Why We Must Pay More Taxes
The perfect economic storm is forming before our eyes and it seems everyone, including our politicians in Washington, is oblivious to it.
We’re experiencing extraordinary circumstances. The United States is actively engaged in two major ground wars, plus the ongoing worldwide war on terrorism that has cost billions of dollars since 9/11 and is expected to continue. For the first time in the country’s history, the U.S. government has decided to borrow, rather than raise taxes, to wage these three wars. In every other war since the Civil War, the government taxed to pay war expenses. Other nations have done the same.
In addition, there are more than 60,000 Americans turning 65 every day, taxing entitlement expenditures and exacerbating health care costs. Making matters worse, the financial crisis of 2008-2009 forced the government to pump more than $3 trillion into the economy to keep us afloat, all of it borrowed.
The financial crisis and subsequent recession proved to be a great bonanza for American corporations. As they laid off millions of Americans, they realized they could do more with less, make more profit, and stash their cash in safe havens around the world. U.S. corporations are hoarding money, with total cash holding amounts at $1.3 trillion, most of it held overseas to avoid taxes. And it will be long before we see any attempt by U.S. companies to hire and put America back to work.
The world has come to count on American consumers to stimulate the world economy with their insatiable appetite for borrowing and spending. However, we have come to realize that the prolonged unemployment of Americans means erosion of consumer confidence among those who still have jobs and an overall softening of consumer spending. It will be a long time before Americans are willing to borrow heavily and spend again. Add to this the financial crisis unfolding in Europe and we have all the elements in place to form a perfect economic storm and a major worldwide calamity.
One idea to consider is levying a one-time tax in the near future. America as a whole is wealthy enough to endure this short-term agony for a long-term gain. It should be a progressive income tax that would require each working citizen to pay a one-time tax in the next three to five years. This will provide everyone an opportunity to plan their finances to pay it. Yes, it will be a hardship, but advance planning will minimize the impact. By making it progressive, we will ensure that all will pay their fair share. Also, Congress must consider cutting $3 trillion to $4 trillion in federal spending over the next seven to 10 years. This must be done to bring the United States back to its full financial strength. Once the United States regains its financial status in the world markets, it will change the market psychology and bring back jobs as well as healthy economic growth.
Leaders on both sides of the aisle are digging in their heels on political ideology and forgetting about the fundamentals of economic forces and the American people. Sooner, rather than later, politicians from both parties must come to terms with the fact that the only way out of this crisis is to raise taxes, rein in spending, and wind down the wars.
Dr. Ezat Parnia is a professor of management at Nichols College. He can be reached at eparnia@nichols.edu.
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