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Why raising taxes are not the solution – unless the problem is not the deficit

November 15, 2010

There has been a lot of talk of late about the Bush tax cuts expiring, which would, despite what liberal double-talkers like to say, raise taxes on Americans.  Now, classism being the newest fad, we are trying to decide if we should just screw over rich people, or stick it to everyone.

The argument against screwing everyone is that it would be disastrous for the economy.  Some of the raise tax zombies have conceded that maybe we should extend them all for a couple of years, because we are in such economic woes.  I ask a simple question.  If everyone concedes raising taxes is bad for the economy, when is there ever a good time to do it?  The answer to that one is a tad bit more esoteric.

The argument du jour is that government spending is out of control, and we can not fix it by cutting the budget alone, we must raise taxes as well.  Is there any historical evidence to support this theory?  Not really, in fact there is evidence supporting quite a different theory, but first the evidence.

In 1963 the top tax rate was 91% on people earning over $200,000.  Now the marginal tax rate people will say, “yes, but that’s only on money over 200k” and they would be right, so what was the marginal rate on say, $30,000?  Oh damn, 62%.  According to the current standard for being the wealthy 1% (a marginal rate of 35%), how much money did you have to make in 1963 to qualify for that vaulted status?  $8,000, or $55,000 in 2009 dollars.  Hmm, hardly considered filthy rich.

But here is the kicker.  We still had a budget deficit in 1963.  With taxation going psycho on the rich back in the day, how come an insanely high-tax rate didn’t solve the problem?  Oh, and as a nod to Kennedy, he also knew higher taxes was bad for the economy.

Not satisfied with such antiquated evidence?  Ok, lets look across the pond.  France’s top income tax rate is 40%, hey not that much higher than ours, way to go frogs!  Oops, I forgot about the Value Added Tax, which is a sales tax.  Damn, that is 19.6%, and that hits everyone, not just the evil stinking rich people.  Luckily France doesn’t have any deficit problems right?  I mean, with all these taxes, they must have their budget way under control.

There has been talk about a VAT being a possible solution to our deficit problems, as recently as this morning on FOX Business a gentleman from the Brookings Institute was touting it.  And here is the problem folks.  Washington has a spending problem pure and simple.  There is not a revenue problem at all, only that the revenue they take in does not cover how much money they want to spend.  If we add a Value Added Tax, guess what, we will still have a deficit.  If for some reason they actually are able to balance the budget, or post a surplus, that money will eventually find something it needs to be spent on.  Politicians are kids in a candy store, they do not care about your money.  If it is a pet project or some ideological necessity for humankind, they will pay for it.  Don’t believe me, see Obamacare.

So as my headline states, higher taxes are not the solution, unless the problem is something besides the deficit, like punishing the rich.  Or social justice.  Or economic justice.  Or spreading the wealth around a bit.  Aww hell, I’ll just come out and say it, socialism.  Hey, if you pinkos can say the Tea Parties want to take us back to Jim Crow, I can say you freaking progressives want to “move us forward” to communism.

Let’s not be confused at what the issues truly are.  The government will always have a deficit unless they get their spending under control, it doesn’t matter what the tax rate is, or if they add a VAT.  They will always have a deficit.  You people who profess to be in the middle and are calling for tax hikes, think hard about what you are truly giving the government the power to do, something we have been slowly curtailing over the last 40 years – we are giving them the power to create a need to raise taxes.  We are setting a strong precedent here.  If we let them raise taxes because of their out of control spending (see Obamacare), then what stops them the next time “we have a revenue shortfall”?  If we stand firm and tell them, “Hell no, you caused this problem, you fix it with the revenue you got right now” then they will know we are serious about fixing the spending problem.  If not, then don’t be surprised when we have the same problem 5 years from now.  Just remember, I told you so.

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12 Comments leave one →
  1. November 15, 2010 9:24 pm

    You wrote:

    ” If everyone concedes raising taxes is bad for the economy, when is there ever a good time to do it?”

    That is a question that I have been trying to get an answer ro for quite a while now, but nobody seems to have an answer.

    You hit the nail on the head, this is not an issue of controlling the deficit, this is an issue of controlling who gets the money. This is nothing more than wealth redistribution, pure and simple.

    • November 15, 2010 9:35 pm

      Yeah, that question has been bugging me too. It is such an obvious hypocrisy, it kills me no one calls out people who say “Raising taxes now would be disastrous for the economy.”

      The real answer is because a vibrant economy isn’t the goal anymore. Government can supply all the jobs we need…if we just let them.

  2. November 15, 2010 10:40 pm

    The social and economic justice crowd will never see the folly of their ways. No matter what numbers you throw at them or what facts back your position, they will always see that the problem is not enough government. They will continue to create programs to redistribute wealth that they do not create or have. This is why we’re in deep trouble. Until we drive these Marxists from positions of power we will continue to create do nothing programs that raid the treasury and the fruits of our labor.

    • November 15, 2010 11:17 pm

      I was hoping a moderate might read this and perk his ears up a bit. You are right about the progressives, they just don’t care.

  3. November 16, 2010 6:46 am

    You raise some very good points, Colin. It seems obvious to me that spending is the problem. I wouldn’t want to go anywhere near tax increases, until we have see how cutting spending will affect the deficit. I mean real spending cuts, not just some feel good measures that don’t amount to a hill of beans. Start with earmarks and work our way forward. I think some people would be amazed at how that would work.

    • JustFacts permalink
      November 16, 2010 9:13 am

      The problem is, they won’t let it work. It is just like the so-called de-regulation of the Airline industry, Railroads, Insurance Companies, Power industry, etc. That was not de-regulation, it was re-regulation. For every “regulation” they did away with, there were 10 new regulations, in the form of “requirements”, that were imposed. As a former employee of a large power generation company that went through “de-regulation” I can tell you that the politicians rewrote all of the regulations in such a way that there was absolutely no way that the power companies (or any of the retail marketers) could actually make a profit. So, it then became a necessity to “re-regulate” the power companies. So, guess who makes out in all of this – if you said the LAWYERS, you get the prize.

      • November 16, 2010 11:51 am

        Yeah, “de-regulation” is a scare word. In the world of government, removing one regulation qualifies as removing all regulations from an industry and allowing them to run rough shod over the poor unsuspecting American worker, then…the world ends.

    • November 16, 2010 11:36 am

      The government needs to get the message that they have a finite amount of money to work with, until then we will always have budget problems. Of course, that also means a lot of Americans are going to need to learn the same thing.

  4. Peter Fegan permalink
    November 16, 2010 7:35 am

    Well, if I may return the favor since you commented on my blog.

    Nice try, but to suggest that the budget deficit under Kennedy is comparable to the one Reagan left us with and Bush 44 ballooned is simply not factually correct.

    The whole in your argument is that Clinton raised taxes during his term and was still able to balance the budget. Of course it also took spending cuts, but virtually every single economist has shown that when you slash taxes you get approximately 80 cents back for every dollar in taxes you lose.

    What Charles Schumer has proposed and others like him , and I agree with, is to raise that $250K number. Schumer wants it at a million. I’d settle for $500K. Keep those cuts in place for the time being then let the rest of them expire.

    As for “Obamacare”, it is revenue neutral. You can hate it, but it isn’t doing anything to the deficit.

    And now I will sit back and watch as you and your friends roast me alive as a socialist / fascist / whatever.

    BTW, it is my policy never to delete any comments people make on my blog, unless they are violent or just flat out offensive in nature.

    Regards,

    Peter Fegan

    • November 16, 2010 11:49 am

      Thanks for the comment.

      I did not suggest the deficit under Kennedy was comparable to any other deficit except that it was a deficit, plain and simple.

      Their is no hole in my argument, in fact Clinton balancing the budget enforces my final point – that even if we do find a way to balance the budget, or even post a surplus, our government will find a way to spend that money. And we will have a deficit in the future. I think history has proven that lesson.

      Again, with your reference to Schumer – answer a simple question for me, because you appear to be conceding the same point – If letting the tax cuts expire now would be bad for the economy, when is it ever good for the economy to raise taxes?

      Obamacare has not been fully implemented yet, its hit to our budget is not fully reconciled yet, despite what the always accurate “bi-partisan” CBO says – you do know the government has interesting ways of doing math right? They usually can make numbers fit their argument, ways that would make Enron look like champions of ethics. Oh what am I saying, its not like the government has ever failed to predict the cost of something accurately.

      No one will roast you. Liberals (not talking about you, but standard HuffPO Daily KOS trolls) are usually the one’s that go all psycho on people. My readers are intelligent people that can actually form cogent arguments.

      My policy is the same. We can have a discussion.

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