10.15.2012 in Big Government, Featured, Federal Budget, Politics by Bill Wilson 9

Earth to Obama: Raising taxes will not balance budget

By Bill Wilson — In a July campaign ad entitled “The Choice,” Barack Obama reiterated his plan to raise taxes, saying he wants to ask “the wealthy to pay a little more so we can pay down our debt in a balanced way.”

There’s only one problem. If Obama gets his way, and tax rates increase at the end of the year on couples making $250,000, and individual filers making $200,000 and above, it would only raise an additional $42 billion of revenue in 2013 according to the Congressional Budget Office.

That would reduce the $1.2 trillion deficit by just 3.5 percent. We would come nowhere near balancing the budget, let alone being able to retire any portion of the $16.1 trillion national debt — which has grown every single year since 1957.

So, even if the Obama tax hike were implemented today, the debt would still grow at an exponential rate. In fact, even with all the current tax rates were to increase — as they are set to do at year’s end — the Office of Management and Budget (OMB) projects that by 2022 the national debt will still rise to $26 trillion.

And that’s assuming the government’s rosy economic projections over the next ten years come true, with average annual growth of 3 percent and tax receipts averaging $3.8 trillion a year.

But, right now, the economy is only growing at an annualized rate of 1.3 percent. Which puts us in a definite bind, as revenue growth is less dependent on higher tax rates than it is on robust economic growth.

If the government is wrong about growth this decade, and tax collections only average $3 trillion instead, the debt will rise to a gargantuan $34 trillion in 2022.

Moreover, if tax rates get too high, they will have a constricting effect on growth, in turn hurting revenue, a self-defeating proposition.

Still, OMB thinks the economy can take Obama’s tax hikes over the decade, projecting the economy will grow by 63 percent nominally this decade. It predicts tax receipts will outpace economic growth, with the former increasing by about 100 percent. That works out to economic expansion of about $9.9 trillion over the decade and revenues increasing by $12.4 trillion.

Now, revenue growth exceeding economic growth is not unprecedented — it happened in the 1930s, 1940s, 1950s, 1960s, and the 1990s. Also, since World War II, revenues have pretty much doubled every ten years.

But this does not take into account more recent history.

In 2000, receipts totaled $2 trillion, and rose through 2007, when they peaked at $2.56 trillion. But after the economic downturn, by 2010, they only totaled $2.1 trillion — just a 6.7 percent increase from 10 years earlier.

Yet tax rates have remained constant since 2003. Meanwhile since 2007, spending has increased by roughly $1 trillion.

Our trillion-dollar annual deficits did not come about because rates were too low, but because the economy fell off a cliff and afterward we spent ourselves into the grave.

Yet Obama persists with the fiction that more taxes will do a thing to correct our fiscal imbalances. At the Oct. 3 debate, he said he was, again, “asking those of us who have done very well in this country to contribute a little bit more to reduce the deficit.”

Obama’s tax-the-rich mantra may sound nice to those not in the crosshairs, but it will do nothing to reduce the deficit. There’s no getting around the obvious: We cannot raise taxes enough to balance the budget. We must cut spending, and that will not happen so long as Obama remains in the White House.

Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

  • pduffy

    These envy-mongers know that they can’t ‘tax the rich’ enough to balance the budget, as that is not their intent. These lies are designed to get the votes of the poor democrats that love to hear that they will be receiving bigger welfare checks off the backs of ‘the rich’. The truth is this government runs a 50 billion dollar deficit every DAY, so this ‘tax’ would amount to one day’s spending.

  • Buzg

    “The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” Vladimir Lenin

  • http://www.facebook.com/people/Ardell-Nagle/100001014522455 Ardell Nagle

    It is lie after lie that is being told to the American people. More taxes will only kill more jobs and put more people on welfare then where will they come up with the money!!

  • Einstein lives

    The welfare crowd wants the kiII the goose that lays the “Golden Egg”, once the rich are taxed out of existence [not Soros though he won’t get taxed], then the entitlement boys will realize no food no production is a bad choice, when they have to spend hours in line to get a loaf of bread, just like Russia and China!
    Notice over revenue taking and the other Great Depression both started in 1930 only 15 years after the onset of the FederaI Reserve disease.

  • Einstein lives

    The welfare crowd wants the kiII the goose that lays the “Golden Egg”, once the rich are taxed out of existence [not Soros though he won’t get taxed], then the entitlement boys will realize no food no production is a bad choice, when they have to spend hours in line to get a loaf of bread, just like Russia and China!
    Notice over revenue taking and the other Great Depression both started in 1930 only 15 years after the onset of the FederaI Reserve disease.

  • http://www.facebook.com/people/Thomas-Berquist/100000269520591 Thomas Berquist

    Obama is also ready with more transfer of wealth by creating tax regions. He will have taxes collected in the suburbs sent to inter cities. He will kill the middle class in no time at all.

  • WVF

    Obama is a Muslim plant who knows exactly what he is doing. My guess is he is only unhappy about the debt not being $32 trillion. He hates America and Amercans!

  • WVF

    Einstein live, in fact, the two most damaging entities to the American way of life were both given life by the Jekyll Island Club which met at Jekyll Island, Georgia in 1913. The Federal Tax System and the Federal Reserve were created by a bunch of bankers from the northeastern part of the U.S. to begin the death of America. They were the Jekyll Island Club who believed they knew best about what Americans needed.

  • Jenny_Lee

    You can tax the ‘rich’ as much as you want, but it does not stop them from utilizing numerous tax deductions (loopholes) to bring their percentage back down again. Why do you think all of those ‘rich’ celebrities that hang around with Obama are not stressing about tax increases? Additionally, has Obama brought up any spending cuts that have been utilized by the Federal Government during the last 4 years or before? As much as Obama wants to insult the ‘rich’ and talk about everyone having their fair share, has he brought up reducing his own life of luxury in any way? It is funny how ‘rich’ politicians, usually Democrats, talk about how horrible the ‘rich’ are, but never once seem to count themselves in that same group of people or bring up what they themselves are willing to give up in their own lives.
    https://www.facebook.com/JennysRantsandRaves

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