Federal tax revenue is about 17% of our GDP, while spending is at about 25% GDP. If we were to continue that trend, in just 12.5 years, we would reach federal debt of 200% of GDP. That, by any calculation is unsustainable. The problem, however, is not that taxes are too low (rather that they’re too unfair), but that the cost of health care and entitlements (cough, cough, Baby Boomers) is rising so rapidly at a rate that, in time, the government would inevitably default. What our government needs to do is bring spending to the same level as our projected revenue and then increase revenue by 2-3% to start paying down the national debt. As much as one would like to believe that taxing the rich will solve all our deficit problems, the problem is more about unemployment and a bad economy than inequality (according to Time Magazine, $3.6 trillion of our debt is from shortfalls from the Great Recession).
The United States federal tax code is 7 times longer than the Holy Bible. It is ridden with loopholes, written by lobbyists. In addition to our need to spend what we earn, we need to completely overhaul our tax code. Climate change is one of, if not the, greatest problems facing man kind. Why not take advantage of this unfortunate situation to create a tax code that does not only benefit our economy but our climate as well. We must stop taxing income and start taxing consumption. Essentially, a 25% or so consumption tax would replace income and payroll taxes. Anyone below the federal poverty line would receive federal rebates on consumption taxes paid (similar to the proposed Fair Tax). In addition, essential goods, such as groceries and prescription meds, wouldn’t be taxed. In addition, there would be a flat 15% corporate income tax (without loopholes for medium-sized and large corporations) and carbon, energy, water and other environmental taxes.
America must become fiscally responsible by paying down its debt and by leveling the playing field for taxes. The times are a’changing and so should our budget and tax code.