The Washington Post reports this morning that letting current tax policy lapse (thus raising taxes on all Americans on January 1 next year), would generate enough revenue to “bring the country within striking distance of meeting President Obama’s goal of balancing the budget.”
A few counterpoints:
1) Obama’s idea of “balancing the budget” isn’t really a balanced budget. If you recall, the Administration’s FY 2011 budget submission claims “primary balance” in 2015 – spending MINUS interest payments. That’s not a balanced budget. Perspective: CBO estimates that the federal government will make $202 billion in interest payments this fiscal year—equal to 5.8 percent of all outlays, or 1.4 percent of GDP. By 2015, interest payments on the debt will reach nearly $500 billion. (Read: it ain’t chump change). Therefore, claims that letting current tax policy lapse would “pretty much do it” (so says Peter Orszag) take liberties with the truth that would make Pinocchio blush.
2) Even if it was true, that doesn’t mean it’s good policy. Letting all of current tax policy lapse would:
- Increase taxes on all Americans – high, middle and low-income households.
- Reinstate the marriage penalty for all Americans.
- Reduce the child tax credit by half.
- Subject 26 million Americans to the alternative minimum tax.
- Raise the death tax on family-run businesses from zero to 55 percent.
- Contradict President Obama’s promise not to raise taxes on anyone earning less than $200,000/$250,000 (single/married couples).
3) President Obama has no plans to let any “savings” from higher taxes lay idle. In his Parma, Ohio speech on Sept 8, President Obama said (more than once), “I’ve got a whole bunch of better ways to spend that money.” So the notion that Democrats would use the revenue from higher taxes to reduce the deficit is just plain wrong. Higher taxes = more government spending.
