5 Somewhat Unpleasant Assumptions I Make About Taxes
1) If we raise taxes, best case scenario, the new revenue will reduce the pressure to cut spending and worst case scenario, it will be used as an excuse for new spending. Even setting aside the fact that higher taxes may very well reduce economic growth, this is why it’s such a bad idea to implement higher tax rates right now.
2) We have spent so much more than we have for so long that spending cuts alone probably will not be sufficient to eradicate our deficit, our debt, and fund our future entitlement programs. While we should certainly try to fix the problem just by cutting spending, it’s almost a certainty that we’re going to have to increase taxes at some point to prevent defaulting on our obligations.
3) Despite all the cries that the rich aren’t “paying their fair share,” they’re actually already being heavily taxed. Can the government pry more money out of their pockets? Yes, and it undoubtedly will. But even if the government confiscated all the wealth the rich has, it wouldn’t fix our deficit problems for a single year — and, of course, that’s not feasible. In fact, because of a number of factors, the rich are relatively close to being “tapped out.” Keep in mind that they are already heavily taxed, feel the burden on them is unfair, are more able to pay lobbyists to pursue loopholes, can send money overseas, can cut back on work, and can shelter their money — so the rich are not going to be the biggest source of new tax revenue long-term.
4) So, if the rich are fairly close to being tapped out as a revenue source and the poor don’t have much money, which is why they’re poor, that leaves middle class Americans who are — and people are going to hate to hear this — dramatically undertaxed compared to the amount of government benefits they receive. Keep in mind that the average American IS NOT paying into the system what his Social Security and Medicare benefits will cost and roughly half of Americans, many of whom could fairly be called “middle class,” are paying no income tax. What this means is that when the government feels compelled to raise large sums of money, the middle class, not the wealthy are the people who are going to really get socked with tax increases.
5) Since the middle class is strongly opposed to paying more taxes, expect the tax hikes on them to be shifty. The government will hit corporations with taxes they know will be passed on to the middle class, insert hidden last minute tax increases in bills, and worst of all, push a value-added tax.