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  • CBO Figures Once Again Prove Tax Hikes Unnecessary to Fix Budget

    The Congressional Budget Office (CBO) just released its long-term outlook for the federal budget. As expected, we are going broke slightly faster than we were a few months ago.

    No doubt the usual bigger-government types will use this news to repeat the mantra that we need to both cut spending and “enhance revenues” (a thinly veiled euphemism for tax hikes). Treasury Secretary Timothy Geithner used this oft-repeated line just this week.

    But their argument is exactly backwards. The CBO report actually once again proves that no tax hikes are necessary to fix our budget woes.

    The CBO calculates that if Congress leaves the tax code as it is today—which would include permanently extending the 2001/2003 tax cuts for all taxpayers (even those greedy, job-producing rich folks and small businesses), patching the alternative minimum tax so it does not impact middle-income families, and continuing a host of other tax-reducing provisions that regularly expire—tax revenues would exceed their historical average of 18 percent of GDP in 2021. Revenue would continue growing thereafter absent any policy changes and soon surpass the all-time record high hit back in 2000 at the height of the Internet-tech boom.

    Earlier CBO reports show (and this latest release confirms) that revenue would actually match the 18 percent of GDP mark by 2017 and could get there even sooner.

    Renewed economic growth—once it finally takes hold—is the reason tax revenues will shoot up in the coming years. Faster growth means that taxpayers earn more income and move into higher tax brackets. Faster growth also means that there are more taxpayers than before.

    The impending rebound in tax revenues seen in the CBO data also rebuts the argument that “taxes as a percentage of GDP are at their lowest levels since 1950.” It has been repeated most recently by Fareed Zakaria.

    These low tax receipts have nothing to do with changes in policy, like lower tax rates, as those making this argument would have us believe. Tax revenues are low compared to their historical averages, but that has everything to do with a terrible recession and a worse-than-anemic recovery that has repressed incomes and driven millions to the unemployment lines.

    Conveyors of the wrongheaded wisdom about the necessity of tax hikes are trying to convince the American people that there is just no way to lower the deficit with spending cuts alone, that some tax hikes are necessary in any “reasonable” plan.

    Higher taxes are not a mathematical necessity. They are a choice Washington politicians would make to expand the size of government. After all, history has shown us that Congress rarely if ever uses revenue from tax hikes to lower the deficit. Rather, it uses the money on new or expanded big-government programs. And tax hikes now would further harm job creation.

    The reality is that hikes are not necessary to fix the budget. If Congress restrained spending to its historical level of 20 percent of GDP (rather than the bloated 25 percent that President Obama’s budget aspires for), the deficit would fall to manageable levels as revenues climb, and the national debt would stabilize as a share of the economy.

    It is all about the spending, and no amount of reiterating false claims about plunging tax revenue can change that. Washington has spent us into this budget hole and wants more of our money to fill the void they’ve created. It is time they realize they’ll be getting plenty of our money in the coming years, and the only way out of this mess is to cut spending.

     

    Posted in Economics [slideshow_deploy]

    15 Responses to CBO Figures Once Again Prove Tax Hikes Unnecessary to Fix Budget

    1. Mic Hudson says:

      Renewed economic growth? — "once it finally takes hold?"

      There you have given only one part of the formula; so, the equation is incomplete. The problem is that despite the rich having the continuing tax reductions, the economy remains stagnant (and/or sliiping) as it has has been since before Obama ever took office. The greedy SOBs who could be creating jobs with their their absolutely profane degree of prosperity, but are not doing so.

      Whereby the vast majority of Americans continue to be punished undeservedly, in part because of these CBO prognostications which continue to be proven as unreliable as they have been for the past decade.

      "Faster growth also means that there are more taxpayers than before?"

      Not if the people remain unemployed! Where is the growth at if they don't have jobs to earn money and increase the tax roll? The tax breaks have been in place for a decade, so where are the job?

      The impending rebound in tax revenues seen in the CBO data…? What Impending rebound?

      Based on data the CBO has been releasing for years, their prognostication regarding a recovery still has yet to occur. Doesn't that prove the presumption to be false and erroneous? It shouild point out the fallacy because the recovery so far just ain't happening. The economy remains in a stagnant stage due largely to those greedy people who could be producing jobs but are not doing so (unless you count slinging hash at McDonald', or some such like).

      Nope, despite having the benefit of continuing reduced taxes, those greedy SOBs at the top of the financial chain are simply not creating jobs, else the unemployment figures would not still reflect over 9% unemployment.

      "These low tax receipts have nothing to do with changes in policy?"

      Yes, tax revenues are low compared to their historical averages, and though it does indeed have somewhat to do with the recession. That recession has only become more bloated and "worse-than-anemic," because those who could be creating jobs simply are not doing so. They instead continue to hold on their bucks, while those millions who have been driven to the unemployment line are forced to remain there.

      • Will says:

        Producing Jobs? Business grow triggers the demand for more labor (job producing). Basic economic…

      • Last Sane Man, CA says:

        The classism present throughout your counterargument is simply astounding. These "greedy SOBs at the top of the financial chain" bear sole responsibility for the lack of recovery because they're not… not what? Throwing their money at the unemployed? Do you bother explain why this is? No. They're just greedy and selfish and evil rich people I suppose.

        The real cause of reluctance and hesitancy by those who are in a position to create jobs to do so is the biggest fears of all business: uncertainty and regulation. The government is creating uncertainty in the private market by threatening to impose additional regulations and restrictions on businesses.

        That is not to say that deregulation directly creates jobs, but it allows jobs the freedom and room to grow on their own. This is better policy than any classist, populist, centralized government handling of the problem than you could dream up.

      • Todd says:

        The wealthy are wealthy because they EARNED their wealth. They don’t owe you a damn thing. Furthermore, it’s not their responsibility to spend money how you or big government want so that the economy “improves”. Blaming the wealthy and demonizing the rich is the same, tired, old song and dance by Communists (ie liberals) since the 1900’s, and frankly, the American’s are getting really tired of it – hence the rise of the Tea Party.

        The economy has only gotten worse since Barack Hussein took office, and that’s not by coincidence. It’s because of the radical Marxist policies by our radical Marxist president. Feeling you have the right to circumvent the Constitution, Congress, and all other laws created to ensure a balance of power creates grave concern by the wealthy. Stating you believe in “spreading the wealth” creates hesitation by investors. Creating stifling regulation creates panic in the private sector. And spending recklessly to the tune of $5 TRILLION in DEBT in only 2.5 years causes ALL consumers to “batten down the hatches”.

    2. JIM & CAROL REISZNER says:

      HOORAY I LIKE LESS SPENDING BY THE GOVERNMENT. I WONDER IF THE REPUBLICANS
      WERE IN TOTAL POWER THAT SPENDING WOULD BE REDUCE. NO NOT A CHANCE, THEY'VE
      BEEN THERE BEFORE. JUST PROVES ONE THING A POLITICIAN IS A POLITICIAN.

      JIM & CAROL REISZNER

    3. "After all, history has shown us that Congress rarely if ever uses revenue from tax hikes to lower the deficit. Rather, it uses the money on new or expanded big-government programs. And tax hikes now would further harm job creation." !!!!!!

    4. Bobbie says:

      “enhance revenues” means raising expectations to a higher degree regarding efficient spending with less monetary need! "enhance" does not mean "increase."

      mr. geithner should have 1st thought what he can do to avoid all costs of his consequences but like a democrat, he can only think to put increased costs on the people he does more disservice to then serve at all.

      Gather all members of government who failed their patriotism and cheated Americans by tax fraud, have them publically recognized to pay and at the highest of penalties and increase capital taxes on trust fund babies working in government (pelosi, reid, kerry, wasserman-schultz, etc.,) to show their sincerity to the people they serve and their willingness to conduct government according to America's principles, holding themselves expectantly accountable to matters within their control.

      There is a huge disconnect in America regarding integrity, when the conduct of government isn't compliant with the will of THE PEOPLE, YET STILL PAID BY THE PEOPLE!!
      NO TAX HIKES! NO INCREASES! NO NOTHING BUT GOVERNMENT REDUCTION!!!!!

      GOVERNMENT HAS TO BE HELD ACCOUNTABLE TO EVERYTHING WE CAN'T SEE, TOO!!

    5. Your whole argument is wrong. The CBO says for things to "stay the way they are" that means current laws, which means the 2001 tax cuts ending.

      They specifically say that extending the tax cuts paint a "bleak" picture, and in their graphs, the extended tax cuts represent "alternative scenario"

      Read it better next time.

      "The budget outlook is much bleaker under the alternative
      fiscal scenario, which incorporates several changes to current law that are widely expected to occur or that would
      modify some provisions of law that might be difficult to
      sustain for a long period. Most important are the assumptions about revenues: that the tax cuts enacted since 2001
      and extended most recently in 2010 will be extended"

      those darn pesky reality based facts.

    6. fittinguy says:

      Raising taxes Will Be part of the 2012-13 budget. To believe otherwise is foolish. The American economy has been and will be stronger with a better balance sheet.

      • Will says:

        Tax was increased many times, did it solve anything, yet? Only more taxes! When will we/you ever going to learn?

    7. Bill says:

      Let's take away all deductions and lower the tax rate to say 10-20% and reduce our IRS personnel with a simple tax code that needs less people to collect. Business could spend less on tax accounting. Congress would have less opportunity to pedal tax deduction favors to some industries.
      Everyone should pay some taxes even GE. No specially blessed industries like Green Ones. Oil companies should pay their fair share. But lets cut out are subsities too: No Farm or AG payouts. No pay outs for getting out the vote, and other special favored activities.

    8. Sam says:

      "The Ryan Plan" is being misinformed on both sides as it is the #1 talking point, and litmus test for future elections. The website domain, theryanplan.com as well as .info and .org are being auctioned on ebay…..Someone needs to spread the plan to the American People. http://cgi.ebay.com/TheRyanPlan-com-medicare-repu

    9. politicreader says:

      "The Ryan Plan" is being misinformed on both sides as it is the #1 talking point, and litmus test for future elections. The website domain, theryanplan.com as well as .info and .org are being auctioned on ebay…..Someone needs to spread the plan to the American People.

    10. Alton Easton says:

      I have questions about the CBO release and they all relate to what assumptions were made to come up with this conclusion. Did they assume that corporations would stop sending jobs outside the country, did they assume a reduction in unemployment, what assumptions did they make to the rate of inflation as it relates to the tax code's standard deduction rate, what assumptions did they make as to the economic growth as it relates to carbon regulations and etc.

    11. Obama just does not get it. I posted this excellent article on my blog. http://haltingarkansasliberalswithtruth.com/2011/

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