CQ Roll Call May 22, 2013 | Register

Can We Tax Our Way Out of Debt?

Posted at 9:45 a.m. on Jan. 24

Eduardo Porter breaks down the impact of various proposals to reduce the deficit through taxes alone.

“In one possibility, the center estimated, the top federal income tax rate for the richest families…would rise to almost 54 percent… Middle-class families, earning $17,850 to $72,600, would see their top tax rate rise to 23.1 percent from 15 percent… High income tax rates blunt incentives to earn more, putting a drag on economic growth.”

“Another option is to tax the money that people spend, using the kind of value-added tax employed in every other advanced country. The Tax Policy Center estimated that the government could hit its revenue targets with a broad V.A.T. of 16.7 percent… But because the poor spend a larger share of their money than the rich, it would fall more heavily on lower-income Americans.”

5comments
Budget & Taxes, Economy

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  • Chredon

    Attempting to balance our budget on taxes alone is just as stupid as trying to do it with spending cuts alone. Either would seriously damage our economy. The answer, as we all know and accept, is a balanced plan of tax increases and spending cuts.

    Here’s my plan. As long as revenue is rising, let spending rise too, but at 1% less. (If revenue goes up 3%, let spending rise 2%,) Eventually, revenue will catch up to spending and exceed it, at which point we can start paying off the debt.

  • http://www.facebook.com/profile.php?id=657003340 James Fallaw

    I love this: ” High income tax rates blunt incentives to earn more, putting a drag on economic growth” Is there any actual evidence of that? Since growth has died out since the Bush tax cuts went into effect, I’d say it’s only theoretical. Also, why no mention that raising sales taxes is a disencentive to purchase and thus “puts a drag” on growth.

  • Forrest

    Why do they decide to cap the highest income tax rate at 54% in this study when this is very, very far from historic tax rates, such as the 1950s when top income tax rates could reach over 90%?

  • http://www.facebook.com/simon.fields.31 Simon Fields

    We need higher taxes, we need to cut defense spending, we need to reallocate subsidies from oil to green, from corn to organic, and cut all Corporate Welfare. But that won’t pay off the national debt. Our National Debt requires a monetary rather than a fiscal solution. We need to end fractional reserve banking, stop the Fedral Reserve from loaning money it got minted to banks which made too many loans, and print enough money to gradually pay off our debts. This will not cause inflation, because the same money would be printed on behalf of privately owned banks under our current system. Banks will have to change their business models, but they’ll still be prosperous. In Iceland, the decline in their financial sector encouraged technological innovation, because students who would have gone into their financial sector wound up working in the high tech sector. So even if banks make less money under this system, that’ll be a good thing. Some bankers do support monetary reform, and clearly they believe that banking would survive without fractional reserve banking.

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