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  • Currently Low Tax Receipts No Excuse to Raise Taxes

    An AP article today explains that tax revenues this year are projected to be the lowest since 1950. Chalk this one up as a dog-bites-man story.

    Our income tax system is highly progressive. Taxpayers pay higher rates as they earn more income. During recessions, incomes contract sharply, so there is less income to tax and the remaining income is taxed at lower rates. As a result, tax revenues dry up by design during recessions.

    The recent “Great Recession” caused incomes to plummet at a historic rate. Hence tax revenues dropped to historic lows as a share of the economy as well. To anyone with a familiarity with our tax code, this is entirely unsurprising. It’s hard to have solid income tax collections with 9 percent unemployment.

    When economic recovery finally takes hold, tax revenues will rise quicker than they fell. That is why the Congressional Budget Office in its most recent budget estimate showed that tax receipts will recover and even surpass their historical average of 18 percent of GDP by 2018.

    In the AP article, Senator Kent Conrad (D–ND) is quoted saying that “the current state of the tax code is simply indefensible. It is hemorrhaging revenue.” Senator Conrad is no doubt intimating that tax reform is needed to fix the broken tax code.

    He is right that tax reform is needed, but it’s not because the tax code doesn’t take enough of our money. The various deductions, credits, and exemptions in the tax code that cause it to “hemorrhage revenue” create a drag on the economy because they influence the economic decisions of individuals and businesses. Because there are so many of these provisions, the drag on the economy has become considerable.

    Tax reform should not be used as an excuse to raise taxes above their historical levels.

    Tax reform is needed to eliminate these economy-slowing policies and broaden the tax base. A broader tax base would also mean eliminating special-interest tax breaks that litter the tax code and act as a barrier to fundamental reform.

    A broader base would allow lower tax rates, which are too high right now. These changes should be “revenue-neutral,” meaning they should be made without raising taxes and keeping tax revenues at no more than18 percent of GDP.

    Tax reform could become a reality if all sides agree that the revised tax code should continue raising its historical amount of revenue. Of course, if Congress stopped trying to take more of our hard-earned income, then we’d really have a surprising story on our hands.

    Posted in Economics [slideshow_deploy]

    12 Responses to Currently Low Tax Receipts No Excuse to Raise Taxes

    1. George Colgrove, VA says:

      Raising taxes will further reduce revenue. Not raising taxes will reduce revenue. Revenue is shrinking because so manny Americans are out of work and over the last year, those who are working received lower household incomes.

      Taxation has already had its bite and will continue to do so until we bring jobs back to the country. But regardless of the matter, the big hit on economic prosperity is the looming federal debt. Between interest and principal payments we are talking about removing about a trillion dollars every year for quite some time! This money not floating around and not being used for growth will hurt the country.

    2. West Texan says:

      Tax reform should begin with repealment of the 16th amendment. Next do away with the 17th amendment so that states are again properly represented at the national level regarding their own internal affairs. Federal spending would be drastically cut by downsizing the social progressives' bloated, overextended and large wasteful programs. None of which ever was their constitutional authority or right.

    3. Pingback: Tweets that mention Currently Low Tax Receipts No Excuse to Raise Taxes | The Foundry: Conservative Policy News. -- Topsy.com

    4. Pingback: Currently Low Tax Receipts No Excuse to Raise Taxes | Big Propaganda

    5. Dennis Georgia says:

      Only jobs can and will increase taxes. The dems and obama want more to spend more, they have no concept of how the average worker lives and manages to get by. The socialist agenda of obama can only fail, as people stop looking for work. We as voters need to replace our mouths with votes in 2012. The current crowd has to go before it is to late for America.

    6. Gabriel says:

      so lowering taxes(spefically on high-income earners) will not further reduce revenue? really? extended those Bush Tax Cuts will guarantee higher deficits and if any of you can't see that then there is nothing anyone can tell you to change your minds. that's like telling me if you were to direct deposit less money into your bank account year after year you would magically have more money in your account. It is 100%LUDACRIS!!! If you decide to tell me that low taxes create jobs all you would have to do is provide the evidence…well guess what, you have no evidence, no evidence at all. entitlements are not the only reason for deficits. I'm amazed just how ignorant people in this country have become. It's like a mass herd of idiotic zombies believing in everything they here on political websites and tv. This just sucks!

    7. West Texan says:

      Gabriel, please stop projecting. Conservatives do get it. They understand there's more to economics than the power grabbing two-dimensional elitist propaganda from the left. The federal government's social progressive nonsense serves the ignorant masses quite well.

    8. FairfaxKen says:

      If we want the tax code reformed all we have to do is make every Senator and Representative complete his/her own tax return manually. It would accomplish two things; first it would take them so much time they wouldn't have any time left over for stupid lawmaking/breaking, and second it would make them realize that the tax code is really dumb.

    9. Marc Florida says:

      Stop the crazy entitlements,its called tough love. Stop the spending raise the age limits for SSI.The worst entitlement, someone collecting welfare has 2 kids 3 yrs later have 5 kids, guest what its a pay raise thats crazy.

    10. Gabriel says:

      Look how silly this is…

      I provided a different opinion regarding the cause of deficits, including the tax cuts for the wealthy and this is the response i get…

      "They understand there’s more to economics than the power grabbing two-dimensional elitist propaganda from the left"

      -what the heck does that even mean!!!?

      No, you obviously dont' get. You keep pushing for lower and lower taxes, specifically for high-income earners. Who payed for the bush tax cuts from 2002-2010? Who will pay for extending the tax cuts? Yes, you don't seem to get it.

    11. West Texan says:

      Gabriel asked "-what the heck does that even mean!!!?"

      Just what it says sir. You can believe and/or listened to whatever social progressive dogma you wish. And to address your surprise, your earlier comment went beyond providing a simple opinion.

    12. Pingback: Democrats propose new tax brackets for millionaires, billionaires

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