Want to raise taxes? Do these things, then we’ll talk

A “cancer” that, absent preventive action, “will destroy the country from within.” That’s how the wise men tasked with cutting our debt and deficit commission describe America’s fiscal future.

That depiction comes as no surprise to those Americans who have turned our public borrowing into one of the year’s top political issues. But it can’t hurt to have a committee appointed by President Barack Obama reiterate the painful truth.

But setting the table, so to speak, for a frank discussion about the national debt is all the commission members can do. Only Congress and the president can actually make budget law to alleviate the problem.

So, it’s important that the issue is framed appropriately. Conservatives were skeptical about this blue-ribbon panel because it’s likely to be a.) a fig leaf for inaction; or b.) political cover for something Democrats want to do anyway — raise taxes.

To that end, it was somewhat heartening to hear one of the co-chairs, former Clinton staffer Erskine Bowles, suggest that “we can’t tax our way out” of this problem. He hinted at a plan along the lines of Britain’s new austerity budget, which seeks to make up three-quarters of that country’s gap with spending cuts and just one-quarter with tax increases.

A 3:1 ratio of spending cuts to tax increases may sound horrifying to big-government liberals, but the right also may be alarmed. Done badly, even a comparatively modest move to raise taxes could be disastrous.

With that in mind, here are some principles to guide any tax/spend compromise:

1. There’s a difference between deficits and debt. A deficit is the shortfall in any one year’s budget; debt is the compilation of deficits over time.

We don’t need to raise taxes to shrink the deficit. Government should spend within its means. Eliminate the deficit with spending cuts.

Do that, and we can talk about taxes dedicated to paying down debt. Bowles reported last weekend, when he and co-chair Alan Simpson met with the nation’s governors in Boston, that interest payments on the debt alone could reach $2 trillion a year by 2020. If so, it’s better to pay down that debt now than to pay out more to keep financing it later.

2. Don’t let Congress keep increasing spending at will. When economic growth returns, revenues will increase. Part of our debt problem is that rising revenues traditionally inspire Congress to spend even more.

Some states have kept their legislators in check by limiting spending growth via a formula — often a combination of population growth and inflation. There’s no reason Congress couldn’t do the same thing.

If revenues rise faster than spending does, great — dedicate the overage to debt payments, or refund it to taxpayers with a broad-based tax cut.

3. No new taxes. Meaning, no new kinds of taxes.

No new value-added tax or other consumption tax (barring the full repeal of the 16th Amendment — which, sorry to say, Fair Taxers, is unlikely). No new carbon tax.

New taxes never die off, they just go to pay for other desires in Washington.

If we are going to pay down debt with taxes, do it with existing forms of taxation, whose rates can be raised for that temporary purpose. And do it in a way that creates the least harm possible: For example, dropping the mortgage-interest deduction, as Bowles and Simpson floated, could be lethal to a housing market recovery.

4. End it at some point. Pick a certain level of debt that’s considered manageable, probably represented as a share of the economy. Once the debt reaches that point, re-lower taxes.

If these sound like a hard line, well, they are. But if we’re serious about reducing debt and deficits, they’re also more than reasonable.

P.S. — I am spending Wednesday and Thursday traveling with gubernatorial candidates as they campaign to gather material for this weekend’s column. So this post will have to tide y’all over until Friday.

165 comments Add your comment

wallbanger

July 14th, 2010
8:28 pm

The ham handed fashion that this administration wants to tax out of existence those who generate income for others is disgusting, and very short sighted. Everyone knows that reducing taxes stimulates more income. People are then willing to invest in businesses, in equities and in things that create jobs. If we are all reduced to penury, well Obama will have certainly spread the wealth. Too bad it simply disappeared.

The Taxman Cometh

July 14th, 2010
8:49 pm

@Wallbanger- 8:28- “Everyone knows that reducing taxes stimulates more income”- I don’t think our
brethren on the Left quite accept that. History proves it out, they just don’t
accept it.

Buckagon

July 14th, 2010
9:48 pm

Kyle,

“Setting the table for a frank discussion”?? Your naivete here is noteworthy. A frank discussion is not Obama’s goal here. In fact, I doubt seriously that he ever would have a frank discussion with anyone since Joe the Plumber accosted him in public. Axelrod and Gibbs are probably praying they can find invisible glasses that contain a teleprompter.

Let’s see: did we get frankness in anything from Obama/Pelosi/Reid or the whole crazy deem&pass crowd?

Healthcare — no
Budget — no
Excusing black panthers — no
Oil Spill — no

We could go on…. Obama’s MO is to set up straw men and argue against them–his non-opponents. Expect a VAT and all kinds of fiscal mischief post November.

BW

July 14th, 2010
10:02 pm

Yes reducing corporate tax rates to zero will suddenly inspire companies to re-hire for jobs that Americans demand too high a salary for given the relatively low skill of labor required….yeah right. Millions of manufacturing and other high paying jobs didn’t disappear when Obama became president…middle class America has been under assault for years and at some point people will have to decide what is more important: lowest price or low unemployment. Don’t forget the unemployment rate is much higher among non college grads compared to college grads. It’s all about marketable skills and soon everyone will be a mercenary if not already one.

Le Bourgeois

July 14th, 2010
10:02 pm

Creating the painful truth of a balanced budget should be enacted by Congress along with a realistic increase in receiving Social Security benefits. And how about doing some serious audits on people claiming “disability.”
Also, as one who has to deal with the immense red tape of the federal bureaucracy regarding ARRA stimulus funds, how about a stop of wasting what amounts to probably 50% of intended funds on stupid compliance costs and directly stimulate the economy with a check in hand to each taxpayer. I’m sure the cost of issuing and processing checks even with postage is much, much less than over-lording the wasteful stimulus programs.

Le Bourgeois

July 14th, 2010
10:04 pm

Let me clarify that I meant an increase in age to receive SS benefits.

amerikkka is awesome

July 14th, 2010
10:13 pm

freedom ain’t free, obummer is a muslim, beware the gulags, keep granny away from the death panel, beck is gawd, lame-stream news, ignorance is bliss…..

Buckagon

July 14th, 2010
10:26 pm

BW, economics isn’t a science, but insofar as history and economics show us, we can be certain of one thing: lower prices increase demand, and increased demand will put a strain on supply causing an increase in production.

Lowering corporate taxes will decrease price because it will decrease cost.

Do you really think corporations pay taxes? They don’t, my friend. Corporations are simple a vehicle to pass-through money for whatever purpose: to make things and generate services on a larger scale. WE pay the taxes when we pay for their higher priced goods and services.

Basic econ 101…

Learn it, live it. All your liberal nonsense can’t argue against it. If Congress would learn this also, many manufacturing jobs would come back to this country.

Grand Forks

July 14th, 2010
11:00 pm

“We don’t need to raise taxes to shrink the deficit. Government should spend within its means.”

Well Kyle, the majority of democrat voters are people who have no idea what it means to save. Most democrat voters are welfare baby mamas, ex felons and dead people.

Oh, and Obama is bringing in Billy Cigar Clinton to help him figure out a way to “bring back jobs.” Kind of odd because a lot of Obama’s staff is left over garbage from the 90’s.

Grand Forks

July 14th, 2010
11:03 pm

“I am spending Wednesday and Thursday traveling with gubernatorial candidates as they campaign to gather material for this weekend’s column.”

Are you going to be hanging out with Handel? If so could you ask her some basic college level questions about economics, current events and basic math. I mean, the woman only has a GED and Georgia is gonna look mighty stupid if they elect someone like that. I’m sure she’s a nice person but hey, so is the truck driver who almost ran me off the road the other day. I’m sure he has the same education that she does. Not that there’s anything wrong with a GED.

BW

July 14th, 2010
11:18 pm

Buckagon…you may be right about the demand factor but if I’m an employer I wouldn’t hire one more person than I needed. Some jobs are simply gone with the wind buried by technology. The others are gone by the increased efficiency of the workers still on broad. Things may cost less if we don’t levy fees on corporations but I can never be convinced that a corporation wouldn’t rather pocket that saved money than have to pay an employee. Further, this is a service based economy and there will be a whole group of people that barely finished high school and are finding out that they can’t go ask daddy to get them on at the Ford plant anymore. I’m in northwest Indiana this week and it’s one abandoned factory after another on the South Shore. This didn’t happen during the financial crisis…it started when outsourcing and offshoring became popular. So thanks again for your economics lesson but the system is fundamentally broken for providing oneself with a consistent decent middle class standard of living even if you went to college.

wingnut

July 14th, 2010
11:32 pm

1. End the Iraq war now
2. End the Afghanistan war now
3. End Medicare Part D (the drug benefit)now
$. Cut the Pentagon budget in half, so it only equals half the rest of the world, not the whole thing
Then we can talk about cutting spending, right?
Thought not.

Lt Dan

July 15th, 2010
12:20 am

How about:

1. Pass the Fair Tax
2. Repeal Obamacare
3. Repeal the ’stimulus package’
4. Pass legislation that gives the President the power of a line-item veto
5. Pass legislation that does away with earmarks (do away with Congress’ discretionary spending altogether)
6. Cut government salaries 15% to start with (more to follow – they are truly overpaid and under worked)
7. Cut government’s size 15% (a good start there, more to follow)
8. All monies going towards Social Security will go only to Social Security and not the General Fund (something the Democrats did back under Lyndon Johnson to fund “the great society” programs)
9. And while we are at it, secure our border with Mexico (fence it, wire it, mine it, whatever it takes)

We need to get the Federal government out of the way and let States (as well as individuals) take more responsibility for themselves.

Try about two years of this and then we will look into tax cuts.

As for our military, no cuts, but some expansion so we can better deal with problems in the Middle East, Africa and supporting our new allies in Eastern Europe.

Somewhere in there we give the United Nations their walking papers and let them take their corrupt organization elsewhere. We should continue to send an ambassador there (wherever they wind up at; maybe Somalia!).

DeborahinAthens

July 15th, 2010
6:45 am

You go Wingnut!!! The hypocrisy of the Republicans is sickening. Bush was so coy, running two wars off the books, and firing anyone and everyone that tried to warn him about the deficit dangers of Medicare Part D. I would love to see how much money Bush ultimately gets from the pharma industry for this huge gift he bestowed on them! It seems that deficits aren’t bad if it’s a Republican deficit.

ByteMe

July 15th, 2010
7:01 am

Government should spend within its means. Eliminate the deficit with spending cuts.

Total BS.

Are you ready to eliminate two wars, Kyle? Are you ready to shrink the military back to 1990’s level or would you then complain that Obama “weakened the military”? Or are you ready to actually insist that the government raise the taxes to pay for them?

If you leave the military, social security, and medicare untouched, and cut everything else to 0 you CANNOT balance the budget on current tax levels. It doesn’t work. Bush and the Republicans missed the desired revenue targets and are unwilling to acknowledge that Reagan raised taxes back by nearly half their cuts starting with the first of several tax increases coming out of the 1982 recession. Instead, the myth of Reagan — “he cut taxes and the economy expanded” — has become a dogma that has seriously harmed America’s ability to respond to external and internal issues.

And now the right-wingnuts — who openly claim that spending cuts don’t have to be paid for, but paying for unemployment benefits do have to be paid for — are trying to act like deficit hawks. Deficit chicken-hawks, that is.

Total BS.

No More Progressives!

July 15th, 2010
7:42 am

“But setting the table, so to speak, for a frank discussion about the national debt is all the commission members can do. Only Congress and the president can actually make budget law to alleviate the problem.”

But neither Congress nor the Prez will cut any spending………until after November 2. After all, it’s what liberals do; talk a lot, craft meaningless legislation, and waste other people’s money.

No More Progressives!

July 15th, 2010
7:46 am

And now the right-wingnuts — who openly claim that spending cuts don’t have to be paid for……….

Please explain how a “cut in spending” has to be “paid for.”

Civics 101: Where does the Federal Government obtain the money they so gleefully waste?

They confiscate it from you and I. What a shock, huh?

jt

July 15th, 2010
8:00 am

Coorperations just leave when the regulations and taxes get to be unbearable. The super rich have armies of lawyers and accountants to shield their money. The only money available for washington corruptocrats is from the middle class. The gang of 525 will continue to increase the tax load upon the middle class as long as we will allow it. The politicians in washington (republicans AND democrats) could care less about holding signs and protesting. Apparently, the middle class isn’t even close to the breaking point because big government Senator Isackson will be awarded another term this November. Re-electing incumbants is just a sign that they can steal more wealth.

It has been estimated that the former Soviet Union confiscated 95% of the income of the average Soviet citizen before the citizens finally shrugged their centralized government off of their collective shoulders.

And as far as some ridicoulous 2 trillion dollar debt? I never signed for it. I personally repudiate it.
100 million more Americans ought to do the same.

That is the only way. The only people that I will support is my local and state government.

W

July 15th, 2010
8:10 am

Kyle, can you reprint your comments from when Bush ran up this huge deficit?

Sick of Dems

July 15th, 2010
8:19 am

You go Lt Dan…..if a Republican or Independant would run on that platform they would win by a landslide. The liberals are distroying this country I can’t wait for November

Williebkind

July 15th, 2010
8:38 am

Why re-invent the wheel Kyle, just take a look at what the state of Virginia has done. The leadership there took a 1.8b deficit to a 220million surplus. Again it take a leader not a politician. I wonder why this is not all over the news?

LeeH1

July 15th, 2010
8:52 am

It is simple. Let all the people who are employed by local, state adn federal governments resign. Certainly, no one in the tea party should be a government worker.

This will reduce cost, and in this market, few of these employees would have their positions re-hired.

Then have everyone who works for a contractor who works for the local, state and federal governments resign. They are as bad, or worse, than government workers in getting high salaries and outrageous contracts from their buddies in government. No one who wants lower taxes should work for a government contractor.

Then let all these recently unemployed people refuse to take any welfare or subsidies or assistance from the government. They are on their own to have their children go hungry until they find a job in the private sector.

This is what tea party people want. Or, especially, this is what tea party people want done to other people, but not to thier family. Their family is different, because their job is important, and other people’s jobs in local, state and federal government, are not.

But no government worker, and no government contractor or contract worker, should ask for lower taxes until they have left the gravy train. Otherwise, you are asking others to do what you won’t do yourself.

Hypocrite.

Haywood Jablome

July 15th, 2010
9:01 am

That’s some powerful good name calling from those on the right.

Now go back to the AM radio and learnt some new names.

Gator Joe

July 15th, 2010
9:18 am

Kyle,
Where do you expect the revenue to come from, in order to fund Defense, Medicare and Social Security, the “Big Three”? Some savings could come from Conservatives, the Right, the Tea Party and Republicans who are so opposed to government spending, if they would return their Social Security and Medicare checks. Also, you and the aforementioned groups who have parents in those programs could assume complete financial responsiblity for them and return the checks.

It’s easy to talk about spending cuts, yet another to put your money where your mouth is.

PS
“Democrat” is the noun, while “Democratic” is the adjective.

HDB

July 15th, 2010
9:23 am

If you are to be serious about eliminating the debt…here’s what needs to be done:

1) Close ALL tax loopholes that the wealthy use to escape paying taxes.
2) Go back to the Clinton tax rates – the economy GREW
3) Cut government spending 10% across the board the first year…and increase the spending cuts proportionately for every successive year
4) Cut the corporate tax rate to 12% from 15%
5) Reinstate the estate tax for estates ovver $25M

That will close the deficit…and eliminate the debt….

ByteMe

July 15th, 2010
9:30 am

@No More Progressives! : Argh. You correctly caught my typo. Was supposed to say:

And now the right-wingnuts — who openly claim that tax cuts don’t have to be paid for, but paying for unemployment benefits do have to be paid for — are trying to act like deficit hawks. Deficit chicken-hawks, that is.

Sorry for the confusion.

Dearie

July 15th, 2010
9:33 am

W – 8:18 –
How many times does Kyle have to repeat – he was not the Conservative Columnist until AFTER Obama tooking office – therefore he CAN NOT REPRINT ANY COMMENTS regarding Bush, since he did not make any.

Overtaxed

July 15th, 2010
9:35 am

Sounds like a plan.

But….let’s face it. Democrats AND Republicans only give lip service to cutting spending, but never actually do it. As a libertarian minded conservative “Republican”, its disappointing to me that there really is nowhere to turn.

Its time we vote out the old guard and put true fiscal conservatives in office. How many American’s… Republican, Democrat, Independent….would vote for a person that says lets 1) SIMPLIFY our tax system, 2) CUT spending, starting with redistribution, and 3) stay out of peoples lives at the federal level?!

Probably will never happen.

p.s. I may have to move out of State if Roy Barnes or John Oxendine are elected governor.

p.s.s. Karen Handel, you seem ok, but your grandstanding against gay marriage is ridiculous. Why in the world do you even care if two people decide to join in marriage? How in the world does this affect you or anybody other than those two people? REALLY? This alone might make me vote against you. I’m straight, but know too many good people that are gay and would like to marry. Seems like an infringement of their personal liberty to me.

Horrible Horrace

July 15th, 2010
9:37 am

What shades of Lipstick is Boy-Roy taking along for his appearances?

JP

July 15th, 2010
9:40 am

Good column. As a left of center Dem, I am all for spending cuts before tax hikes, but I’ll be the first to admit I don’t know where to cut that will fill such a large hole in the budget. Will conservatives hold off on tax-cuts until we find the spending cuts? Will liberals balance any new spending with cuts in other spending?

Grand Forks

July 15th, 2010
9:44 am

“The hypocrisy of the Republicans is sickening. ”

Guess the left wing retards don’t realize that the GOP isn’t in charge.

JF McNamara

July 15th, 2010
9:46 am

Is Kyle joining the dark side? He actually said that we should raise taxes to solve our problems along with spending cuts? This actually seems rational instead of the normal lower tax dribble.

I’m actually on board with the majority of this article. Look out Kyle, you’re becoming a centrist.

Thomas

July 15th, 2010
9:59 am

Who is supposed to cut spending? The Repubs who have had us on a credit card since Eisenhower? What do they know about fiscal responsibility? They always run on cutting spending and taxes. Once in office, they do the politically easy and cut taxes but have never had the courage to cut spending because they’re political cowards. The only way a congressman is going to have the backbone to cut spending is if we establish term limits.

JP

July 15th, 2010
10:03 am

Thomas…… I agree with you, but to be fair to the Rs, Dems don’t have a good record of cutting spending either. I wonder if it’s time to revisit a constitutional amendment requiring a balanced budget? Would that be a catastrophe? Anyone have any idea?

ByteMe

July 15th, 2010
10:17 am

JP: it would only be a disaster in time of great national crisis — e.g., war, massive bank failure — when flexibility to borrow is one of the reasons the USG is able to work toward resolving the crisis, but most individual states are stuck hoping for a bailout from the USG. Until then, it would be a great thing.

I’d be all for “Pay-Go” rules for EVERYTHING including war and the debt. But forcing hard decisions on the “Tax Cuts Are the Only Answer We Will Talk About” Party and the “Wimps” Party is not going to get us any further.

Grand Forks

July 15th, 2010
10:17 am

“2) Go back to the Clinton tax rates – the economy GREW”

The economy grew because of the Dot-Com boom, not because of Clinton. You must also have selective amnesia because the House and Senate were GOP controlled. They forced Clinton’s hand. No, the other hand that wasn’t busy with a certain intern.

Ragnar Danneskjöld

July 15th, 2010
10:32 am

Bravo, Kyle.

Cuts:
(1) Abolish agencies that lock the barn doors only after the horses escape. They contribute no good to the economy, but the drag they inflict is substantial. SEC, FDA, EPA.
(2) Abolish agencies that produce no value to the society. Agriculture, Energy, Education, HUD are four expensive ones to start with.
(3) Abolish federal entities that cost taxpayer monies but usurp normal private economy functions: FNMA, FHLMC, FHA, SBA are four good places to start.

CJ

July 15th, 2010
10:34 am

Kyle: “We don’t need to raise taxes to shrink the deficit. Government should spend within its means. Eliminate the deficit with spending cuts.

Two points:

1. That’s what Republicans always say, but they never tell us specifically where they would cut to balance the budget. Why? Because either they have no idea or their ideas would make them about as popular as the Taliban. Note, for example, that Paul Ryan’s “Roadmap”, well received among many conservatives (so-called), includes a value added tax and doesn’t even purport to balance the budget for 40+ years. If I’m wrong, then we’re looking forward to Kyle’s follow-up post explaining specifically, showing his numbers, where Congressional Republicans propose cut to balance the budget (friendly advice—don’t hold your breath).

2. Government was spending within it’s means until we put conservatives in the White House and conservatives charge of Congress. Then, all hell broke loose.

In conclusion, conservatives aren’t conservative. It’s only pretense for the benefit of those who seem to enjoy being lied to.

Grand Forks

July 15th, 2010
10:40 am

“It’s only pretense for the benefit of those who seem to enjoy being lied to.”

Like black people?

CJ

July 15th, 2010
10:42 am

It’s easy to see why Grand Forks has been banned by other bloggers.

JP

July 15th, 2010
10:45 am

CJ – don’t know about your #2. I am not smart enough to figure that out, but both parties are being dishonest on the cutting side, I mean since 2000, neither party has a serious record of cutting spending. Then again, the voters keep putting these folks back in office…..

CJ

July 15th, 2010
11:01 am

CJ – don’t know about your #2.

Recall, JP, that we had run surpluses for two or three years before Bush was inaugurated (hence the comment, “Government was spending within it’s means”). We were also paying down the national debt and got it down to about $5.4 trillion before Clinton left office (Bush more than doubled the national debt).

With regard to cutting spending, no, Clinton did not cut spending; he grew the economy (despite false predictions that his tax increase would cause a recession). And growing the economy increased government revenues which led to government surpluses.

I’m not for big government or small government. I’m for practical government. And practical voters understand that some forms of government spending grows the economy: interstate highways, ports, levies, homeland security, research and development, teachers, police, fire departments, and yes, aid to struggling states and unemployment insurance when the unemployed outnumber the available openings. There’s another word for such spending: investment.

HDB

July 15th, 2010
11:01 am

Grand Forks

July 15th, 2010
10:17 am
“2) Go back to the Clinton tax rates – the economy GREW”

The economy grew because of the Dot-Com boom, not because of Clinton. You must also have selective amnesia because the House and Senate were GOP controlled.

Granted..GOP-controlled Congress was in Clinton’s SECOND term! The dot-com boom began in earnest in the summer of 1993….Clinton’s first term with a Democratically-controlled Congress.

We all know that the President presents his budget as a template; the House begins appropriations, the Senate concurs. I have no problem with divided government…as long as it works effectively! During the Clinton Years, the nation was considered to be at FULL employment….and the tax rates for the wealthy were 39%! If we go back to those rates, eliminate the AMT for incomes under 250-500K, that would get the middle class BACK in the picture…and shift the tax burder UPWARD!!

HDB

July 15th, 2010
11:04 am

CJ July 15th, 2010
11:01 am

My compliments….you are so on point!!

HDB

July 15th, 2010
11:07 am

Grand Forks

July 15th, 2010
10:40 am
“It’s only pretense for the benefit of those who seem to enjoy being lied to.”

Like black people?”

No — like ALL Americans! Conservatives think liberals lie only to minorities….liberals think conservatives lie to everyone!! Both sides have their issues with the truth…but if we, as Americans, stay INFORMED, research the issues HONESTLY, we can find..and handle the truth!!

Grand Forks

July 15th, 2010
11:13 am

“Granted..GOP-controlled Congress was in Clinton’s SECOND term! The dot-com boom began in earnest in the summer of 1993….Clinton’s first term with a Democratically-controlled Congress.”

HDB, I could not find anything about the dot com boom starting in 1993.

The “dot-com bubble” (or sometimes “IT bubble”[1] or “TMT bubble”) was a speculative bubble covering roughly 1995–2000

http://en.wikipedia.org/wiki/Dot-com_bubble

Grand Forks

July 15th, 2010
11:13 am

“but if we, as Americans, stay INFORMED, research the issues HONESTLY, we can find..and handle the truth!!”

Then you guys really missed the boat in voting for Obama.

Don

July 15th, 2010
11:14 am

I am really enjoying Kyle’s commentaries.

I think balanced budget laws are not useful because they don’t allow enough flexibility during economic fluctuations – you have do do draconian things in during a tough year. But, I think that tying federal spending to GNP could be useful, perhaps based on a rolling average of the past several years. Say, federal spending in any year could be no more than 22% of the GNP avg over the past 5 years. It would make figuring budget easier and aligning taxes to the budget palatable.

Grand Forks

July 15th, 2010
11:14 am

“It’s easy to see why Grand Forks has been banned by other bloggers.”

Bloggers don’t ban other bloggers, Einstein. The moderator does.

NJF

July 15th, 2010
11:17 am

Grand Forks:

Why infuse race into the discussion?