Potential Solutions

The US Constitution gives Congress the power to determine what government will do for us, then it gives Congress the power to appropriate funds to do those things and determine income sources (taxes, tariffs, etc.) to fund the government.  Congress has been fighting incessantly for the last 75 years about what to fund and how to fund it – leaving us with $37 Trillion in Federal debt.  Since Congress has failed its primary job, which is to determine important federal programs and appropriate funds to fund the Federal government, now American citizens must resolve this major issue before the USA goes bankrupt.

This blog speaks only to half of that problem – how do we fund the government to do what we want it to do.  Join in and help fast track a discussion on how to fund our government. Another article on this blog will deal with what we want the Federal government to do for us. Watch for that post soon.

Before we start discussing government income strategies, here are some important terms we need everyone to understand.  Taxes can either be Progressive or Regressive.  No, Progressive taxes are not liberal taxes, they are taxes that progress (escalate) as individuals or corporations make more money. Here’s an AI Overview definition of progressive and regressive taxes:

“Progressive taxes take a larger percentage of income from high-income individuals than from low-income individuals, aiming to reduce inequality and provide funding for public services. In contrast, Regressive taxes take a larger percentage of income from low-income individuals than from high-income individuals, such as sales taxes or payroll taxes.”

In another blog, we’ll discuss what programs we want to fund, but right now let’s assume we continue with the USA programs already in our legislation and find solutions to bridge the gap between our income and our expenses.  We would need to find about $1 Trillion in annual income at least.  

Some potential solutions are:

• Return USA Income tax to a Progressive tax system – tax the highest income earners to pay a higher tax rate on their higher income tax brackets.
• Raise Corporate tax rates on their profits.  Perhaps tie lower corporate tax rates to those corporations that manufacture their products here in the USA or have a high percentage of their employees in the USA.
• Eliminate all tax deductions.  Simplify our tax code and then perhaps we can lower tax bracket rates and still generate more income.  One option of this strategy is a Flat Tax, forcing everyone to pay a Flat Tax or Minimum Tax.
• Increase Tariffs on imported goods.  This is a key strategy of the Trump Administration.  It will increase income, should we continue to do it?  At what rate will it detrimental impact GDP?
• Put a Value Added Tax on all goods sold in the USA – many European countries have VAT taxes which are like a federal sales tax.  Should we consider VATs as a new income source?
• Raise FICA tax rates – Increase Social Security and Medicare percentage deductions from employees’ salaries to a fund these programs.  This would be very regressive but would help close the income to expense gap on those programs.
• Legalize more drugs and tax their sales.  Americans have an insatiable appetite for drugs so what if we legalized them, regulated them to make them safer and taxed their sales?
• Tax wealth – set an annual tax rate on the Net Worth of wealthy individuals. Elizabeth Warren has proposed this idea.
• Other income ideas?

Join In.  Suggest solutions.

What do you think?  What could solve our income issue in the United States?  Remember, comments must stay on topic and not be defamatory of anyone.  Solutions to problems is what this UNSTUCK Blog seeks.

Additional information is provided below to guide this discussion – Current Situation, Historical and Constitutional context.  Given the increased influence of religion in our country at the present time, there is also information on religious perspective on this topic if applicable.

Current Situation

Today, American workers feel over-taxed – and they are right.  Since 1962 taxes in this country have shifted over 20% of federal income to regressive taxes from previously progressive taxation putting the tax burden on America’s middle class.

• In 2023, Income tax (our largest tax category) is 49% of USA income vs. 45.7% in 1962.  While it is true that wealthy individuals pay more in absolute numbers, the tax code has shifted from a very progressive income tax in the 1950s (taxing the top income tax bracket as much as 90% with few deductions) to a regressive income tax code burdening the middle class with higher effective tax rates while giving big tax deductions to the rich lowering their effective tax rate.
• Payroll taxes (aka FICA withdrawals from paychecks) now are 35.4% of federal income, whereas Payroll taxes were only 17% Federal income in 1962.  Workers are paying their Medicare and Social Security taxes out their paychecks as the only funding source for these programs while hearing constant threats about the solvency of these programs.
• Corporate taxes have declined 11% – from 20.5% of Federal income in 1962 to 9.5% in 2023 – due to tax breaks given to corporations by recent Republican tax legislation.
• Excise taxes (taxes paid by the manufacturer or retailer on certain products like fuel, alcohol and tobacco) has declined from 12.5% of federal income to 1.7%.  Taxation on these products has shifted to sales taxes (a regressive tax on individuals).
• In addition, Estate taxes have declined from 2% of Federal income in 1962 to less than 1% in 2023.

Trump Tariffs. In his first term, Trump’s campaign promise was: “The trade is so easy for me.  I am going to fix our trade.  I am going to bring jobs back to America.”  As the 45^th President he cancelled long-standing and new trade agreements – NAFTA with Mexico and Canada and The Trans-Pacific Partnership with 11 Asian countries.  Then Trump imposed tariffs on imported goods from most countries – shifting America’s trade policy from Free Trade to American protectionism. In his second term, Trump 47 has accelerated this Tariff strategy raising new tariff revenue on almost everything and every country.  He could generate $500 billion a year in Tariff revenue soon.  Americans are waiting to see the impact of this regressive tax strategy on their cost of living and our overall economy.  The outcome of Trump’s tariff policy is unclear.

History

The USA is no exception to all governments, who must impose and collect some form of taxes to fund their operations.  But it wasn’t until the Civil War that the USA in 1862 implemented its first version of Income Taxes – a very personal and therefore unpopular form of taxation.  That change was codified on February 13, 1913, with the 16^th Amendment to the Constitution formalizing a USA income tax. So those who claim US Income taxes are illegal are wrong, which is why Income taxes continue to this day.

Tariffs have had a more volatile history.  They have been imposed, then determined to be unconstitutional (1894 Wilson Tariff Act was outlawed in 1895 as one example).  During the Great Depression in the 1930s, tariffs were criticized as adding to the continued economic downturn.

In the years during and after WWII, Revenue acts were passed to increase US tax rates to pay down the huge deficit we generated to win WWII.  Our current FICA withholding from paychecks began with the 1943 Current Tax Payment Act to ensure these taxes were collected.  Standard Deductions were created in 1944 in the Individual Income Tax Act.

Then the Republican Party began it’s “no more new taxes” campaign and shifted American legislation to tax reduction laws – in 1964, 1981, 1986, 2017 and 2025 which widened the gap between USA expenses and USA income – generating more deficits and debt for our country. The promise of “Trickle Down Economics” – that these tax rate decreases on the rich and corporations would generate more taxable GDP/income didn’t materialize to close the gap.

US Constitution

Article I of the US Constitution puts the power to raise revenue and collect that revenue for the Federal government squarely on the shoulders of the US Congress.  

“All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other bills.” – Section 7

“The Congress shall have power to lay and collect Taxes, Duties, Imposts and Excises, to pay the debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” – Section 8

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived without apportionment among the several states, and without regard to any census or enumeration.” – Amendment XVI

Bible

There are 120 references to taxation in the Bible, most of which describe each tax, complain about taxes and in some cases state that clergy is exempt from taxation.