Pethokoukis, Economics, Taxes and Spending

A quick reminder of the Democrats’ endgame on taxes

Image Credit: Leader Nancy Pelosi (Flickr) (CC BY 2.0)

Image Credit: Leader Nancy Pelosi (Flickr) (CC BY 2.0)

Former US Deputy Treasury Secretary Roger Altman offers a sequester escape route (via the FT):

Unblocking the impasse should follow three principles. First, further deficit reductions are necessary. Second, they must incorporate both reductions in entitlement spending, which is growing too quickly, and increases in tax revenue, which is growing too slowly. Third, they should be phased in to protect the still fragile economy.

Later in the piece, Altman says he would raise more tax revenue by reducing the value of tax deductions for high earners. The Obama White House is pushing for about $500 billion in such tax hikes.

But the tax hikes won’t stop there. I think it is a good time to remind ourselves of the Democrat/liberal/progressive endgame. Here is Altman back in 2009:

We all know the recent and bitter history of tax struggles in Washington, let alone Mr. Obama’s pledge to exempt those earning less than $250,000 from higher income taxes. This suggests that, possibly next year, Congress will seriously consider a value-added tax (VAT). A bipartisan deficit reduction commission, structured like the one on Social Security headed by Alan Greenspan in 1982, may be necessary to create sufficient support for a VAT or other new taxes.

How much money would Altman like to raise from a VAT? Well, back in 2009 — Democrats were VAT-crazy that year — I heard him at a Center for American Progress event recommend a $400 billion VAT. Correction: A $400 billion a year VAT. (BTW, that would be a massive middle-class tax hike.) If we did the Altman plan this year — and assuming no further tax hikes — tax revenue would jump from $2.7 trillion, or 16.9% of GDP to $3.1 trillion, or 19.3% of GDP. And assuming no economic damage, tax revenue would easily be over 22% of GDP by 2023 vs 18% historically.

The US tax burden likely does need to rise above its historic average in coming years. But it needs to be done in a pro-growth way — not layering a VAT on the existing tax code — and combined with entitlement reform.

11 thoughts on “A quick reminder of the Democrats’ endgame on taxes

  1. “End game” implies, you know, the last stage.
    VAT cannot be the last stage, because it is a consumption tax. That means it falls less on the wealthy who invest more of their money than they spend compared to everyone else.
    So after enacting a VAT, someone will suddenly notice that the wealthy are (unexpectedly!) not paying enough of it – and you know what happens next!

  2. Spare me all these tax revenue machinations.

    The “iconic” Reagan federal government tax revenues averaged 18.4% of GDP during his first term. The “kenyan” Obama averaged 15.4%.

    How much money did Reagan make “flipping property” with Lou Wasserman?

    Why were Reagan’s income tax returns always under review with the IRS?

    You AEI bloggers are out to “food truck” lunch.

    • How much money did Reagan make “flipping property” with Lou Wasserman?“…

      Did Reagan make money of this property flipping?

      Something wrong with property flipping?

      Got something credible to back that statement up with…

      It really does interesting but I thought property flipping was rather common all the time and not just with actors or whatever…

  3. Tax revenue 2002-08 was 17.4% of GDP; tax revenue 2009-12 was 15.4% of GDP. Same tax rates. Maybe tax revenue is less about tax rates and more about the health of the economy and the confidence of the consumers and businesses? Just sayin’.

  4. As long as anyone has a single dollar that has not been given to them by a bureaucrat Democrats will not have achieved their endgame.

  5. rather than argue about entitlements or tax revenues,
    how about this:

    We current take in about 1.5T in tax revenues (once you subtract out FICA).

    how about we decide how much of that 1.5T we want to spend on Defense and whatever is left goes to entitlements and the rest of govt?

    how much do we spend on National Defense?

      • re: ” Why spend any money on entitlements and welfare, there’s nothing in the Constitution that mandates the federal government to be a giant weath transfer mechanism?”

        ” The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;”

        but how much did the Constitution say to spend for “defense” ?

        could we spend one dollar and still meet the requirements in the Constitution?

        or could we spend twice as much on Defense as we take in – in tax revenues?

        but be reasonable here.. what percent of our available revenues would you allocate to Defense?

        • but how much did the Constitution say to spend for “defense” ?“…

          It doesn’t…

          could we spend one dollar and still meet the requirements in the Constitution?“…

          Well if its OK to do that in order for politicos to pander to the parasites then why not on defense too?

          but be reasonable here.. what percent of our available revenues would you allocate to Defense?“…

          40% of what’s paid in all taxes, fees, fines and other form of government and return 55% back to the people who actually paid the taxes…

          Sounds eminently reasonable to me…

          • well I give you credit for giving a percent.

            now how about the number for the taxes… since you saw fit to go beyond the 1.5T that is composed of corp and individual income taxes? what other money, how much?

            I don’t see much other money in the discretionary budget and surely you don’t mean 40% of gas taxes and such, right? you would take 40% of the FICA tax also for Defense?

          • I don’t see much other money in the discretionary budget and surely you don’t mean 40% of gas taxes and such, right? you would take 40% of the FICA tax also for Defense?“…

            First and foremost discretionary or non-discretionary when
            used regarding the federal budget is merely a political scam like the phrase Federal Baseline Budgeting is…

            larry g let me repeat what I said in the previous comment: 40% of what’s paid in all taxes, fees, fines and other forms of federal government extortion goes to defense and return 55% back to the people who actually paid the taxes…

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