Raising Taxes Is Not The Solution To Run-Away Government Spending
James Pethokoukis asks a good question:
How does Barack Obama want to make Social Security solvent? By raising taxes—specifically by removing the wage cap on Social Security taxes. No talk of cutting spending. What if we applied that high-tax philosophical approach toward entitlement spending in general, paying for the projected rise in spending for entitlements—from 18 percent of gross domestic product to 35 percent in 2082—by higher taxes with no cuts in spending?
The Congressional Budget Office has the answer:
With no economic feedbacks taken into account and under an assumption that raising marginal tax rates was the only mechanism used to balance the budget, tax rates would have to more than double. The tax rate for the lowest tax bracket would have to be increased from 10 percent to 25 percent; the tax rate on incomes in the current 25 percent bracket would have to be increased to 63 percent; and the tax rate of the highest bracket would have to be raised from 35 percent to 88 percent. The top corporate income tax rate would also increase from 35 percent to 88 percent. Such tax rates would significantly reduce economic activity and would create serious problems with tax avoidance and tax evasion. Revenues would probably fall significantly short of the amount needed to finance the growth of spending; therefore, tax rates at such levels would probably not be economically feasible.
What this means is that if we don’t cut spending on at least the biggest entitlement programs - Social Security, Medicare and Medicaid - we’re starring down the barrel of paying twice as much in taxes as we do now.
Twice as much.
At some point this country is going to have to bite the bullet and reduce the size of government. Because the current rate of growth in government is unsustainable.
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