Is raising taxes the silver bullet the U.S. “needs” to balance the budget? Lately, there is much talk in DC about the “need” to raise taxes in order to reduce the budget deficit and lower our federal debt. Hasn’t that been the most popular tool of choice since the turn of the 20th Century? Where has it gotten us? On the other hand, relatively little work is underway to substantially cut federal expenses, just like households and businesses must do when times are tough. There is even talk of starting a Value Added Tax (VAT) without any discussion of it replacing the income tax, just riding on top of it.
What would Washington, Jefferson, Lincoln, and other fiscally prudent former presidents think? What are all the other options? Regardless, another special interest advocacy group, called the Tax Foundation, has said plenty about using an increase in income tax to get the feds out of hot water. Established in 1937, this non-partisan organization focuses on taxpayer education. Their report, Can Income Tax Hikes Close the Deficit, estimates the income tax rates would have to more than double to do this. And this assumes that the federal budget stops ballooning, and the cost of servicing federal debt does not escalate as it recently began. This was due in part to the huge amount of debt we have in relation to our Gross Domestic Product (GDP). 10
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In the dismal financial shape we’re in, the world is beginning to treat us like a “debtor nation.” This means that financing our debt will become more costly, and at times perhaps more difficult. National security concerns may arise since we owe huge sums to countries, such as China, who we need to get to the bargaining table to hammer out solutions to significant issues, such as relations with our allies and nuclear disarmament. Hopeful Americans can look forward to the coming mid-term elections to help us get back in better shape – and to help keep us that way. The non-partisan Congressional Budget Office and Federal Reserve Chairman Ben Bernanke agreed in their assessments this week; we have little if any time to spare. iStockphoto Friday, April 09, 2010 www.topnewsandviews.com