Raise Tax Rates? Why not collect what is already owed.

Stop me if you have already seen this movie - it's fundamental.

President Joe Biden and a bipartisan group of senators just announced a deal has been reached on infrastructure.

*Pounds Table*

“Of all the gin joints in all the towns in the world, she walks into mine…”

The iconic scene from Casablanca where Rick Blaine, American, laments the return of his true love, Ilsa Lund, into his life, and into his bar.

For those few of you who don’t know the story - Blaine fell in love with Ilsa in Paris before the Nazis stormed in to occupy the City of Light. Ilsa thought her husband, Victor Laszlo, had been killed trying to escape a concentration camp.

Just as the Nazis come into Paris, Ilsa finds out that Laszlo is, in fact, alive and she writes Rick that they cannot see each other. She also doesn’t explain why. Naturally, Blaine is devastated to be jilted and without explanation. It was before break up texting.

And we’re back…

National Republicans seem to have the same pitiful drunken lament as tax and spend policies have entered the political conversation because like Victor Laszlo, some Democratic Senators and a handful of Republican Senators have decided to return to fiscal responsibility by actually paying for stuff.

Republicans know they should win this fight, but also know they won’t.

*drink*

(Play it, Sam…)

The Stuff in this case is actually much needed infrastructure projects around the country (now that the bill has been trimmed back) for what former Virginia Governor Doug Wilder would call “necessities, not niceties.”

Yes, the one true love of the old Republican guard (cue gasp - the Establishment!) has returned - tax and spending fights. But only because Democrats actually want to pay for something. Since 2001, and especially since 2017, the Republicans have simply gotten drunk on indebtedness so as to avoid making the hard budget decisions of cutting spending and/or raising taxes.

(It was all going so well until that Wuhan thing got out… Play it Sam…)

State lawmakers are more fiscally sober than that since they almost always are constitutionally forbidden from having unbalanced budgets. If they want to spend more money than they are expected to bring in, they either have to cut other spending or raise taxes.

Credit the Democrats for actually wanting to pay for things. No, not the things we have already done. Now, it’s The New Stuff that will distract the audience for the next election cycle. You know - roads, bridges, tunnels, airports, water systems, and whatever else deemed necessary today.

But let’s not be distracted from our fiscal reality. Our nation is currently running a massive deficit that gets tacked onto our already massive debt load.

Here’s the real Stuff that few even dare to bring up because they will then be asked, “Okay, what do you intend to do about it?”

Our National Debt is $28,439,400,000,000.00+ or 128.1% of our Gross Domestic Product.

In 2000, our Debt to GDP ratio was? Right, 57.5%

In 1980? Right again! Good job! 34.6%

Mind you that’s just federal Debt to GDP. Add up the rest and we’re at 143% of GDP.

Our National Deficit? $3,287,441,000,000.00+

Largest federal budget items?

Medicaid/Medicare $1,315,000,000,000.00+

Social Security $1,126,177,000,000.00+

Defense $728,136,000,000.00+

INTEREST on the Debt? $400,865,000,000.00 +

Student Loan Debt? (a very large asset for the federal government) $1.75 trillion.

Naturally, the question follows - “Okay, how do you intend to pay off ALL of that debt?”

The first place we should be looking is to what IRS chief Charles Rettig told the Senate Finance Committee recently are uncollected taxes which he estimates to be over $1,000,000,000,000.00+ EVERY YEAR. That’s right - around ONE TRILLION is going uncollected under the current tax code.

Over at the print shop, Janet Yellen says it's around $7 Trillion over a decade.

I’ll write that out $7,000,000,000,000.00 - uncollected.

So, why on God’s green earth are we trying to change the tax code? Well, naturally it’s the old piñata that liberal/progressive interest groups love to bat around that the big wealthy corporations and individuals don’t pay their fair share.

They never actually define what fair share is but rely on our collective agreement that it ain’t us - it’s them. No, not the liberal/progressive interest groups Them. The Them is the folks with the ability to pay more which is how most of us (we) see the world. That’s a far fairer definition of fair. At least in democracies.

Q - If our democracy is under assault and/or dying, how come so many more people actually voted in the 2020 elections than 2016? Asking for a nation of friends.

Think about this now. There is a big spending proposal out there to fund A LOT of what we normally call Core Government Services and the tab is around $1 Trillion.

CURRENTLY, we don’t collect $1 Trillion from the CURRENT economy’s CURRENT tax code. Shouldn’t we focus on those who owe versus squeezing more out of those of us who don’t?

If I am making too much sense, just pause your reading here and hit share.

The only thing about the new plan that is likely to be shovel ready are the excuses why we can’t collect this revenue. It’s probably, ya know, complicated. No kidding…

However, further complicating an already complicated tax code which CURRENTLY INCENTIVIZES not paying taxes is simply asinine.

We should be simplifying the federal tax code, not punishing those who are operating under the current structure which is the framework for many business operations.

Just read Salena Zito’s op-ed in today’s RTD about a South Dakota wind turbine manufacturer - Molded Fiber Glass. One of the reasons for the closure? “Proposed revisions to the tax policies affecting the wind energy industry in the United States.”

Proposed. Not actual, mind you. Just proposed.

The margins for that company - in a growing industry - are so thin and the global competition so intense, that even considering tax revisions was a reason for shutting their doors. Those tax incentives apparently helped them employ 300 workers.

Regulatory and tax compliance is cumbersome, incredibly expensive, and an inordinately inefficient use of capital.

Look, policies matter and incentives work - even perverse ones.

But the underlying premise is the problem. We shouldn’t have a tax code that incentivizes NOT complying which creates fights over fairness and collections.

You know why most folks don’t complain about sales, gas, and meals taxes? They’re fair and easy to collect.

American companies would be much more competitive and innovative with a simpler, fairer, and flatter tax code. The federal government would be able to collect more revenue with greater efficiency. We could probably even lower rates - eventually.

Raising the corporate tax rate and other tax rates that will hurt our global competitiveness only creates less compliance, more avoidance, and less net revenue.

We’re just coming out of a pandemic, changing the financial rules now couldn’t come at a worse time for many businesses who are trying to adjust to a scrambled global economy with disrupted supply chains.

Let things settle out and collect from those who legally owe. That’s the better way to go.

In Casablanca’s final scene, Rick makes the noble call by boxing out the Nazis and making sure Ilsa and Laszlo get on the plane to Lisbon which then get them to America where he can continue the fight against their common enemy.

The toughest decisions in life are often the easiest because they are so obvious. I’m not asking people to check their sofa cushions for extra cash. This is simply money owed to the treasury.

Getting better at collecting revenue owed should be a core priority if we are going to fund our core services while growing our way out of this pandemic.

It’s fundamental.

You must remember this

A kiss is just a kiss

A sigh is just a sigh

The fundamental things apply

As time goes by.