Retroactive Tax Hike May Be in the Cards
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- Right now, the political debate in Washington, D.C. is focused on how to slice $60 billion from a budget in order to avoid a government shutdown. Where's the discussion about reducing the $14.2 trillion that remains in arrears?
Given our nation's exploding debt burden, the time has come for politicians to face the music. This leads to the current Congressional dilemma. Do Congressmen really want to face constituents and raise taxes to reduce the debt? Alternatively, do legislators want to reduce aid to our country's growing number of impoverished citizens in an attempt to cut the fat?
In a world where our House Representatives are up for election every two years and the President's term lasts four short years, highlighting any negative aspect of life is political suicide. Inconveniences such as debt reduction can only be dealt with on a crisis-basis. Finger-pointing is a much safer way to cruise through political life than taking the blame for woeful decision-making and its consequences.Amid the political bickering and posturing, however, a compromised solution to lowering our nation's debt will inevitably surface. Legislators will come to the realization that it is less politically harmful, and a lot less economically disruptive, to raise taxes on past income rather than on future income. Politicians are rightfully reluctant to increase taxes on the current labor force as that might create a disincentive to work longer hours, thereby worsening the country's ability to reduce its debt over time. Moreover, taking away health benefits for the sick, elderly and impoverished is outright cruel if not politically impossible in our current environment. Accordingly, the government's "easiest" first step toward fiscal austerity is to renege on its Social Security obligations. Accordingly, Congressmen may soon be suggesting that the age for someone to be eligible for Social Security should be older than current law dictates. They may point to the recent Bowles-Simpson Deficit Plan that proposed raising from 62 to 64 the age when Social Security benefits can first be claimed, and raising from 66 to 69 the age when full Social Security benefits can be claimed. Legislators may even suggest "a means test" whereby persons with a certain net worth are simply not eligible to receive the Social Security payments to which they have been promised.
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