Can Using Only Tax Increases Address The Debt Problem? - Granite Grok

Can Using Only Tax Increases Address The Debt Problem?

This is how I understand it.

We have $16,000,000,000,000 in debt.  We’re spending $1,000,000,000,000 more a year than we bring in, and we’ve been doing it for the last 4 years.

As a conservative, I see it as a spending problem; we simply spend more money than we have. We get the money by borrowing from our children, leaving them the debt to be paid.  But hey, I’m human; I may be wrong; I just want the debt burden lifted off of my children and future grandchildren so that they may have the life my parents afforded me, so I’m open to alternatives.

So, let’s try to tax our way out of it.  And no hodge-podge right wing loon sources; we’ll use only liberal or other non-conservative sources to get our data to address our concern. We’ll assume no cuts in spending, only raise taxes, and all else being equal.

First up is the favorite bogeyman of many non-cutters: Bush Tax Cuts. Let them expire. How much will that save?  According to the Economic Policy Institute (EPI), “Allowing them to expire would shave a meager 0.1 percentage point from real GDP growth in 2013 relative to current policy, but revenue would rise by $1.2 trillion (0.6 percent of GDP) over fiscal 2013-2022.

That $1.2T looks good for a single year, but that number is for 10 years without the Bush Tax Cuts. In 10 years, we’ll incur another $10T in debt (remember we’re not changing any spending in this excercise) which will total $26T. So $26T in debt, minus $1.2T gained by removing the tax cuts, is $25T in debt by 2022.

EPI doesn’t stop there. They then go on to remove the middle-income tax cuts. “The case for extending the middle-income Bush tax cuts is also thin, and expiration would increase revenue by another $1.4 trillion (0.7 percent of GDP) relative to current policy over fiscal 2013-2022.”

They’re no longer hitting the rich; they’re also hitting the middle-class, and, again, all else being equal, another $1.4T gets removed from the debt in 2022, so we’ll be 23.6T in debt.

Next up: the Buffett rule, legislatively known as the “Paying a Fair Share Act”. How much additional revenue will that bring in?

Well, according to Reuters, “The Buffett tax would raise $47 billion from 2012 through 2022….” Money said using it, “… would raise $47 billion over 10 years….” FactCheck.org says the Buffett Rule, “…would generate $20 billion a year in additional tax revenue…”  But those are puny numbers. Let’s use data from a liberal think tank. ThinkProgress says that even if the Bush Tax Cuts don’t go through, “…[the] bill has been estimated to raise $264 billion,” over 10 years! $264B, now we’re talking. $23.6T minus  $264B is $23.3T.  Hmm that doesn’t look right. Alas, math doesn’t lie.

This doesn’t seem to be working. What if we increase tax on the millionaires 100% now, and not wait 10 years. What will that bring?  “According to calculations by FOX News analysts …taxing millionaires at 100% would now run the federal government for two and a half to three months“.  (I know, I know, I said I’d only use non-conservative sources and some consider Fox not in that category, but I couldn’t find any liberal or non-conservative source.) Only three months tops!

We need to go hardcore (no spending cuts, remember). What about we use “…the market value of all officially recognized final goods and services produced within a country in a given period”, otherwise known as the GDP, and throw that at the current debt number of $16T? What will that bring?

Well, according to the International Monetary Fund, “the U.S. GDP was estimated to be over $15 trillion in 2011.

Eureka, that’s it! Take everything that was produced in 2011 (suspend disbelief, we can time travel) and we sell it to the bondholders to pay off our debt. After which, we will all be out of money and assets and still owe $1T.

Kill the Bush Tax Cuts on the upper and middle classes, and throw in the Buffett Rule, and we’re still way over $23T in debt by 2022. Tax all millionaires 100% and we can only run the government for three months. Take everything the US generated in 2011 and we’re still $1T in debt.

The debt is real. The dollar can collapse. Tax hikes will not address the problem. Spending must be cut.

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