Creating Paths to Citizenship Can
Reduce the Growing National Deficit
As of September 30, 2017, the U.S. budget deficit was $665.7 billion or about 3.5% of Gross Domestic Product (GDP). As a result of the tax bill, the budget deficit was expected to rise to $1 trillion in 2019, which is equivalent of about 4.8% of GDP. The U.S. budget that was just passed would increase next year’s deficits to about $1.2 trillion.
How might this big increase in the U.S. budget deficit be reduced? Douglas Holtz-Eakin, Congressional Budget Office Director under President H. W. Bush and currently President of the conservative American Action Forum, concluded in 2013 that increasing the number of immigrants would reduce the federal deficit by about $300 billion per year or by $2.7 trillion over 10 years.
A 2016 Center for American Progress study found that deporting 7 million unauthorized immigrants nationally, about five percent of the U.S. workforce, would amount to a loss of $4.7 trillion in gross domestic product and a loss of $900 billion in federal government revenues. This study concluded that GDP would immediately drop 1.6% and would drop by 2.6% over 10 years. The federal deficit would increase close to a trillion dollars by 2026.
How Income Taxation Built the Middle Class
Across the U.S., new progressive state legislative majorities endorsed the income tax amendment in 1910 and 1912. Early in 1913, final ratification gave Congress a green light to add an income tax to the tax code. Eight months later Congress passed a new revenue act that featured a modest income tax of up to 7 percent on income higher than $4,000, the equivalent of $94,000 today.
On the 10th Anniversary of the Bush Tax Cuts, the Center for Budget and Policy Priorities assembled 5 Charts that show the wealthy gained far more from the Bush Tax Cut than working families. The tax cuts did not spur economic growth, and the cuts were the largest contributor to the deficit. Their charts show that letting the Bush Tax Cuts expire would halt the a rise in U.S. debt over the next decade.
"America is the richest country on earth, measured in per capita income, but the way we spend our money makes us one of the poorer," writes David Morris. He points out that the United States is the only advanced economy that lacks guaranteed paid vacation, sick leave, and maternity leave, that fails to assure its citizens health care and provide preschool programs for its children, and that pays a small fraction of wages for such a short time to its unemployed workers. How does European countries' shared prosperity affect their competitiveness, productivity, and trade balances? Find out by reading Morris' article.
David Morris, Vice President, Institute for Local Self Reliance
Erskine Bowles and Alan Simpson, chairs of the deficit commission, cap government revenue at 21% of G.D.P. Paul Ryan's Republican Budget restricts government revenue to 19% of GDP. Are such caps necessary for a prosperous economy? Prosperity for all citizens requires both a strong public sector and a strong private sector. Actually as a percent of G.D.P., the United States has one of the lowest tax rates in the world including all levels of taxes - local, state, and federal. The United States rate is 27.3% whereas Germany has 36.2% and Denmark has 50%. Yet Germany is second highest in exports, and Denmark has a growing export industry and an unemployment rate much lower than the U.S. Both countries have strong social safety nets.
Minnesota's most affluent residents pay a smaller share of their incomes in state and local taxes than the average MN family according to the Minnesota Department of Revenue's 2011 MN Tax Incidence Study. Minnesota's taxes have become more regressive because the state has shifted towards using local property taxes for public services instead of state income taxes.
The average household paid 11.5% of their incomes in state and local taxes. Comparable figures were 10.3% for households in the top 10%, people with incomes of $129,567 and up, and only 9.7% for the wealthiest 1% of households with incomes more than $429,000.