Click here for part one of this topic.
The Pro StrategyAs was clear in my introduction to the December topic analysis, this topic can potentially be a hard-sell to citizen judges. There is simply no doubt that people do not like having their taxes raised. Most folks like to have nice things from the government like well maintained roads and bridges, a well-equipped and obedient military, clean air and environment, a good public health system, etc. But often, there is a tendency to forget, nice things cost money. (Of course we will look at the Con side of this debate a little later!) Maintaining our nice government-augmented life-styles while not providing sufficient revenue to cover the expenses, results in deficits which force government borrowing, driving up debt. I think there can be little doubt, that is what this month's resolution is targeting; the national debt which is currently over sixteen trillion dollars. There is one way to pay down debt. Get more money. The US federal government gets more money for debt payment by either raising taxes (or any number of actions which effectively raise taxes) or by reducing expenditures or both. The Pro position must argue that tax increases should be prioritized over spending cuts and so expand that to assume, tax increases should be prioritized over spending cuts as a mechanism for reducing the debt.
Priority ProblemsEven if Pro is capable of making an excellent case that tax increases are the greatest things since sliced bread, apple pie and texting; Pro can still lose if they fail to convince the judge the tax increases should be prioritized. By this, I mean, a certain level of tax increases will be effective in paying down the debt and if one can make the case government can raise the taxes and the judge is convinced it is absolutely a good thing with minimal backlash from the majority of the tax paying citizens, one must remember Con could potentially be making the same arguments about spending cuts. So, unless Pro can give the judge a convincing argument that tax increases are somehow preferred over spending cuts, the case could be lost. For this reason, without having seen the cases run, I anticipate there will be problems over the word "prioritize". Therefore, Pro will need to establish a compelling argument that taxes are preferable over spending cuts as a mechanism for reducing debt and therefore should be prioritized.
The most obvious ways Pro will establish priority is through a comparative advantages framework. Pro will expose the advantages of both taxes and spending cuts and show how the advantages of taxes outweigh the advantages of spending cuts or Pro may expose the disadvantages of spending cuts and show how these are more harmful than the harms of tax increases. It could be tricky, because again, Con will be doing the same thing and so we have potential for clash over conflicting evidence and different economic theories. I just hope it doesn't get ugly.
Believe it or not, it is a well known persuasive technique to expose the downside of one's advocacy. In this case, it means admitting that tax increases do have the potential for problems but those problems are offset or outweighed by the advantages or they are outweighed by the disadvantages of the opponent's position. While it may sound as though you are conceding the weaknesses of your advocacy, you at the same time are demonstrating a full understanding of the issues to the judge which increases the strength of your arguments when you make claims your position is the better or the lessor of two evils, as the case may be. You are basically telling the judge, "yes, we have thoroughly examined this issue and we see the weaknesses, but our research has convinced us the benefits are far greater than the disadvantages".
How To Increase TaxesAs I have said in the second part of this analysis (here) citizens pay taxes as a percentage (a rate) of some purchased commodity or personal income or on the value of personal property (though this is usually a state or local tax). Generally speaking, the federal government's major sources of tax revenue include personal income tax, payroll tax (paid by employers), corporate taxes, and to a much smaller extent excise and other forms of taxes (see: http://www.taxpolicycenter.org/briefing-book/background/numbers/revenue.cfm). Obviously, increasing the tax rate on any of those forms of taxes constitutes a tax increase and thus satisfies the resolution...well kinda. If we are engaged in this debate to argue the best way to reduce the national debt, then care must be used. For example, excise taxes (the "hidden" tax on things like gasoline, alcohol and cigarettes) are usually allocated to specific funds, not debt reduction and they are a small percentage of the total money taken-in by the federal government. A huge amount of money is received through payroll taxes but a big portion of those taxes are allocated to social security, medicare and unemployment benefits. So the only tax that can reasonably be expected to have a significant impact on national debt is the federal income tax so no doubt, many Pro teams will be focused on increasing the federal income tax rates because the advantages which must offset spending cuts are in that category of taxes and the way that tax is increased is to increase the percentage folks must pay. Currently the federal income tax rates are dependent on different income levels and whether or not the tax payer is married or single, so once again, raising the tax rate in any of the so-called tax brackets also meets the intent of the resolution.
Click here is a breakdown of the 2012 tax brackets .
Resolution MayhemWhile it seems the intent of the resolution is to narrow the clash to actions which are aimed toward reducing the national debt, the resolution clearly does not explicitly say so. This does open the possibility of alternative Pro's (and I know other coaches are going to hate me for saying this) such as tax increases versus spending cuts to finance national infrastructure projects, or to stimulate job creation, or pay for health care or any of a myriad of initiatives which completely explodes the debate grounds. Any of these could be legitimate reasons to prioritize tax increases over spending cuts and it could be argued they are topical. This creates resolution mayhem since it is impossible for teams to be able argue against an arbitrary number of possibilities. So having thrown that out there for those debaters who like to be clever, let's keep the focus on directly reducing the debt or at least the deficit.
Resolution MagnitudesBecause the resolution does not explicitly say we should clash over debt reduction and we assume that is the intent, we are subject to lots of various interpretations which affect how the judge evaluates the round. For an obvious example, let us assume we advocate a tax increase for the upper tax brackets as proposed by President Obama during his re-election campaign. Some evidence may indicate the increase will have little effect on the national deficit if spending remains at current levels. Or even if spending is reduced, the national debt may not be reduced at all, it will just grow at a smaller rate. Does that constitute a legitimate Pro stance? Even when Pro advocates sweeping tax increases there are no guidelines as to how much the debt must go down and over what period of time before the judge can be convinced the increase constitutes a legitimate prioritization over spending cuts.
K.I.S.S. (Keep It Simple Stupid)Because there are so many ways to complicate this debate, I urge you to KISS. There is really little to be gained trying to obfuscate the intention of the resolution at the risk of totally confusing the judge. While winning is always better than losing, it is better to win decisively rather than by default and that is done by presenting a nice, clean, powerful case easily understood by the citizen judge.
Here We Go...McKinney 2011:
"Yet, in the face of all of these facts, fiscal conservatives righteously believe and have gone so far as to pledge that they will not increase taxes. These pledgers are violating their constitutional responsibilities and are ignorant, or worse, as to the impact their folly is having on the economy. They fail to see that their actions are raising interest rates and making matters worse for the very people, small business owners, they purport to be supporting. An increase in debt interest of even 50 basis points (a half of 1 percent) translates into $150 billion more in interest payments on the federal debt, further increasing the deficit and debt."
"According to our analysis of current tax rates and their elasticity, the revenue-maximizing top federal marginal income tax rate would be in or near the range of 50%-70% (taking into account that individuals face additional taxes from Medicare and state and local taxes). Thus we conclude that raising the top tax rate is very likely to result in revenue increases at least until we reach the 50% rate that held during the first Reagan administration, and possibly until the 70% rate of the 1970s. To reduce tax avoidance opportunities, tax rates on capital gains and dividends should increase along with the basic rate. Closing loopholes and stepping up enforcement would further limit tax avoidance and evasion.
But will raising top tax rates significantly lower economic growth? In the postwar U.S., higher top tax rates tend to go with higher economic growth—not lower. Indeed, according to the U.S. Department of Commerce's Bureau of Economic Analysis, GDP annual growth per capita (to adjust for population growth) averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%."
My immediate purpose here, though, is simply to assert that there is no fix for our situation, despite the win-win siren song crooned by self described supply-side economists, without higher taxes. Taxes far lower than public expenditure may anesthetize us a bit longer, but the hangover will be fierce.
The most urgent step is to raise taxes. This is so, by the way, even if social democrats like Paul Krugman are right that the economy needs immediate massive stimulus. If taxes are raised, Congress can offset the near-term effect with spending. I can hear readers objecting: What difference does it make? Isn’t that just a zero-sum game in which fiscal drag from increased taxes and stimulus from additional spending cancel each other out? No. Stimulus spending can be temporary. Tax cuts are forever. If today’s tax rates are extended across the board—even one year beyond their scheduled expiration—the scorched-earth supply-siders, having tasted blood, will never let them go. The Obama administration’s surrender to them late last year did not make them more tractable, but more rabid. The looming debt ceiling crisis has accorded the administration, through no merit of its own, one more chance to show some spine. Let this one slip away, and we are on the road to Greece.
The smart approach to addressing the "fiscal cliff"—the tax and spending changes scheduled to occur at year-end that would cut budget deficits sharply over time, but likely throw the economy into recession next year—is to replace it with a more fiscally and economically appropriate package. Specifically, we should let all the Bush-era tax cuts expire, scrap the automatic spending cuts ("sequestration"), and replace them with a balanced package that raises revenue and cuts spending over the long term while providing more deficit-financed stimulus over the next year or so to boost the weak recovery.
"The above shows how big each policy is as a share of the total impact of the cliff. Some policies are more important on the budget side than the GDP side. Letting the high-income Bush tax cuts lapse, for example, generates $42 billion in 2013 but hardly hurts GDP at all. By contrast, the defense cuts amount to $24 billion but hurts growth by 0.4 percent — quadruple the high-income cuts’ impact.
The report also drives home how much the cliff is a tax phenomenon. The sequester makes up less than 13 percent of the total deficit reduction the cliff accomplishes. The other 87 percent, except for the expiration of the unemployment insurance extension, is all tax increases: income, estate and capital gains increases from not renewing the Bush-era tax cuts, payroll tax increases from letting those cuts expire, and expiring stimulus tax credits."
For the Con position click here.
For links to other Public Forum topics click here.
Links for General Information:
Links to Evidence Quoted Above:
The case for raising taxes to balance the U.S. budget, The Bay State Banner
Dr. Fred McKinney, 2011
Dr. Fred McKinney is president and CEO of the Greater New England Minority Supplier Development Council
April 23, 2012, 7:14 p.m. ET
Diamond and Saez: High Tax Rates Won't Slow Growth , We're not close to the top of the Laffer Curve. Raising tax rates is part of a sensible deficit reduction strategy.
By PETER DIAMOND AND EMMANUEL SAEZ
Mr. Diamond is professor emeritus at MIT and a Nobel laureate in economics. Mr. Saez is a professor of economics at UC Berkeley and a John Bates Clark medalist
Last Chance, America, THE LAW SCHOOL, THE UNIVERSITY OF CHICAGO
(Professor, University of Chicago Law School)
Chad Stone, October 2012,
To Avoid Fiscal Cliff, Let Bush Tax Cuts Expire, US News & World Report
CBO: Letting upper-income tax cuts expire would barely hurt economy
The Washington Post
Posted by Dylan Matthews on November 8, 2012