I wrote a check to the IRS this week that had a lot more numbers to the left of the decimal point than I would have preferred. I wrote that check with mixed emotions: I am thankful that I can pay a lot more in taxes than I earned when I started the business that is my day job. Naturally, I would have liked to pay less. But I honestly can’t quibble with my tax bill. If we are ever going to get our nation’s debt under control, I’ll probably be paying even more in the future.
Credit-reporting agency Standard & Poor’s announced early this week that America’s credit worthiness was in danger of slipping. Investors panicked; they sold, and the market fell. A few hours later, however, “the street” decided that the politicians in Washington would agree on a plan to trim the deficit and eventually balance the budget.
There is no reason to think that logic will suddenly overcome those on both ends of Pennsylvania Avenue and avoid brinksmanship on the debt ceiling as well. This time, the eleventh hour might be too late. The debt ceiling is not just about a cap on government borrowing — to most of the world it is an indicator of our ability to solve America’s economic problems.
We are just about the only major economy in the world without a plan to curb the growth of our debt. It is not because we can’t — there are a lot of bright, common-sense ideas for doing just that — it is because the political value of demagoguery on the issue seems so precious to politicians of both parties.
That senseless political gridlock is what led Standard & Poor’s to downgrade our economic outlook to “negative” this week. It is also what threatens to undermine America’s standing as a stable economy and a safe and sure investment. Nothing will undercut confidence in America faster than another march to the edge of that financial cliff the politicians have been yammering about the last few weeks. If investors here in the U.S. and around the world become convinced that buying and holding Treasuries is not such a safe investment anymore, their money will go elsewhere.
So what does this all have to do with the taxes we’ve paid this week? Actually, a lot. As a friend with a seven-figure tax bill put it to me a few days ago, “What if they held a treasury auction and no one came?” He, along with a growing number of business leaders, is coming to the conclusion that paying more in taxes is far preferable to an America in danger of default.
As any family that has lived through a rough patch knows, there are two things you can do when debt threatens to overwhelm. You can cut expenses and/or increase income. Most families do both. I’ve worked two jobs in my life to stabilize rocky finances, as have a lot of others. Obviously we need to cut spending, and while we can all debate what cuts should be made, it is inevitable that they are coming. But this is no time to also cut taxes and preserve loopholes for corporations and higher-income individuals.
I’m proud to be one of those the Tea Party calls a job creator — but I don’t need lower taxes to hire people. If my company has work to do, we’ll add jobs — as will any business. Job creation is a lousy argument for tax cuts.
Corporations have compiled record amounts of cash in the past few years. Profits are rising and corporate taxes are falling. In 1955 corporate taxes were 4.3 percent of GDP. For 2010 they will be 1.3 percent. In 1955 individuals paid 58 percent of all income taxes. This year they’ll pay nearly 82 percent. Businesses paid more in “the good old days.” That’s a tradition and a message politicians need to remember as we struggle to right America’s financial ship.