white male consumer

The fact that “47% of Americans paid no federal income tax in 2009″ made the rounds recently as Americans geared up to pay their taxes again and rich white people picketed on the deadline to file, April 15th. My first reaction was, “Well, yeah, but seems like that burden is being shifted downward to the state and local level.” Dig a little deeper, and it turns out that more people are paying the feds than at first glance. Between payroll, medicare and social security, excise, and gas taxes, three-quarters of the population stand to pay something to the federal government this year, according to the Tax Policy Center.

And the average federal take – median of 18%,  millionaires at 27% – trends toward reasonable, at least to the reasonably-inclined. The problem of course is the gap between what the government collects and what it spends. American sales tax is low compared to other nations, where a value-added tax, or VAT, is the norm. This method adds fractional tax percentages at each stage of production of a product, taxing the additional value. This taxes consumption more directly and would stand to raise a fair amount of additional revenue. Alone, a VAT can be seen as regressive, but a refundable tax credit – for lower income taxpayers who spend proportionately more of their income on necessary goods –solves that dilemma.

The overall American tax structure might not need drastic reform then, but incremental. Everyone acknowledges that cutting into the deficit will require both increased revenue and decreased spending. On the spending side, it’s popular to say that there are no easy answers, but I can think of a few right off the bat. The military budget continues to bloat, with total defense spending budgeted between $880 billion to $1 trillion in fiscal year 2010. It’s a sickening waste of money, the bulk of which stands to do nothing against the reigning terrorism bogeyman, but there’s little to no political will to start cutting the fat. Going hand in hand, the war on drugs continues to blow untold billions in federal, state, and local enforcement, lost wages and cost of imprisonment of offenders, and costs associated with failure to provide due treatment to those abusing. True reform of the tax code stands to bring in substantial additional revenue by cutting granddaddy entitlements and credits to business and special interests with no redeeming value.

But the obvious obstacle to all of this is hyperpartisanship and no one having any incentive until the plug is pulled by America’s creditors.

In summary: “wah wah wah!”