Monday, Monday
For those of you who consume this Sunday Blog regularly, you know that the post last Sunday was about the national debt, social security, interest, and a few other smatterings of fear and loathing about the American economy that some who want our vote would rather we didn’t know. If you didn’t catch it, the spoiler alert was how our leaders have basically f’d us and the future generations of our people (just my opinion).
Tons of feedback from you guys and thank all of you so much for that. But several of you also asked, “What can be done?” It’s a good question. I was asked that very thing by an old girlfriend as we were enjoying the perfect Sunday breakfast on sunny Sunday afternoon. I told her, “My job is to put the word out without bias and provide facts that support it, the people will take it from there.”
And as fate would have it, the people did.
The next day I got a message from one reader who had sent it to a member of Congress and believe it or not, he got a reply letter. The power of one – it’s a thing after all.
What I Care About
In the past couple of Does it Pencil webinars and the last and current Blog, I’ve decided to focus on the national money situation (debt, deficit, social security,…). In doing so, I want to make sure that all of you know about the two things I care about. Here they are:
1) I care that we the people get fair, concise, and unvarnished information so that we can make up our minds for ourselves. This is our life too. And it’s our money.
2) I also care that we get back to a place as a people and a society that it’s ok to disagree about our beliefs and we don’t need to behead or divorce each other when we do.
My Take
In the next section I will present the congressman’s letter. He’s not my congressman, I don’t really care for a lot of his views, and I didn’t vote for him, but I know who he is, and he’s very articulate and well-spoken and I respect that. And he did reply, so that’s pretty great. Way faster than Comcast for sure.
Before we get to his letter, I want to offer 4 points that won’t align with his. These under the banner of “respectful disagreement”. Please consider these as you peruse the congressman’s letter.
1. It’s a common slogan for politicians to talk about rich people not paying something called their “fair share”. It infers that wealthy people are somehow cheating the system. In this America you’re assumed innocent until proven guilty, but notwithstanding the occasional tax cheat (rich of poor), which political body designed the rules that allow those rich bastards to get away with this white-collar crime of immorality in the first place? That would be “Congress”.
2. The “fair share” slogan sells because we all empathize with the victim and the victim always needs a villain. But is it true? I recently watched a college professor in economics address this one with math. Here’s the simplest way to explain the numbers: there are three groups of taxpayers in America: poor, middle, and rich (the 1%). When you add back “transfers” that are credited and/or paid to each group (things like the Earned Income Tax Credit, housing vouchers, and other entitlements and deductions), here’s what you see in terms of “effective tax rates” paid by each group:
Low Income: -56%
Middle: 3%
Rich: 34%
Surprised? If you are, it’s because you’ve only heard people in the other Washington tell you what sells. The federal tax system is designed to be “progressive”, meaning simply that rich people pay more than poor people. It’s working, and they are.
3. In 2023, Congress spent $1.7 Trillion more than the Treasury collected. Lots of politicians talk about increasing taxes on the rich to cover their deficit spending (the villain thing). And yet, it’s widely known by tax think tanks, honest economists, and college professors that when you raise the tax rate on the rich, tax receipts by the treasury actually go down. This is true for personal tax, corporate tax, and estate tax. The only two exceptions to that rule being Social Security and Medicare taxes which hammer our low- and middle-income brothers and sisters the most. Again, which political body capped those taxes after income of $168,600? That’s right … Congress.
4. Finally, if you go back 70 years and look at all of the highest marginal rates, they go from as high as 90% to as low as 33%. And yet no matter what the highest marginal rate, the Treasury collects just about 17% of GDP every year. It’s ironic in a way, but history has shown us again and again that raising taxes isn’t the fix. That leaves you with just one option to resolve this mess before it’s too late: cut spending. It’s the one option that will work, but it’s also the one option that doesn’t get you elected.
Ok, that’s enough of my windbagness. Again I want to thank Congressman Smith from the great state of Washington for responding. Below are his comments to last weeks’ Sunday Blog. They are respected and appreciated. If you want to cross reference last week’s Blog, you can check it out at this link.
The Congressman’s Letter
Dear Constituent,
Thank you for sharing your concerns about the federal budget and our national debt. It’s important to me that my constituents not only understand my views on these issues, but that I have the opportunity to hear directly from constituents about the issues they care about.
One of Congress’ most important roles is enacting smart and sustainable budgets that prioritize investments in government agencies, programs, and policies that support our communities and ensure our nation’s safety. From funding for education, environmental protections, workforce training, and repairing our nation’s infrastructure, the federal government plays a critical role in sustaining programs that improve the daily lives of families and individuals in our communities. I also understand and share the concerns about our nation’s long-term debt and deficit challenges, and the need to put us on a more fiscally responsible long-term path.
I support efforts to improve Social Security—a program that makes up around 20% of our federal budget and is critical to our seniors. One way to do so is raising the so-called ‘Social Security cap’, which would require wealthier individuals to pay their fair share into the system. Presently, individuals only pay Social Security payroll taxes on the first $168,600 of their earnings, and any income above that level is not subject to the Social Security tax. Removing this cap on taxable earnings would increase revenue from higher-income earners, help cover program costs and extend Social Security’s solvency well into the next century.
I also support closing the “tax gap”, the difference between true tax liability and the amount that is paid on time. The wealthiest 1% are the largest contributors to the tax gap, failing to pay as much as $160 billion in owed taxes each year. The tax gap totals around $600 billion annually and is predicted to result in approximately $7 trillion in lost tax revenue over the next decade. By investing in modernizing Internal Revenue Service (IRS) infrastructure and ensuring the agency has enough resources to conduct audits on top earners and corporations, we will ensure billions of dollars annually are reinvested into the Treasury to cover government spending and payments on the national debt.
Hedge fund investors and speculators on Wall Street make thousands of trades per second, profiting off their access to faster technology and advanced information. I am a proud co-sponsor of legislation to impose a 0.1 percent tax on high frequency trades that only benefit elite investors and would raise $752 billion in new federal revenue over the next decade. Additionally, I support taxing the ultra-wealthy and making them pay their fair share. I am a cosponsor of the Ultra-Millionaire Tax Act, which would impose a 2% wealth tax on assets exceeding $50 million. This is predicted to bring in at least $3 trillion in revenue over 10 years, helping to address budgetary and debt concerns, without raising taxes on the 99.95% of Americans.
Ensuring that wealthy individuals pay their fair share in taxes and closing loopholes that allow Wall Street to avoid their fiscal responsibilities are essential steps toward protecting our seniors and securing a financially stable future for our nation. By adopting a fair and equitable tax system, we can uphold our commitment to social justice, invest in essential services for our aging population, and put the United States on a path to fiscal responsibility and sustainable growth.
The comments I receive from constituents are an integral part of understanding the issues that are important to our community. Please know that your input is greatly valued, and I hope that you will not hesitate to reach out to me or my office in the future.
Sincerely,
Adam Smith
Member of Congress