think we can tax your way out of a deficit and they point out that the ‘rich’ already pay twice their ‘fair share’ when comparing their percentage of the tax revenue to their percentage of the income. I pointed this out a few days ago in the following graph and this should be used the next time anyone on the Left says the wealthy should pay their fair share. They hit the nail on the head and crystallize the whole issue with the following paragraph:
“The question of whether to tax the wealthy more depends on political judgments about the right size of the state and the appropriate role for redistribution. The math says deficits could technically be tamed by spending cuts alone – as Mr. Obama’s Republican opponents advocate. Class warfare may be a loaded term, but it captures a fundamental debate in Western societies: who should suffer for righting public finances?”
The article does outline three  reasons to raise taxes on the wealthy and if you read them with an open mind you’ll find they make sense.
First, any tax increases must be matched with spending cuts that are four  times that amount. If President Obama and the Democrats would adopt that mentality then the ability of Congress to reach a compromise would be much more attainable. Right now the only plan coming from the Left amounts to tax increases which mean we have a revenue problem instead of a spending problem. That is ridiculous and the Left weakens their argument when they lead with this. Walls immediately come up on the Right and intelligent debate is stifled because the Left is seen as hell-bent on redistribution of wealth and marching toward Socialism.
Second, they make the point that the spending cuts will most likely hurt the lower end of the Income spectrum since these cuts will be in Social programs (Welfare, Social Security, Medicaid, Unemployment benefits, etc.) so to show that we are all in this together the upper echelon of the income spectrum must make sacrifices as well. Once we adopt this approach, the Left will be unable to foster the meme that the budget deficit solutions are falling on the poor and not the wealthy.
Third, and this is the one I like the best, the tax increases must be coupled with tax reform. It makes no sense to increase the income tax on the wealthy since the wealthy make most of their money from investments and not from a weekly paycheck. Capital gains taxes are much lower than Income taxes and this is good because we need to incentivize people to invest in companies to spur economic growth and raising capital gains taxes will put the brakes on Corporate America. But imagine a tax system which simplifies the code, eliminates deductions but also eliminates double taxes on investment by lowering Corporate taxes to zero. Corporations would react to that by moving more manufacturing back to the US and this will stimulate the economy better than any ‘shovel ready jobs’ stimulus that the President seems to be fixated on. More people working means less Government spending on social programs and increased tax revenue through income taxes.
If we adopt these measures and add to that reductions in regulations from the EPA, DOJ and FDA as well as repealing Obamacare our economy will sky-rocket and lead the world out of this malaise.