Washington budget battle held up by two words: 'I want'

Republicans don't want taxes raised on the upper class and Democrats don't want entitlements lowered on the middle class. In other words, both sides want what they want, which is the same protracted storyline that elected officials have been struggling with for years. The arguments are laced with misperceptions - most notably the fact that Americans at all income levels paid less in federal, state and local taxes in 2010 than they would have paid in 1980, according to a NYT analysis.

The federal income tax, which will turn 100 next year, is in decline. Congressional Republicans and Democrats have repeatedly voted to reduce the share of income that people must pay. Over the last decade, annual revenues from federal taxation of individual and corporate income averaged just 9.2 percent of the nation's gross domestic product, the lowest level for any 10-year period since World War II. The recession and new rounds of tax cuts further reduced revenues, to 7.6 percent of economic output in the 2009 and 2010 fiscal years. Stronger economic growth has produced a modest increase in tax collections, but the White House budget office estimates that collections for the fiscal year that ended in September will total 9 percent of economic output, still less than before the financial crisis.

Federal spending, meanwhile, grew faster than the economy over the last decade -- particularly during the recession. To pay those bills, the government borrowed more money than it collected in income taxes in each of the last three fiscal years, something it had not done in even a single year since World War II, federal data show. Congress could have eliminated those deficits by cutting spending. It might also have averted those deficits by leaving the tax code unchanged. The government on average would have collected an additional $800 billion in each year from 2006 to 2010 if the 1980 code had remained in effect and economic activity had continued at the same pace, the Times analysis found.

Unfortunately, raising taxes has become politically untenable - as have spending cuts that would require eligibility requirements to Medicare and Medicaid. You can blame the politicians all you want, but they're simply reflecting the leanings of their constituents. More from the NYT:

Anita Thole, a middle-income safety supervisor for a utility contractor, is not wealthy. She does not expect that she ever will be. She is a single mother with a daughter in college, and she said she regarded the wealthy with a mixture of envy and admiration. But she does not want them to pay higher taxes. "They work their butt off to get what they got," she said. "I wouldn't want them to pay more so that I can pay less." Do they work harder than you? "What? No. I work my butt off," Ms. Thole, 46, said. "But you got to believe in the American dream. You got to love them for what they did, for what they made of themselves and for being more aggressive than me."

Ms. Thole, like many in Belleville, is also convinced that governments could avoid raising taxes by adopting more frugal habits. "There's some days we stay home and we eat peanut butter," she said. What would she like governments to cut? "I really like it when they cut the weeds along the highway," she said. "I like it when there's good roads to drive on. The schools, I don't know, I don't want to pull back from the schools. I don't have the answer of where to pull back. "I want the state parks to stay open. I want, I want, I want. I want Big Bird. I think it's beautiful. What don't I want? I don't know."

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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