Spinning Loans

Our deficit, still major, still huge; over one trillion.

To deal with our deficit, Obama is making the case for the Buffett rule to go into effect. It states that any taxpayer making over a million bucks should pay a minimum tax of 30%. Buffet made his case for this in a NY Times op-ed piece where he points out that most millionaires and billionaires like himself have effective tax rates lower than 30%.

Many millionaires receive their income from dividends that are taxed at 15%, capital gains that are taxed at 15% and municipal bonds which are exempt from federal tax. Put into perspective, many low and middle class taxpayers have effective tax rates that are higher than the millionaires.

I say we think of our deficit as a business where there are two ways to cut debt: cut spending and raise revenues. Sometimes you have to make tough decisions to cut costs like letting go an employee or discontinuing a product line. And business owners are always looking for ways to grow revenues.

As a country, we need to reduce our deficit by following that example and simultaneously raise taxes and cut spending. As an entrepreneur, I can vouch for the fact that consistently increasing profits is not easy. It takes focus and discipline but that’s what we need to do as a country to get us out of this mess.

I do think that higher wage earners should pay more taxes than they are currently paying but it shouldn’t be by such a wide margin. Why? Think of it this way. Before a self-made millionaire became wealthy, s/he was an average Joe or Jane. This average Joe and Jane made a conscious decision to create a better financial future. Should they be penalized for the risks they took in their businesses and lives to achieve some wealth? Joe and Jane stuck their necks out, thought differently, went for it and made it.