This all sounds more than reasonable. I wouldn't even go that far myself, 2:1 tax increases over spending cuts. Heck I'd go the other way, 1:2 in a heartbeat, so long as these measures aren't implemented for another year or two to give the economy some more growth, and then implemented in stages.
However, the real problem is you can't make that kind of bargain in our political system. It reminds me of the immigration issue: we'll support amnesty for some illegals, IF the border is closed first. Sounds reasonable since you don't want the one without the other. Trouble is, what happens when the one is implemented but the other side reneges on the other? Or worse yet, not even reneging because there's no promise to renege on. We know on the issue of taxation that 97% of the GOP in Congress have signed a pledge to never increase them for any reason. The problem then is that there's no incentive to give them their spending cuts.
That pledge is the single biggest enemy to a balanced budget right now. Not only because it takes tax increases off the table as a tool to balance, but because it makes the spending cuts a fool's bargain for the side who would rather not cut the spending (especially the entitlement spending). Government only works by compromise. We don't have that right now.
- wolf
Problem is, promised spending cuts never materialize. Every time the right has compromised to raise taxes, no balancing cuts can be made. Thus the pledge, a belated recognition of the fact that raising taxes will only result in increased deficit spending and never have offsetting spending cuts. It's a thorny problem made worse by the pledge, but the pledge itself is a reaction to broken promises.
I'd say there are three very much bigger enemies to a balanced budget right now. First, the economy - with tax revenue so low and demand for services so high, any meaningful cuts are extremely difficult and any meaningful revenue increases will likely be borne by a small percentage of the population. Second, our very high corporate tax rate. Raising taxes just gives businesses and wealthy business owners more incentive to move economic activity safely offshore, whether it's higher rates on personal income or on the corporate income from which it is derived. And it gives them even more incentive to spend their time and money lobbying the government for more exclusions and tax shelters, negating the purpose of the higher taxes. But the biggest enemy to a balance budget has to be base line budgeting. If we can't even agree on the definitions of a cut and an increase, how can we ever balance a budget? And if we did settle on the Democrat version, how could we ever balance a budget when spending the same actually means spending 5% or 10% more than last year?
Raising the top marginal rate won't give the government more revenue. The government doesn't need any more revenue anyway.
I actually think that if the corporate marginal tax rate was reduced to 15% or less, the government would actually get more revenue, but that's the only way the government should be allowed more revenue. Unfortunately, Dr. Paul is the only one in either party who supports having a corporate tax rate less than 25% (and that isn't even 30% less than the 35% marginal rate that it's at now).
I could support getting rid of all deductions with reduction or elimination of the payroll tax as long as no one's taxes go up. That wouldn't give the gov more revenue, but it would reduce the administrative costs of the IRS so that would effectively reduce the deficit (although not by much).
Anyway, if the corporate tax rate were reduced to 15%, then that would reduce offshoring by big companies and result in more government revenue. GE was comfortable paying billions in corporate taxes to other countries and that's because the U.S. has one of the highest corporate tax rates in the world.
Raising the top marginal rate might give the government more revenue, depending on how it is done. Higher tax rates make some investments and economic activity impractical, but I wouldn't say categorically that this always offsets the additional revenue from the higher rates. And until we can all agree on a MUCH smaller size of government, government certainly does need more revenue. Right now we're all willing to cut the other guy's programs and raise the other guy's taxes, but not cut our own programs nor raise our own taxes. I see no practical way to decrease federal government spending by a third any more than I see any practical way to increase revenue by a third.
I'd love to see the US corporate income tax abolished completely and capital gains taxed as wage income (after adjustment for inflation and perhaps excluding real and personal property sales), but without either some fundamental shift in mentality among the American public or some return to a tariff system, that won't change the dynamic enough to make manufacturing in America competitive with manufacturing in low wage, low regulatory burden nations. Mostly it would change the price that an American company pays for the products it imports from its foreign subsidiary to put more of the apparent profit in the tax-free nation. It would also probably not greatly decrease the IRS' costs, as a lack of corporate tax would incent executives and owners to maintain as corporate holdings things that are exclusively for their own benefit. We'd need a LOT of oversight to know if that ski chalet is actually a business marketing investment or in reality the Chairman's new tax free vacation home.
