What's wrong with a war tax?

Question

During previous wars Americans have had to make sacrifices. If this war is so important, shouldn't we pay for it now rather than borrow the money and force our children and grandchildren to pay off the debt?

Answer 1

You are so right there use to be a war tax on previous wars. The war tax was put in place during the Spanish - American war. Remember war bonds? What happened to those?

In the past (WW II and Vietnam) there was a war tax, to cover war costs. Members of the US Armed Forces who are currently exempted from taxes because they receive combat zone compensation & their spouses would be exempt. Survivors of fallen soldiers would also be exempt.

So far we have spent $450 billion fighting the war. The president is expected to ask for an additional $150 billion soon.

Too all the supporters of the Iraq war I say put your money were your mouth is and pay a war tax.

Answer 2

When this 'war' started one of my first posts concerned a war tax. Of course we were assured that the war would cost in the 'millions' or the low billions and it would be paid for with Iraqi oil. Did the Bush Junta 'lie' about that? Probably. They also said we'd be greeted as liberators. Did they get that one wrong? Certainly! When the Iraqis voted, we were told that now everything would quiet down and 'freedom was on the march'! Did that happen? Definately not. Now we're told that the 'surge' is working wonders. Is it? Not likely. We're told that violence is 'down'. Maybe, but there's no proof that it's down for the reason stated. Basically the Bush Junta either lied its @ss off, or had no clue what would happen after the first shot was fired or both. Since then the war has become institutionalized and will have to be paid for. Since Iraqi oil will never do it then it stands to reason to make this next decade of war a pay as you go proposition instead of borrow ahead. If there was a war tax people actually might take some interest in this war..as it stand now....not that many people have anything personal involved and as long as they don't the longer this BushWar for Oil will drag on.

Answer 3

That would make a lot of sense, but no one said that anyone in Congress had common sense. We have bills and we should be paying them. Whether we pay them with a tax increase, spending cuts, or a combination of both doesn't really matter to me.

Answer 4

I'm all for a war tax so long as the only people taxed are the people like dick cheney and haliburton who are profitting from the war.

Answer 5

Yes, we should. I wonder why the Government isn't selling War Bonds, as it has in the past. I wonder how many the pro-war crowd would buy? It seems they don't want to put their money where their mouth is.

Answer 6

debt doomsday is a myth. Its fundamental flaw is that it ignores two very important financial mechanisms:

• debt rollover; and
• growing tax receipts in a growing economy.

Walter Wriston, former Chairman of the Citicorp Bank, put debt rollover this way:

If we had a truth-in Government act comparable to the truth-in-advertising law, every note issued by the Treasury would be obliged to include a sentence stating: "This note will be redeemed with the proceeds from an identical note which will be sold to the public when this one comes due."

So here’s the whole truth: Although it’s true that too much debt can be damaging or even disastrous, it’s also true that just the right amount of ever-increasing debt can be, in Alexander Hamilton’s words, “a national blessing.”

How come our politicians never explain that second possible outcome to us?

Put yourself in the place of an investor who’s considering investing in our country’s treasury securities, such as savings bonds, or a ten-year Treasury note. Your fundamental analysis would be something like this:

"Let’s see: Will the USA be able to cover its interest payments comfortably? If so, my principal will be safe, because on the date my bond matures, plenty of other investors will be thinking the same way I'm thinking today; the money they pay for their new bonds will be used to pay me for my maturing bond—heck, I might even just exchange my old bond for a new one. If not, however, history teaches us that countries in that situation are likely to inflate their currency; in that case, I should either build a higher inflation premium into my desired rate of return, or simply avoid the risk by investing my money elsewhere.”

Key question: Will the USA be able to cover its interest payments comfortably if its debt continues to grow and grow? Short answer: Yes, if its tax receipts continue to grow and grow at least at the same pace as the interest payments.

Here’s the anti-debt-doomsday argument, point-by-point:

• The outstanding treasury securities will not all mature simultaneously, not even close;
• When an old bond matures, it is exchanged for dollars that the government gets from selling a new, fresh bond;
• The steadily-increasing number of bonds held by the public requires a steadily-increasing number of tax dollars each year to be paid out as interest;
• A steadily-growing economy generates steadily-growing federal tax receipts, even with no change in tax rates;
• Therefore, in reality, it's not an inevitable disaster, it's a race between two growing numbers: interest payments and tax receipts;
• For several years, tax receipt growth has outpaced interest payment growth; in other words, the burden of debt has decreased.

Conclusion: If interest payment growth stayed even with tax receipt growth, year in and year out, our grandchildren's debt burden would be no greater than ours is today.

Two things cause interest payments to grow: interest rates, and debt growth. Keeping inflation low and steady will help hold interest rates down. Debt grows steadily when we run perennial deficits—but tax receipts grow in tandem with the growth of the economy. Bottom line: If the economy grows at least a fast as the debt grows, and inflation is low and under control, our ability to make growing interest payments will increase at least as fast as our obligation to make those interest payments.

If we can sustain those conditions, our grandchildren will have much larger incomes than we do, but will have a debt burden that is no worse than ours. Do you like that scenario as much as I do? Then why is there so little discussion about how to sustain those conditions? Why is all the talk focused on how to cut this or cut that?

Answer 7

Based on the spending habits of Congress, a war tax will only encourage Congress to spend further. It will ultimately increase our debt, not reduce it.

Answer 8

Hey, I agree, Rufus.
I mean, isn't it the responsible thing to do.
I am against the war, but it has to be paid for somehow.

Answer 9

I don't see anything wrong with it, but then I'm a liberal and I want a balanced budget. I don't believe our children should suffer for our mistakes.

Answer 10

A sole cry for "responsibility" among the throng of the irresponsible! thank you!