Friday, November 2, 2012

November Won't Bring Santa Claus

My oldest grandson, being a very precocious child, had it figured out about Santa Claus at about age 6.  He also figured out that along with belief in this fictitious character came some nice perks. It was obvious, at least to me, that he didn’t want to rock the boat and upset a good thing, so he went along with the deal.

Unfortunately, too many voters would rather ignore myths emanating from politicians’ rhetoric than face cold, hard facts. Rare as a hen’s teeth are admissions by those seeking office that they would ever consider levying taxes of any kind.

Most politicians, when confronted with questions of how promises of new roads, better pay for teachers and vast improvements in education could be accomplished without increasing revenue, have several favorite dodges. One of the foremost popular methods of avoiding admitting new taxes might be necessary is by promising to provide for all of the new government services by eliminating waste and increasing efficiency. Probably the runner-up to this dodge is the optimistic hope that by creating a new set of officeholders a vibrant and growing economy would result. Taxation and revenue would naturally flow into the coffers at a greater rate than in the past.

We are currently faced with such a Santa Claus scenario in the presidential race.  Mr. Romney proclaims non-stop that he can lower everyone’s taxes while at the same time maintain the same level of income for the federal government. Unfortunately for all of us, Mr. Romney will not tell us exactly how he intends to do this trick, other than to say he intends to close loopholes. We only need to apply common sense to this political promise to measure its accuracy. 

A whole host of so-called loopholes or tax write-offs are available to most of middle Americans making less than $200,000. These write-offs include a dependent deduction for each child, taxes paid locally, tax paid on your homestead, interest payments on your home mortgage--and, for those unfortunate enough to have high medical bills, a portion of those may be written off. We know from past statements made by Mr. Romney that he would not ever consider doing away with the massive loopholes, write-offs or perks given to corporations--such as the multi-billion dollar give away to oil companies as a subsidy. Using simple arithmetic, one can determine the promise of reducing taxes and raising the same amount of revenue is an empty political promise. 

Reducing the tax to 20% across the board, as Mr. Romney would like to do, would reduce the current revenue flowing to the public coffers by 5 trillion dollars. You add the $2 trillion the Republican nominee for president has pledged to give to the military, and we are looking at a 7 trillion dollar hole before the process gets started.  One reason Mr. Romney is able to pay only 14% of his income in taxes--about half what the average working stiff in America pays--is because of the capital gain provision of the Internal Revenue Code. I can’t imagine Mr. Romney doing away with the capital gain provision in that it would cost him and his supporters millions and millions of dollars.  

Additionally, it would be breaking his nationwide promise to not raise taxes on anyone--including the billionaires in the United States. Even the Congressional Budget Office and numerous other experts tell us that if you eliminated all of the deductions used by ordinary Americans making $200,000 a year, or less, there would not be enough savings to make up for the 5 trillion dollars lost by reducing the tax rate across the board to 20%.

The choice of Mr. Ryan as the Republican vice-presidential candidate gives us a good insight on what sort of things might be on the chopping block when we start trying to make up for the multi-trillion dollar hole created by the Romney tax plan, or to assist in balancing the budget. Mr. Ryan has repeatedly advocated privatizing social security, as well as converting Medicare to a voucher system, which would in effect put most of us at the mercy of the insurance industry.

As former President Clinton urged in a recent televised speech, all we need to do to figure out who is trying to “bamboozle” us is to do the arithmetic. When we do, it is easy to see the Romney/Ryan plan does not add up.

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