State of our broken financial system

One could read the previous four posts here and get a sense of what we, collectively, own in the United States. The President spoke during the State of the Union of many strengths our country has, similarly to what I point out here about our assets. We need to look at what our president says not just in understanding his goals and his agenda. We need to hear his speech and realize what is influencing our political dialogue. Both political parties give an ovation to a wounded soldier and generally agree that America is great. Wonderful. I can get behind that. Who can't?

When the two sides talk numbers regarding Veterans Administration budgets, it's a different story. Why is it we can agree that the recovery and presence of one veteran is great but that treatment of all of them is problematic? Indeed, it should be far cheaper to treat those with less severe injuries than Cory Remsburg. Furthermore, it's easy to just throw a blanket over all veterans and just SAY we should take care of them when they leave the service. It's almost unheard of someone proposing tax to PAY for this care. There is somehow a disconnect between our sense of moral obligation and our fiscal duty.

This blog will not advocate for Democrats or Republicans. I am here to talk about our country's finances and not about political squabbles. But recently the two subjects have intersected (collided?) When the arguments over our budget reach a point where our government shuts down non-essential offices for half a month and approaches fiscal default, the process has broken down. It's even more broken down when Congress's only agreement during the shutdown is to pay the people who can't legally go to work even if they want to volunteer. The only person who bore the brunt of the shutdown was the American taxpayer.

This is relevant to the state of the union now: Boeing is applauded and encouraged to stay in Seattle with the help of millions in local, state, and federal spending. But this nets zero to America as a whole. It's really just an issue of whether the jobs are in Seattle or St. Louis. But of course, the people physically building the planes have little say in the matter. Sure, the union has a seat at the table, but this is really a negotiation between Boeing and various levels of government. The union only really has power in the form of their members' votes.

Employee unions harmed themselves when their corruption was revealed. They could still be a legitimate place for workers to organize and have their interests represented politically. But they have lost their battle by being corrupt and being representatives not of greater good but their own cottage industry. The American workforce became more mobile and less likely to stay in a single job for decades; union options did not adapt to the changing work climate, and therefore union membership is on a steep decline. What's more, unions were the check on corporate management interests. Without workers' voices being effectively represented, corporations have achieved a lot of federal benefits subsidized by the American taxpayer.

Life in America has changed since the 1950s, but we have a tax system that still understands people as living in that structure. Rent is not tax deductible; mortgage interest is. Capital gains are taxed at 15%; income is taxed at 20, 25, 30%, even more. Retirement contributions are tax deductible; people who live paycheck to paycheck are then completely dependent on a Social Security system that is in disrepair. Even the tax brackets themselves are narrow because when they were created, the dollar was worth more and those income brackets made sense to that dollar's value. Whether you make $450k or $4,500k a year, you pay the same taxrate.

Herman Cain was onto something. He is not someone who knows a lot about foreign policy, but as far as tax policy goes, he thought outside of this 1040 box that we just keep checking, year after year. Does it make sense to have an income tax “rate” and then have an accountant work games to get you into a lower bracket and make that rate lower? Do we really know that the taxpayer contributing to that “non-profit” is not benefiting from that non-profit's work? Does it make sense to encourage people fresh out of high school to get tax credits for their parents and simultaneously get them to take out student loans that they will be paying back until they are well into their thirties? Does a tax benefit to procreate make logical sense?

I disagree fundamentally with the idea that we should use tax policy to encourage or discourage behavior. We should pay our government's bills, and we should pay them every year. We should all pay them, at an equal percentage of our total income. It's a tax policy that would be shorter than this blog post. Take the annual budget of our government, and add a payment schedule for our national debt: we seem to like 30 year mortgages. Divide that budget by the number of individuals and business entities in the United States (remember, corporations are people my friend). Then we figure out a percentage of everyone's income in which that total is then met. That is everyone's tax rate, and there are no deductions. Income is money that goes into an account in your name that year. Say the number is 22% - then everyone pays 22%.  It's simple. It takes a few minutes and a calculator to figure your taxes. Sorry accountants, I can do this myself.

Where is the mention of tax reform? And are there people serious enough about it to get something done? Not right now, because these politicians have created a system which they benefit from. It's a classic conflict of interest, and the only people who can do something about it are us.