EEEEEEEEK! Taxe Rates Required to Erase the Deficit

From the Tax Foundation via Bruce McQuain, I don't think this needs any comment:

taxes1

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  • Link

    This has been the key point of my rants for the last year: you could raise marginal rates on our top 5% earners to 90% and not cover the fiscal gaps we already have. ... Hell, you could raise marginal rates on anyone earning over $75,000 to 90% and not cover the fiscal gaps we already have. This is before Healthcare, before Energy. I have yet to see a MSM report on this.

    Obama wants to level society.

    "... the things you could do with a trillion dollars ..." A typical small business requires less than an a million dollars to start ... you do the math.

  • gn

    I wonder what sort of economic growth these numbers assume(i.e., tax twice as much but the economy still grows at the same rate).

    Too many people in the wagon, not enough people pulling the wagon... pretty soon the wagon stops.

  • Raven

    Part of the problem is Americans are not willing to accept a broadbased national VAT/GST. This forces governments to rely on the much more damaging income/payroll taxes to raise revenue. It think it would be interesting to do the numbers with a 5% VAT instead of income tax increase.

  • Bobby L

    @Raven:

    I think the problem that a lot of libertarians have with a VAT is that it would be placed on top of the income tax.

    That is, given the current government budget gap, do you really think they're looking to replace income tax, or supplement it?

  • Mike F

    This is an interesting math exercise and does show the insanity of how much deficit the USA has.

    Nobody in their right mind would actually pay 95% of their salary in taxes. I would just stop working because there would be no point to it.

    If anyone were actually thrust into this, they would probably just defer their salary for x-number of years until the tax climate improved.

  • nom de guerre

    introducing a VAT tax into an economy as a quick fix for funding issues is *precisely* the same as introducing a fast-growing cancer into your body as a "quick and easy way to lose weight". that's a real good reason why "americans won't accept a broadbased national VAT/GST." i can't think of a better incentive for the most productive 10% of americans to 'go galt' than to allow this VAT abortion to become law.

    then, of course, they'll have to raise taxes to replace the missing revenue.....lather, rinse, repeat....

    and before ya know it, blue jeans cost $150, and cash is illegal.

  • Raven

    Bobby L,
    The question is not whether all taxes bad (they are). The question is which taxes are better (or less worse) taxes. I think a broad based VAT is a much better option than increased income taxes because it raises money from everyone even if the poor get tax credits at a later date. The worst thing for a democracy is a tax system that exempts the majority from direct taxes because it breaks the chain of accountability between the people paying for the services and the people demanding them. A VAT is not a perfect solution but it is a lot better than the alternatives.

  • Raven

    nom de guerre,
    The money has been spent which means that even if a government is elected in 2012 with a mandate to radically cut the vast network of programs they will not be able to avoid the inevitable tax increases required to pay interest on the balooning debt. In other words, the cancer is already spreading through the body and amputating limbs can only slow it. The only choices to save the life of the patient are chemo or radiation - treatments which are deadly and can potentially kill the patient faster than the cancer but they offer a better chance of success than doing nothing. I see a VAT as a lower risk treatment.

  • nom de guerre

    ok, raven, i'll bite. lets say for grins (god forbid) that we introduce a temporary VAT tax to clean up this mess, and right there on the front page of the bill, we say "this tax will expire in 5 years, come hell or high water." you know, just as a temporary measure for the duration of the crisis, and then it'll stop and things will go back to the way they were. like they did with payroll withholding in WW2: they swore up & down it would stop the INSTANT we won. (hmmmm. well, ok, maybe that's a bad example.)

    here's my simple little questions:
    1) has any government anywhere on earth EVER let a VAT tax expire?
    2) has any government anywhere on earth EVER used VAT revenue solely to pay down debt?
    3) has any government anywhere on earth EVER seen the size of their budget and powers *decrease* after introduction of a VAT tax?

    that'd be 'no', right? what's the classic definition of insanity? "doing something that's never worked each and every time it's been tried in the past, and expecting a (different) positive outcome"? but i'm willing to work with ya here, raven. tell you what: when the federal and state governments finally STOP taking their cut out of my paycheck like they said they would- WW2 having been won 64 years ago - then we'll talk. until then, i want that VAT cancer kept as far away from me as possible.

  • Bobby L

    Raven,

    I don't think we differ too much in opinion, I think we may just be missing each other's points.

    I think that if the VAT was enacted today, it would just be another revenue stream for the government to fund all of this insanity that's been legislated / proposed to be legislated.

    If however, income tax was repealed, and they junked all of the crap that the government has no business dealing in in the first place, and then instituted a universal and modest VAT to cover the then severely reduced federal budget - then yes, it would be more fair and transparent.

    But I don't think any of these power hungry clowns in DC have the balls, will, moral fiber or restraint to ever do that.

  • Raven

    nom de guerre,
    I believe a VAT should be permenant and income taxes reduced instead.

    Canada introduced a 7% VAT in 1990 during a time of spiraling government debt. After 10 years of cost cutting and tax increases the government was able to start reducing income taxes and did so many times over the last 8 years. In the last 2 years the VAT was reduced 2%.

    Here are some concrete stats:

    Total Canadian government revenues have fallen by almost 4 percentage points of GDP, from a peak of 44.2% of GDP in 1992 to an estimated 40.5% of GDP in 2006.
    ...
    Total government spending in Canada has fallen by an astonishing more than 10 percentage points of GDP, from a (recession-bloated) high of 53.3% in 1992 to an estimated 39.5% of GDP in 2006.

    So the answer to your question is yes it is possible for democratic governments to raise taxes to fix a debt problem and then lower them when times get better. Whether is it possible for the US government to do is another question.

  • MikeLoe

    Who is John Galt?

  • Methinks

    Mike F hit on this - the incentive effect.

    Does the tax foundation assume that people will generate the same amount of income as they do under the current tax scheme? If it does, the numbers are way off. Much higher taxes would be required at much lower income levels and, more likely, the deficit would simply never be paid off. The only reason the United States was (barely) able to maintain a 90% top marginal tax in the past is because people in that tax bracket paid an average effective tax rate of 23%.

  • anon

    Most of you (especially Raven) are missing the big picture.

    Under the current level of spending, we need to roughly double our current individual tax burden.

    VAT or income tax, doesn't matter. Double the current individual tax burden.

  • non-anon

    I find it so hard to believe how little outrage there was about the deficit for the entirety of the 90's. Now with the new, hated-by-"fiscal conservatives", guy it's suddenly more than they can stand. Where is the chart from before Pres. Obama pre-spent a nickel of our money? From what I recall, we didn't seem to be heading down the path of erasing the deficit then either.

  • Rob

    It's too bad that someone doesn't start a new country with dues rather than taxes. If you don't like the club, don't join. If you don't like the dues, rules, people, etc then leave.

    I hate the implicet slavery (loss of freedom) from taxes which have just become another accepted part of life. If we don't accept it, then we get locked up. As sad as it is, do we have anywhere better to take our business and riches besides the USA?

  • Durk Pearson

    If that were to happen, I'd predict a boom in the sales of recreational real estate and fishing rods...