Having just seen the film "Lincoln", I was overwhelmed again with what it cost to "save the Union."
Since the time of the Civil War, the continued vitality of the Union has depended upon our willingness to work together to meet the country's challenges and obligations. We in Chautauqua County have a common bond, not only between ourselves but with our fellow Americans.
Thus, we come to our most current issue of trying to solve the deficit financing problem of the federal government. Again, perspective is important.
In Doris Kearns Goodwin's book, "Team of Rivals," upon which much of the "Lincoln" movie was based, she mentioned that at the end of 37th Congress, in Lincoln's first term: "A comprehensive tax bill was enacted, establishing the Internal Revenue Bureau in the Department of the Treasury and levying a federal income tax for the first time in American history."
The federal income tax has a long history, and here we are 150 years later still arguing about it. The 16th Amendment to the Constitution, approved by the States in 1913, effectively institutionalized the tax and was supported by both Republicans and Democrats.
The top marginal tax rate then was only 7 percent but by 1918 it had risen to 77percent, in large part to pay for the costs of World War I. During World War II the top rate increased to 94 percent. In addition, during the Second World War, the federal government borrowed billions of dollars through war bond sales to its own citizens in order to help finance the war.
So here we are in 2012 - 10 years into the War on Terror, borrowing trillions of dollars to finance the military and our domestic spending while, at the same time, reducing tax rates. Where will it end? How is the country going to finance itself? The Chinese are only going to buy so much of our debt. Eventually, we will have to "pay the piper."
In that context, I am mystified about the rancor over a tax and a revenue source that has existed in one form or another in our country for 150 years.
My father was a strong Republican conservative and as such, his primary concern about government was framed by the words "pay as you go." He was suspicious of government and thought that the private sector had, in most cases, better solutions.
He thought deficit spending was a Democratic idea. He wouldn't have understood the modern idea, under some Republican administrations, that you could reduce taxes (revenues) and increase spending and then through some miracle have a balanced budget. In my Dad's world, if government was going to spend, it should collect the money and pay its bills - that was his idea of conservatism.
If he were alive today, he would probably say that because of our addiction to deficit spending over the past 30 plus years, "the chickens have come home to roost!"
Recently, a newly-minted physician anticipating entering the workforce sent me an article about what doctors could save in taxes if they were taxed at the same rate as hedge fund managers. Hedge fund managers got the law amended so that most of their compensation is defined not as ordinary income but as "capital gains." The capital gains rate of taxation is at 15 percent - less than half of the maximum ordinary income tax rate of 35 percent. Thus, if you are a hedge fund manager, you are pretty well set. If you are a doctor treating patients or an ordinary guy earning wages, you don't get that special treatment. A lot of the "rancor" over the income tax comes from the feeling that there is tremendous inequity in how it is applied.
To my knowledge, Warren Buffett is no raving liberal. He operates Berkshire Hathaway Corporation and is a multi-billionaire. He has not advocated raising maximum rates but supports raising minimum rates for the very wealthy. He is one of the top 400 income earners in the country.
In his words: "The group's average income in 2009 was $202 million dollars - which works out to a "wage" of $97,000 per hour, based on a 40 hour work week. (I'm assuming they're paid during lunch hours.)"
You may recall that earlier this year Buffett divulged that his tax rate was less than his secretary's. He also reflected that in past years, when tax rates were much higher, he made a lot of money and "the middle class and the rich alike gained ground." He is not worried that the rich will "go on strike and stuff their ample funds under their mattress" if tax rates go up. In his view, "the ultrarich, including me, will forever pursue investment opportunities."
So here we are in our body politic waiting to see what Congress and the President can do to address our federal deficit. It seems to me that we should be supporting a solution which will require everyone to do more: accept some cuts in federal services and, at the same time, realize that our federal government will need more revenue to meet its obligations.
Has "common sacrifice" become an out-of-date concept in this federal Union? Do we have the gumption of our forebears to stand up to the plate and balance our common budget? If our country were a corporation, I would be supporting candidates for the Board of directors (politicians) who are willing to make the tough decisions to get our fiscal house back in order.
A Chautauqua County resident interested in analyzing public policy from a long term perspective writes these views under the name Hall Elliot.