And the majority willingly drank the Kool-Aid ...
Tax increases may be necessary to rein in $12 trillion in federal debt, House Majority Leader Steny Hoyer (D-Md.) said Monday.
Hoyer emphasized the need to reform Social Security and Medicare, but he also made it clear that raising taxes will have to be on the table.
“No one likes raising revenue, and understandably so,” Hoyer said in an address at the Brookings Institution. “But if you’re going to buy, you need to pay.
“If need be, I am hopeful that both parties will agree to look at revenues as part of the solution — not as a gateway to higher spending, but as part of a compromise that cuts spending and balances the budget,” he added.
Hoyer, a voice for centrists in the House leadership, said reining in record debt requires a combination of spending cuts and tax increases.
“It seems to me that the only solution that can win the support of both parties is a balanced approach: one that cuts some spending and raises some revenue while avoiding extremes in either direction,” he said.
Tax and budget experts suggest enacting only tax increases or relying only on spending cuts just won’t work.
The White House projects this year’s deficit to hit $1.6 trillion, and it expects annual deficits to average $850 billion over the next decade. Deficits will rise after that.
“Barring major changes, we’re going to see deficits running at $1 trillion or higher and going on forever,” said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center and former tax analyst at the Congressional Budget Office. “And the question is, ‘How do you get rid of trillion-dollar deficits?’ ”
There are a couple problems with this thought process. You can't tax your way out of money problems, nor can you tax your way into prosperity. As Ms. Rubin explains, the tax increases that are slated will devastate not only the average taxpayer, but also small businesses which are already struggling in a weak economy rife with overwhelming federal debt. Second, tax increases don't always equal greater revenue flowing into federal coffers. In fact higher taxes usually means that the government will have less money flowing into their coffers.
Take, for example, the passage of the S-CHIP program, funded primarily on the back of tobacco taxes. Tobacco taxes went up late last year (another broken promise about not taxing people who earn less than $250,000 a year), and what has happened? The federal government is complaining they have seen a decrease in tobacco tax revenues flowing to DC, and the same goes for individual states. We live in Arizona, and the state legislature is kvetching that they're seeing a significant drop in tax revenues they once could depend on. When cigarettes in Arizona, on average, topped $7 - $8 a pack, smokers turned to other alternatives. It wasn't just to change to a cheaper brand. People who smoke, at least those that I know, have turned to filtered cigars or roll-your-own cigarettes. They simply can't afford to buy a pack of Marlboros at over $7 a pack. Many people that I know that do smoke are working to quit completely.
A simple raise in taxes on a simple product has cost the government, both state and federal, a significant amount of tax revenue. Hence a raise in taxes doesn't always translate to more tax revenues. (This is one reason why the Arizona legislature is pushing for an increase in sales taxes and property taxes.)
What is guaranteed for an increase in tax revenues is to REDUCE taxes. JFK proved it. Reagan proved it. George W. Bush proved it. In recent years (the last thirty or so) we have seen that the lower the tax rate, the higher the tax revenues are. Why? Because people have more money to spend. They spend it on goods and services, and the taxes flow into coffers making government happy. In stead of raising taxes Congress should focus on cutting them, across the board. This would also help with the pitiful employment numbers. Cut ALL taxes. Hell, suspend a few for a limited time. If Congress were to do this, and the president were to sign it, we'd see the economy turn around in record time.