April 15 is around the corner, and the taxman is happy. According to recent reports, federal tax revenues for the first five months of FY 2014 hit an all-time record, up more than $90 billion from last March. One might expect the United States government to be flush with cash, but of course, that isn’t happening.
In fact, because spending is far outpacing even these increased tax revenues, Washington is expected to run a deficit of more than $514 billion this year.
And it only gets worse going forward. According to the nonpartisan Congressional Budget Office, over the next 10 years, the government’s take of taxes as a percentage of the economy will continue to increase. By next year, taxes on the economy will exceed the historical average on their way toward record levels. But spending goes up even more, so that within ten years, we are facing trillion dollar deficits, with no end in sight.
Given these facts, it seems pretty obvious that, when it comes to our deficits, spending is the culprit.
Yet President Obama and most Democrats continue to fight for tax increases as a requirement for doing anything to address the nation’s record $17 trillion debt. All efforts by Republicans to restrain spending are met with demands by Democrats for more tax increases.
In fact, the budget the President just sent Congress includes new taxes that far exceed any savings on the spending side. Roughly speaking, the president proposes $1.8 trillion in new taxes and revenues and turns around and puts $900 billion of that toward new federal spending.
Democrats are not just demanding new taxes as a match for spending cuts. They also refuse to support pro-growth tax reform unless tax increases are part of the package.
Most Republicans and Democrats generally agree that our out-of-date, overcomplicated, and uncompetitive tax code is in desperate need of reform. Our individual tax code is a monstrosity of labyrinthine dimensions that Americans are forced to navigate every April 15. To make matters worse, we currently have the highest corporate tax rates in the developed world. That and our out of date international tax system push investment and jobs overseas. At the same time, because our code is riddled with loopholes and carve-outs, some companies are able to avoid paying taxes altogether. The tax code cries out for reform.
In order to provide the kind of jump-start our economy needs, reform should close loopholes, end preferences, and lower-rates. But Democrats have said no. Not without new taxes. Despite the fact that the tax burden on the economy is increasing to record levels as is, they will only consider tax reform if it includes tax increases.
The same is true of efforts to preserve and protect Social Security and Medicare. We know that these critical programs are facing dire financial straits in the coming years. More retiring seniors and rising costs are driving deficits in these programs higher and higher. If nothing changes, most people who are retiring today will live to see the Social Security and Medicare trust funds go under. The Social Security Disability trust fund goes bankrupt in 2017. Medicare follows in 2026. The Social Security Old Age Trust Fund will collapse in 2035. And when that happens, by law, every Social Security recipient will receive a 25 percent reduction in their benefits. Just like that, the money they depend on to survive will be cut by a quarter.
Small changes now can help prevent that from happening, but once again, Democrats have made clear that without higher taxes, they will not consider these reforms. Even proposals to increase means-testing for Medicare — asking wealthier seniors to pay a little more in premiums — are predicated on tax increases. For many Democrats, it seems that saving Medicare has become a bargaining chip to be traded for their ultimate goal — higher taxes on the American people.
With long-term unemployment at record levels and millions of Americans barely making ends meet, more taxes are the last thing we need. President Obama should understand this. His own former Chairwoman of the Council of Economic Advisors, Christina Romer, has concluded that a tax increase of “1 percent of GDP lowers real GDP growth by roughly 3 percent.” In other words, for every dollar the government takes out of the American taxpayers’ pockets, it also takes three dollars out of the economy, slowing growth and killing jobs.
I hope this latest news from the IRS about significant increases in revenues from taxes this year will help make the point that we are not undertaxed. Then maybe we can get Democrats to change their focus from raising taxes to joining us on dealing with the issue that matters most to the American people: creating more jobs and more opportunity.