NOOZHAWK: The so-called Bush tax cuts of 2001 and 2003 will expire at the end of this year. On Jan. 1, what will be the new rates of taxation on income, capital gains, dividends and estates, and the per child tax credit? Do you support the expiration of the existing rates or should they be extended? Why or why not?
JOHN HAGER: I would vote to extend the current rates except for income in the very top bracket — income in excess of $382,550.
I begin by saying that I support a complete reworking of our tax laws, from the ground up. We should scrap the incredibly long and complex Internal Revenue Code and the many thousands of regulations. These have been added year by year for nearly a century, giving us a mess that even lawyers and accountants can’t fully comprehend. We need (and can implement) a simple tax law that is even-handed. Our current tax law excessively burdens the middle class and small business. We need to start from scratch.
The fundamental problem for tax policy is that we need a balanced budget and need either to reduce spending or receive more net tax revenues, or some combination of both. But tax rates do not directly correlate to tax revenues. In some circumstances, a decrease in rates can yield more tax revenue by spurring economic activity and increasing income. Whether that will result from a given decrease is difficult to assess until afterward.
The key point for us now is that our tax revenues are down because of our economic crisis. Raising taxes while we are trying to rebuild our damaged economy is not a good idea. If we keep rates the same, income should rise and with it, total tax revenue will increase without the need to increase rates.
If the existing tax law expires, the new rates will remain as complicated as they are now, which is one of the problems with our 50,000-plus page federal income tax law. Everyone will experience tax rate increases, with the most severe increase being on the lowest income earners. Those with taxable income below $8,575 will see their rates increase by half. Most of the rest will increase by a tenth (about 3 percent more than current rates).
I oppose any tax increase except on the highest bracket — income in excess of $382,550. The last two years have pushed more people into the lowest brackets, and hitting them with tax increases to boot is a bad idea. I think earners in this economy who earn more than that (highest bracket) amount should be willing to accept the 4.6 percent increase, which is a modest sacrifice.
Capital-gain tax rates will also increase, and the impact is again most harsh on the lowest earners. Raising rates will discourage investment, but the actual effect is difficult to quantify. Again, at this time in our economy, I am against increasing capital-gain tax rates because we need to encourage investment to encourage growth in our economy.
The estate tax is the source of more emotional debate than I think it deserves. Only a small percentage of estates end up being taxed, and the amount is only a small part of total tax revenues. This is not an issue for ordinary people; it really matters only to the super rich. This is a topic on which I would maintain flexibility to reach a consensus on an overall tax program.
NOOZHAWK: A leading national polling firm recently asked Americans to choose between these statements: A) President Barack Obama’s economic policies have averted an even worse economic crisis and are laying the foundation for recovery. B) President Barack Obama’s economic policies have run up a record federal deficit while failing to end the recession or slow job losses. Which statement reflects your opinion and why?
JH: Neither one. The economic crisis was triggered by conduct that Congress legalized. Rep. Lois Capps voted for these bills after she accepted large cash payments from financial and insurance interests. It is too soon to tell whether President Obama’s policies will have any long-term positive value, but much of the government support has gone to the top of our economy rather than the bottom. Those at the top donate the most to political campaigns, which is a corrupting influence on the distribution of federal spending across the board.
The words “deficit” and “debt” are used frequently and can be confused. The deficit is the difference in a given year between what the government takes in and what it spends. Deficit spending is spending more money than one earns in a year. The debt is how much the government owes, which is the total of all past overspending. If you have a deficit of $1,000 each year for three years, you will then have a debt of $3,000.
Both parties in Congress have been deficit spending for years. That endangers the strength and security of our nation. We must stop spending money we don’t have. We are burdened by $13 trillion in debt already, almost $1 trillion of which we owe to China. I don’t want to leave this debt as our legacy for our children and grandchildren. We need across-the-board spending control.
NOOZHAWK: According to the Congressional Budget Office, the U.S. debt-to-Gross Domestic Product (GDP) ratio will have risen to 62 percent at the end of 2010 from 36 percent in 2007. In a worst-case scenario, the CBO estimates an increase to 100 percent in 2020 and nearly 200 percent in 2035. What effect does such a debt load mean for middle-class Americans?
JH: The middle class has been forgotten by the parties in Congress. The economic crisis has caused more middle-class jobs to be lost. The money spent by the government to “fix” the economy has reached very few in the middle class. The huge debt slows down our economy and saps the strength from our recovery efforts. We need to stop overspending and we need to concentrate on equitable debt reduction.
NOOZHAWK: How, specifically, are Americans benefiting from the health-care reform law? What are the disadvantages? How would you fix them?
JH: Two groups of people benefit: children up to 26 staying on their parents’ plans and those with pre-existing conditions.
Disadvantages: pharmaceutical and insurance companies both supported this legislation because they were given political plums. They got these rewards in return for giving campaign money to members of Congress. For the rest of us, drugs will cost more and insurance rates will increase.
Do you remember how we were promised that people happy with their current plan could keep their existing plans? Yes, that is true — but you cannot change insurance companies or you lose the right to keep the same plan. That means your current insurance company has been given monopoly power over you because it knows you can’t go elsewhere for coverage without losing your right to keep the same plan. And that monopoly power means higher prices. Many have already seen the effect as insurance rates have gone up.
Also, the health-care legislation does very little to control cost, and it will actually reduce access to care for many, especially the elderly. The government already pays less than actual care costs, forcing medical providers to make up the difference by overcharging (they call it “cost shifting”) the rest of us. This amounts to trickery by the federal government. They act like they are controlling costs when they are actually just forcing the cost of government care onto the rest of us by not paying the full cost. Locally, at Cottage Hospital alone, the government program payments were $75 million less than the actual cost last year. Cottage, a nonprofit hospital, had to make up that difference in what it collects from insurance companies and those who self-pay. No wonder insurance rates keep rising.
Eventually, when the cost of care is not fully paid, providers will stop providing the care. This is especially likely with Medicare because the legislation will reduce Medicare payments by almost $500 billion, while increasing Medicaid (this is Medi-Cal in California) by a comparable amount. Taking money from Medicare to finance Medicaid puts an unfair burden on seniors.
NOOZHAWK: California’s fiscal health appears precarious. While the state Constitution prohibits a bankruptcy declaration, how much of a federal concern are California’s finances? What can Washington do to coax reform, or stabilization? Will the federal government step in if a bailout is necessary? Should it?
JH: When Lois Capps took office in 1998, California received back 90 cents of every tax dollar our citizens and businesses paid to the federal government. By 2005, our return on each dollar had dropped to 78 cents. 42 states received more than we did, making California a milk cow for the nation. The public needs to know that during the Capps era, we have been paying more and getting less.
California’s financial troubles affect the entire nation. Unfortunately, if California is unable to pay its obligations, and its bonds begin to suffer loss of value similar to what we saw with Greece, our federal government has no clear direction from the Constitution. But practically speaking, the security of the United States is endangered if one of the states defaults on its obligations. If one state defaults, the credit (and cost of borrowing) for all other states will be in jeopardy.
If indeed California needs some kind of bailout, it will come with conditions. The rest of the country will be justifiably resentful, and our image (and possibly tourism) will suffer.
What is happening in California is a warning for the rest of the country. As it has been many times in the past, in this area California is also a leader, but here we are setting a bad example. We have very much the same problem in Congress, with the only difference being that the federal government has the power to print money to pay its debts.
Like our Legislature in Sacramento, Congress has become infected with influence peddling by special interests, and partisan bickering with a loss of genuine dialogue. In both, the parties’ addiction to maximizing campaign contribution is a major corrupting influence. Representantives spend more time and effort raising funds than in doing the people’s work. They focus on satisfying the demands of those who pay for their campaigns instead of making principled decisions to operate our government efficiently. For the sake of both California and our country, we desperately need to remove influence money from our political process.
NOOZHAWK: Energy security and sustainability are major challenges for the United States. What policies do you or would you support to meet the U.S. energy demand while ensuring an economically and environmentally sustainable future?
JH: We need to reduce our use of fossil fuels. We need to continue research into safe nuclear and solar power. Safe, effective alternatives to fossil fuels are available to a limited degree, but we need continued research and market efforts to realize the technology in practice. We individually can conserve easily by a few simple things, like replacing incandescent lighting with fluorescent lighting. I know from personal experience that one can achieve a big decrease in electricity usage by this one simple step.
We also need improvements in mass transit, including high-speed train service.
NOOZHAWK: Surveying the global landscape, what is the most beneficial role the United States plays in world affairs? What should be America’s biggest concern?
JH: America must be an example, demonstrating the best in democracy and the rule of law. To do this effectively, we need to build strong relationships with our friends by rewarding that friendship. Making war against today’s enemies is not the most effective use of our limited resources. We are at our best in leading other nations down the right course — that of freedom for all, where fair competition yields the best products and services, and our government sets an example by doing what a government should for its citizens while living within its budget.
NOOZHAWK: Is Iran a threat to the United States? What is the best way to handle its apparent nuclear intentions?
JH: Iran is a threat to stability in the Middle East, and Middle East stability is important to us and the world. We must continue to strengthen bonds with our allies and to pursue joint international pressure on Iran. This may take years of pressure and will require constant vigilance.
NOOZHAWK: Highway 101 is one of the West Coast’s most important arteries and the section within the 23rd Congressional District is critical to the movement of goods through the Port of Hueneme, the nation’s largest transit point for agricultural exports. Meanwhile, the roadway between Santa Barbara and Seacliff is essentially a parking lot. Does the district receive federal transportation dollars commensurate with its importance? Why or why not?
JH: No. As I said in answer to a previous question about California’s fiscal health, California has been getting steadily less back in federal money. When Lois Capps took office in 1998, California received back 90 cents of every tax dollar our citizens and businesses paid. By 2005, our return on each dollar had dropped to 78 cents.
For highway construction specifically, federal highway funds are often used for items of local value, like sidewalks, bike lanes and scenic trails. While these are all of value, their value is local and not interstate. U.S. Highway 101 is a federal highway that extends from Mexico to Canada. Federal funds should be used to assure that this highway serves its important purpose as a citizen and commercial thoroughfare.
We also cannot forget the importance of a balanced national budget and the basic fact that we do not have enough money to do everything we would like to do. But we have highway taxes (primarily paid at the gas pump) for one purpose: highways. We should use them for that.
NOOZHAWK: The 23rd Congressional District is a work of art, boundary-wise. Do you support redistricting efforts to make it more compact?
JH: This is not a congressional issue, but I am proud to represent our district as it is. I do think that redistricting should be done equitably and not simply to benefit the party in power. I support Proposition 20 on the Nov. 2 ballot which would place congressional redistricting in the hands of a nonpartisan commission.
NOOZHAWK: In your travels within the district, what do people say is their most important issue?
JH: Both parties have run our economy into the ditch. People are deeply dissatisfied with Washington’s relationship to money. The public objects to the constant overspending, the corrupting influence of big campaign donations, and the fact that our representatives aren’t genuinely listening to the public’s concerns.
NOOZHAWK: Which current or former House speaker do you admire most, and why?
JH: The Speaker of the House of Representatives has become excessively powerful, doling out political favors in opaque, back-room trading that conflicts deeply with the transparency that our government promises but seldom provides. There is no recent House speaker whom I have admired, primarily because all have wielded more power than any single representative should have.
The political figure whom I most respect is George Washington. I say that not to be trite but because of the particular character that Washington demonstrated. At the end of the Revolutionary War, he was in a position to assume leadership as king or dictator. Instead, he returned to his farm. Only when the Articles of Confederation proved unworkable did he accept his country’s call to lead the Constitutional Convention. Later, without campaigning, he became our first president, receiving 100 percent of the electoral votes. He served two terms and then retired when he could have been easily re-elected. Washington, like Cincinnatus, did not take power for himself. Instead, he offered himself as a public servant, and then nobly went home to his farm when his service was done. That is why I most respect George Washington.
NOOZHAWK: Will you live-tweet the next State of the Union address for Noozhawk?
JH: I don’t want to get caught on camera using my cell phone (just kidding).
Seriously, it is important that I devote 100 percent of my attention to listening to the address. Since Noozhawk will be watching the same address, perhaps you could live-tweet followers. I do hope to be able to post a video commentary later in the evening.
Additional Resources
» Click here for John Hager’s campaign Web site
» Click here for Lois Capps’ answers