Income Tax

Last night's segment about income tax on CBS's 60 Minutes was well done and provocative. It confirmed my own ignorant bias towards progressive income taxes and renewed my hope that sanity may yet prevail in our economy and in our government. The two are inextricably linked of course.

Washington State's referendum on instituting and income tax (currently there is no state income tax in Washington) was used as a focal point of discussion, together with an interview of David Stockman, President Reagan's budget director. See it here: http://www.cbsnews.com/video/watch/?id=7009217n&tag=contentMain;contentBody

Leslie Stahl says, "Think your taxes are too high? David Stockman thinks they're not high enough. And he's a Republican who once helped engineer the largest tax cut in history. Ronald Reagan's former budget director tells Lesley Stahl why he's changed his tune on taxes. " She goes on to interview Stockman, Bill Gates Sr. and Washington's governor. She also interviews opposing individuals.

Everything I have read to date point towards the benefits of "taxing the rich" [or eliminating the Bush era tax cuts for the wealthiest Americans], but the naysayers continue to state that higher taxes on the "rich" would hurt business. I don't get the connection. I can understand how some businesses might benefit from being in a state that has no income tax because they can retain employees that want to work in a no income tax state, but on the Federal level I don't see any viable arguments.

I do understand that an increased revenue stream tempts Congress to spend, spend, spend, but economists such as Paul Krugman argue that spending, targeted at stimulating the economy, is essential in the near term for digging out of this recession and that history proves such is the case. I have to believe he is smarter on the issue than I am even though I know equally smart people disagree with him. If Krugman is correct, then the problem is not taxes in the near term, but how to control spending in the long term. Many entitlement programs need to be brought under control and probably our standard of living as a whole will decline. But if things are not brought under control our standard of living will definitely decline with perhaps worse consequences both in duration and in severity. I am thinking in particular of the crime and political upheavals and wars that have accompanied global economic depressions.