{"id":5604,"date":"2012-12-13T16:50:00","date_gmt":"2012-12-13T21:50:00","guid":{"rendered":"http:\/\/stonescryout.org\/?p=5604"},"modified":"2012-12-13T16:50:00","modified_gmt":"2012-12-13T21:50:00","slug":"potential-remedies-for-the-fiscal-cliff","status":"publish","type":"post","link":"https:\/\/stonescryout.org\/?p=5604","title":{"rendered":"Potential Remedies for the Fiscal Cliff"},"content":{"rendered":"

I have a lot of vacation saved up for the end of the year, so I have to take quite a bit of it so I don’t lose any. (We, like many companies, can only carry so many days of one year’s vacation into another year. Part of the reason is so that people have<\/em> to take vacation and not get burned out.) So I’ll be off the rest of the year, and this will likely be my last post of the year. When I return, we will have gone off the so-called "Fiscal Cliff", or we’ll have come to an agreement to avoid it.<\/p>\n

As the countdown to the Fiscal Cliff continues, tax increases seem to be the only way Democrats in Congress think that we can close the deficit gap. But Michael Barone points out<\/a> that, no, tax increases alone will never be enough. It\u2019s not the panacea that Democrats claim it to be. He covers some ideas that I\u2019ve mentioned here, like the fact that entitlement spending alone is enough to keep a deficit going. You might think tax increases are helping, but we\u2019d just be sinking slower. Some I\u2019ve engaged in on this subject have said, \u201cwell, at least that\u2019s in the right direction\u201d. Sure, if you can hold your breath indefinitely. No, the right direction would be to start rising and get above the water level.<\/p>\n

Another point is that higher tax rates<\/i> don\u2019t typically produce more tax revenue<\/i>. From the 1940s to the 1960s, when the top marginal tax rate was 91% (91%!), tax revenues always bounced between 15 and 21% of GDP. Why? Because with a tax rate like that, people spend more time looking for tax shelters and other means, legal and illegal, to keep from paying those high rates. Thus, the Congressional Research Service notes<\/a> that, during those times of 91% top rates, the effective tax rate on earners in the top 1\/100th<\/sup> percent was 45%. Now, I understand that only income over a certain amount was charged that 91% rate, but even the tiniest sliver of earners at the very top, the absolute richest of the rich, were still paying an aggregate of less than half the rate. Some studies put it at 1\/3rd<\/sup> the rate. This is simple pain avoidance. Threaten to poke me, and I\u2019ll defend myself.<\/p>\n

And so from 1948 until now, with up economies and down, with huge marginal tax rates and smaller ones, under Republican Presidents or Democratic, the total US tax revenue taken in as a percentage of GDP has stayed remarkably consistent in the same range; between 15 and 21%. The tax rate made precious little difference in how much of the economy was taken in taxes.<\/p>\n

The lesson, then, is this: grow the economy and restrain spending. If we\u2019re going to get the same percentage of the economy in taxes, then to get more tax revenue, you must<\/i> grow the economy. And as Barack Obama himself said<\/a> in 2009, \u201cyou don\u2019t raise in a recession.\u201d Now, you might say we\u2019re coming out of the recession, but his proposal for $50 billion more in yet another stimulus says he thinks otherwise. Don\u2019t read his lips; read his proposals.<\/p>\n

But, once you get those increases revenues, don\u2019t spend that and more<\/a> on, well, another stimulus, which, by the administration\u2019s own numbers, grew the economy and the jobs at a slower rate than doing nothing. No, taking more in is not a license to spend it. But it\u2019s what government does. That\u2019s why any deal which includes higher taxes may look like a healthy compromise, but it\u2019s nothing more than a ruse that will put us further in debt.<\/p>\n","protected":false},"excerpt":{"rendered":"

I have a lot of vacation saved up for the end of the year, so I have to take quite a bit of it so I don’t lose any. (We, like many companies, can only carry so many days of one year’s vacation into another year. Part of the reason is so that people have […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,15,18],"tags":[],"class_list":["post-5604","post","type-post","status-publish","format-standard","hentry","category-doug","category-economics-taxes","category-government"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/stonescryout.org\/index.php?rest_route=\/wp\/v2\/posts\/5604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stonescryout.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stonescryout.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stonescryout.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stonescryout.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5604"}],"version-history":[{"count":0,"href":"https:\/\/stonescryout.org\/index.php?rest_route=\/wp\/v2\/posts\/5604\/revisions"}],"wp:attachment":[{"href":"https:\/\/stonescryout.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stonescryout.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stonescryout.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}