Legislators let ego get in the way of practical solutions

With all the pundits, politicians, and activists that throw their two cents into the national conversation on a daily basis, there’s rarely a need for local columns to pass those same exhaustive opinions on as their own. But it seems, as too often happens in Washington, recent debates have focused so much on the ideological politics of winning and losing that instead of finding a solution and implementing it, our representatives have dug into the same stubborn policies they’ve put their head down and pushed for in the past. All to prove they are, and always have been, ‘right’, instead of facing them practically. It’s come to such a standstill that earlier this week Standard & Poor’s, a credit rating agency, issued a negative outlook addressing concerns the United States might not be able to address the ballooning deficit and national debt because of the political divisiveness preventing a solution to the most important aspects of our country’s finances.

Reducing the annual budget deficit and reforming the tax code have been topics bounced around like political beach balls for years, but using a little more common sense and a little less rhetoric would go a long way in improving our financial outlook. You may have heard the saying ‘it’s not a revenue problem, it’s a spending problem’ when substantial cuts in government spending are promoted. While government has many, many inefficiencies that need to be removed, spending is only part of our deficit problem. Think about a family or a business, whether they are facing difficult times or looking to grow. Would cutting spending get them completely out of their financial slump or take their business to the next level? No. Sure, it’ll give them some breathing room, but it wouldn’t significantly change their position. They look for other means of building revenue whether it is by taking on another job, gaining new clients, or developing new products in addition to trimming their budget. Government should do the same.

At this point, someone might say this is advocating for an income tax rate increase. It’s not. In fact, decreasing our deficit and national debt doesn’t have to be generated through tax rate increases at all. Job creation is the proven and most effective way to close the gap when combined with spending cuts. Adding more jobs doesn’t increase the burden on people already earning income, but increases the amount of employees who pay taxes at the current rate.

Tax reform is a timely issue with the 2010 filing deadline passing earlier this week. The over 70,000 page tax code is only growing and it’d be hard to find someone who thinks this is a positive. Many of those pages include tax credits, deductions, exemptions, and loopholes to itemize returns and the amount owed each year. Individuals and businesses can trim hundreds and thousands of dollars off their total tax amount through a variety of different incentives politicians, backed by special interests, have passed over the years. There are potential benefits for taxpayers of all economic classes if they have the knowledge or access to professional assistance to make sure they qualify and document it properly for the IRS. Each tax break lowers their effective income tax rate. While someone may be in the 33% bracket, after a handful of credits and deductions, their real rate might really turn out to be closer to 29% in the end. This disproportionally hurts the majority of filers who simply do their own taxes without itemizing their return. A good analogy can be looked at through the perspective of your favorite restaurant. Patrons who frequent the establishment for their highest-priced and best entrées would typically drive the business’s profits, but instead they often receive the best coupons, and could essentially pay less on their entrée than you might for your simple sandwich. You’re not aware of the discounts so you pay full price as listed on the menu. Because of the discounts others receive, the menu price is higher to make sure those discounts don’t put the businesses revenues at risk as a whole. This is a broad generalization, but the simple point remains the same: limiting tax breaks for the few could lower everyone’s margin tax rate over the long-term.

These are solutions that prevent an undesired adjustment upward in tax brackets and would allow each political party to accomplish their basic legislative and political goals. Republicans would be able to say they kept taxes at their current levels, Democrats would be able to say they reduced tax breaks favoring the wealthy, and Independents would have a slightly restored faith their government has the potential to meet the challenges this country faces. As is usually said when it seems when a solution or set of ideas seem so clear to follow, “Easier said than done”.