David Post: Time for boldness on taxes

Published 12:00 am Thursday, April 21, 2011

My grandparents, both immigrants, cheated on their income taxes every year.
My grandfather would gather a box full of miscellaneous paperwork and take them to his brother-in-law, a lawyer in High Point, to do his tax return. Uncle Ben was a general practitioner who mostly wrote wills and handled real estate transactions.
My grandparents were poor. They went bankrupt in 1939 when they were in their 50s and moved from the Virginia mountains to Salisbury because they found a store with living quarters upstairs. They carried their entire inventory of shoe boxes in a pickup truck. When they sold a pair of shoes, the customer got the shoes but not the box. My grandfather kept the shoe box which went back onto the shelf so that customers thought the store had a lot of inventory.
My grandmother would walk next door to the A&P to buy food, then feign surprise that she had forgotten to bring any money with her. Sheíd return to the store hoping that a customer would buy something so she could go back and pay for that dayís food.
My motherís high school graduation gift was a $50 bill which my grandfather handed her, let her hold, and took back so that he could pay her college tuition a few months later.
After slogging through my grandparentsí grab-bag of information, Uncle Ben would produce a tax return and tell my grandparents they didnít owe any income tax. My grandfather would tell him to do it again. He wanted to pay some tax.
My grandparents were proud to be in the United States, so they cheated on their income tax to show more income than they really had.
President Reagan, who engineered a major overhaul of the tax code in 1981, signed a dozen tax increases over the next seven years of his presidency as federal budget deficits tripled. Clinton raised taxes that generated federal budget surpluses six years later for the first time in a half century as the economy created over 20 million new jobs. When Alan Greenspan worried about surpluses ěas long as the eye could see,î President G.W. Bush converted a $200 billion surplus into the nationís first trillion deficit by cutting taxes, waging wars of choice, increasing Medicare benefits, and bailing out the banks (which was absolutely necessary).
Even with deficits threatening the nationís credit rating, the majority of Congress has taken a ěno-tax-increaseî pledge. (Do those same people sign a ěno-income-increaseî pledge for their personal finances and balance their own budgets only by reducing their spending on health care and retirement?)
President Obama and the Republicans disagree about whether taxes should be raised on the ěrich,î that is, people who earn over $250,000. Congress spent $480 billion this year on a tax cut for everyone, then almost shut down the government bickering over $38 billion in spending cuts. If a Martian came to Earth and witnessed our financial management, it would turn around and go back home.
Americans will pay taxes if they know why their government needs the money. In times of war (except this time), the U.S. has raised taxes. Taxes have increased for Social Security and Medicare because people want the safety net government offers. But, the Tax Policy Center, a Washington, D.C., think tank, reported that 45 percent of taxpayers owe no federal income tax this year.
Maybe a bold new approach is in order: Ask people to pay for the bounty they demand:
1. Require everyone to pay some tax, say, at least, 1 percent. A minimum wage taxpayer earning $15,000 per year would owe $150. Liberals will scream that the poor canít pay any tax. Conservatives will scream that all tax increases are bad. I bet those taxpayers would say, ěFine with me.î
2. Increase the Medicare tax by 1 percent. The average household earns $50,000 and pays approximately $750 in Medicare tax, less than the cost of health insurance for one month. The employer pays another $750. I bet those taxpayers would say, ěGlad to pay another $500 per year to shore up my retirement health care.î
3. And finally, let the Bush tax cuts expire. When Clinton enacted those tax rates, the country grew as never before. If it helped solve the problem, I bet taxpayers would consent, as they did in the 1990s.
Would my grandparents have paid at least 1 percent of their income to be in the U.S.? They paid more. Had they earned $50,000, would they pay an additional $500 to assure their retirement health care? You bet.
My bet is that most Americans are like my grandparents.

David Post is one of the owners of MedExpress Pharmacy and Salisbury Pharmacy and teaches in the Ketner School of Business at Catawba College.