{"id":4158,"date":"2011-08-13T11:42:51","date_gmt":"2011-08-13T15:42:51","guid":{"rendered":"http:\/\/www.jasetaro.com\/blog\/?p=4158"},"modified":"2011-10-13T12:44:18","modified_gmt":"2011-10-13T16:44:18","slug":"the-fallacy-of-the-101-mix-of-spending-cuts-and-tax-hikes-question","status":"publish","type":"post","link":"https:\/\/www.jasetaro.com\/blog\/2011\/08\/13\/the-fallacy-of-the-101-mix-of-spending-cuts-and-tax-hikes-question\/","title":{"rendered":"The fallacy of the 10:1 Mix of Spending Cuts and Tax Hikes Question"},"content":{"rendered":"<p>I suspect most of you have seen or heard about this exchange during the Republican Presidential Debate in Iowa last Thursday night:<\/p>\n<p><span class=\"embed-youtube\" style=\"text-align:center; display: block;\"><iframe loading=\"lazy\" class=\"youtube-player\" width=\"595\" height=\"335\" src=\"https:\/\/www.youtube.com\/embed\/ASQNITVweLo?version=3&#038;rel=1&#038;showsearch=0&#038;showinfo=1&#038;iv_load_policy=1&#038;fs=1&#038;hl=en-US&#038;autohide=2&#038;wmode=transparent\" allowfullscreen=\"true\" style=\"border:0;\" sandbox=\"allow-scripts allow-same-origin allow-popups allow-presentation allow-popups-to-escape-sandbox\"><\/iframe><\/span><\/p>\n<p>It was a bullshit question, first of all unless those spending cuts are immediate they&#8217;ll never materialize&#8230; particularly when the baseline for negotiations is that the taxes increase are made in the first year, while the spending cuts are made over 10 years. Everyone remember President Reagan&#8217;s 3:1 deal? Heh, yeah, we&#8217;re still waiting for those spending cuts to be made. At least Republicans learned that lesson.<\/p>\n<p>Second, the notion that we can tax our way out if this debt debacle is pure lunacy. As I&#8217;ve <a title=\"Thoughts on the Debt Limit Debate \u2014 Updated\" href=\"http:\/\/www.jasetaro.com\/blog\/2011\/08\/02\/thoughts-on-the-debt-limit-debate\/\" target=\"_blank\">explained previously<\/a>, this is not a revenue problem, it&#8217;s spending problem&#8230; The federal government spends roughly a $1 trillion more each year than it collects in revenue. President Obama and the Democrats in Congress argue that we can close that gap by raising taxes on the &#8220;rich&#8221;.<\/p>\n<p>But what does that get us? Blake Ellis answered that very question at <a href=\"http:\/\/money.cnn.com\/2011\/08\/11\/pf\/tax_increase_rich\/index.htm?section=money_topstories&amp;utm_source=feedburner&amp;utm_medium=feed&amp;utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29\" target=\"_blank\">CNN Money.com<\/a> recently:<\/p>\n<blockquote><p>President Obama has defined the nation&#8217;s wealthy as those who make $200,000 or more a year.<\/p>\n<p>According to a recent report from the Internal Revenue Service, that leaves out about 97% of the tax-paying population.<\/p>\n<p>The report, which provides a complete breakdown and analysis of returns for the 2009 tax year, found that only a mere 3% of tax returns were filed by people earning a gross adjusted income of $200,000 or more.<\/p>\n<p>Americans earning $1 million or more were even more rare, comprising just 0.2% of total tax filers and accounting for a mere 236,883 of the 140 million tax returns received in 2009.<\/p>\n<p>The wealthiest taxpayers &#8212; those earning $10 million or more in adjusted gross income &#8212; are even less prevalent. There were only 8,274 people belonging to that elite club, according the IRS.<\/p>\n<p>Out of the nearly 4 million &#8220;rich&#8221; people making more than $200,000 a year, 1,470 didn&#8217;t pay any income tax whatsoever in 2009. But the people who did pay taxes earned a total of nearly $2 trillion in income &#8212; about 26% of total taxpayer income in 2009.<\/p>\n<p>President Obama&#8217;s tax proposals &#8212; which many Republican&#8217;s call &#8220;job-killing&#8221; tax hikes &#8212; include getting rid of some corporate tax breaks enjoyed by oil and gas companies and corporate jet buyers, and restoring some Bush-era tax rates for high-income households. If the Bush tax cuts expire as planned in 2012, the top two income tax rates will revert to 39.6% and 36% from 35% and 33%, respectively.<strong> <\/strong><\/p>\n<p>Yet, even though these high-income earners are a minority, Obama says the proposed tax increases would boost revenue by $750 billion over a decade.<\/p><\/blockquote>\n<p>Does anyone else see the fallacy of the President&#8217;s argument? The simple truth is there no way in hell we&#8217;re going to balance the federal budget on the backs of just 3% &#8212; <em>three percent<\/em> of income taxpayers. $750 billion in new revenue over a decade &#8212; $75 billion a year doesn&#8217;t even begin to put a dent in the annual budget deficit much less the debt.<\/p>\n<p>As you can see, the idea that raising taxes on a small minority of taxpayers can solve our budget problems is just&#8230; its nuts!<\/p>\n<p>If we&#8217;re going to talk about our nations budget problems and tax policy, let&#8217;s do it, let have serious adult conversation about it. Not simply toss around the same old, worn out class warfare rhetoric.<\/p>\n<p><em>Step 1<\/em>, amend or repeal the Congressional Budget Act of 1974 to eliminate baseline budgeting and force the federal government to live by the same Generally Accepted Accounting Principles as everyone else.<\/p>\n<p>You may not realize this, but baseline budgeting automatically increases the federal budget every year. What Congress likes to do is use a bit of smoke and mirrors to make spending cuts that aren&#8217;t really cuts at all. For example if program is scheduled to see and 8% increasing in spending Congress will reduce it to 3% and call it a cut when it&#8217;s still a 3% percent increase over the previous year. Frankly, if a publicly traded company managed its finances the way the federal government does it would a) go bankrupt and b) the management would be indicted for fraud.<\/p>\n<p><em>Step 2<\/em>, undertake comprehensive tax reform that broadens the tax base and flattens rates. Personally, I&#8217;d scrap the entire current income tax code and replace it with a simple, no deductions, no loopholes 15% flat rate income tax. In short, it would work like this everyone would keep the first $10,000 they earn each year income tax-free. After that everything, earned income, interest, dividends, capital gains etc. would be taxed the same 15% rate. In other words someone who earns $30,000 a year would pay an income tax of 15% of 20,000 or $3,000&#8230; Someone earning $300,000 would pay an income tax of 15% of $290,000 or $43,500. I&#8217;d follow a similar model for the corporate income tax rate.<\/p>\n<p><em>Step 3<\/em>, undertake comprehensive regulatory reform with an eye toward merging or eliminating agencies with overlapping jurisdictions and reducing regulatory impediments\u00a0 to economic growth.<\/p>\n<p>And that&#8217;s the bottom line, if we&#8217;re going to get out of this hole we have to get our economy moving again&#8230; The goal of the federal government should be creating an environment where 5% GDP growth year over year is the norm.<\/p>\n<p><strong>Related<\/strong><\/p>\n<ul>\n<li><a href=\"http:\/\/hotair.com\/archives\/2011\/08\/12\/debate-flashback-which-candidates-would-support-a-101-mix-of-spending-cuts-and-tax-hikes\/\" target=\"_blank\">Debate flashback: Which candidates would support a 10:1 mix of spending cuts and tax hikes?<\/a> &#8211; Hot Air<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>I suspect most of you have seen or heard about this exchange during the Republican Presidential Debate in Iowa last Thursday night: It was a bullshit question, first of all unless those spending cuts are immediate they&#8217;ll never materialize&#8230; particularly when the baseline for negotiations is that the taxes increase are made in the first [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26,7],"tags":[748,44,1201,1202],"class_list":{"0":"post-4158","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-economy","7":"category-politics","8":"tag-2012-elections","9":"tag-republicans","10":"tag-spending-cuts","11":"tag-tax-increases","12":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pfpI7-154","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":568,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/10\/01\/crap-sandwich-redux-senate-to-vote-on-bailout-bill\/","url_meta":{"origin":4158,"position":0},"title":"Crap Sandwich Redux: Senate to Vote on Bailout Bill","author":"Jeff","date":"October 1, 2008","format":false,"excerpt":"Michelle Malkin and Ed Morrissey have the details on this 451 page monstrosity... That's right 451 pages! The original Paulson Plan was roughly two pages, the house bill was just over 100 and the senate bill is 451 pages. Some of the additions in the Senate bill include: New Tax\u2026","rel":"","context":"In &quot;Economy&quot;","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3543,"url":"https:\/\/www.jasetaro.com\/blog\/2010\/09\/19\/this-why-its-time-for-the-tea-party-bush-tax-cuts-benefited-taxpayers-at-every-level-and-more\/","url_meta":{"origin":4158,"position":1},"title":"This &#038; That: It&#8217;s the Spending, Stupid; Why It&#8217;s Time for the Tea Party; Bush Tax Cuts Benefited Taxpayers at Every Level; and More&#8230;","author":"Jeff","date":"September 19, 2010","format":false,"excerpt":"I've been pretty remiss about writing lately, I've just had too much on my plate and I haven't felt like I've had much to contribute... Anyway, here's a few must reads from the week that was... The Wall Street Journal last week published two columns that are absolute must reads,\u2026","rel":"","context":"In &quot;Economy&quot;","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":885,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/10\/30\/obamas-infomercial\/","url_meta":{"origin":4158,"position":2},"title":"Obama&#8217;s Infomercial","author":"Jeff","date":"October 30, 2008","format":false,"excerpt":"I didn't watch Barack Obama's prime time infomercial last night. Michelle Malkin live blogged it and the Associated Press fact checked it... Apparently I doesn't look like I missed much. Calvin Woodward reports that Sen. Obama\u00a0 \"was less than upfront in his half-hour commercial Wednesday night about the costs of\u2026","rel":"","context":"In &quot;Politics&quot;","block_context":{"text":"Politics","link":"https:\/\/www.jasetaro.com\/blog\/category\/politics\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4125,"url":"https:\/\/www.jasetaro.com\/blog\/2011\/08\/02\/thoughts-on-the-debt-limit-debate\/","url_meta":{"origin":4158,"position":3},"title":"Thoughts on the Debt Limit Debate &#8212; Updated","author":"Jeff","date":"August 2, 2011","format":false,"excerpt":"What we\u2019ve seeing playing out in Washington during the debt limit debate is in many ways akin to an addict facing an intervention. Washington\u2019s policy makers, both Democrats and Republicans, are hopelessly addicted to spending and they don\u2019t want to admit it or to change their behavior. As a result\u2026","rel":"","context":"In &quot;Economy&quot;","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3898,"url":"https:\/\/www.jasetaro.com\/blog\/2011\/03\/09\/poll-connecticut-voters-not-happy-with-governor-taxes\/","url_meta":{"origin":4158,"position":4},"title":"Poll: Connecticut Voters Not Happy with Governor, Taxes","author":"Jeff","date":"March 9, 2011","format":false,"excerpt":"A new Quinnipiac University Poll released this morning shows Connecticut voters aren't happy with Gov. Dan Malloy or his proposed $1.5 billion in tax increases: Connecticut's new governor, Dannel Malloy, gets no honeymoon as voters disapprove 40 - 35 percent of the job he is doing, with 25 percent undecided,\u2026","rel":"","context":"In &quot;Politics&quot;","block_context":{"text":"Politics","link":"https:\/\/www.jasetaro.com\/blog\/category\/politics\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3917,"url":"https:\/\/www.jasetaro.com\/blog\/2011\/03\/10\/rand-paul-injects-a-little-sanity-into-senate-debate-over-spending\/","url_meta":{"origin":4158,"position":5},"title":"Rand Paul Injects A Little Sanity Into Senate Debate Over Spending","author":"Jeff","date":"March 10, 2011","format":false,"excerpt":"If you read only one thing about how just out-of-control government spending has gotten and why it's so difficult to actually make real, meaningful budge cuts, read Rand Paul's floor speech from yesterday! Here's the video: http:\/\/www.youtube.com\/watch?v=nMqcLQzD-aA&tracker=False You can read the full transcript on Senator Paul's web site... Here's an\u2026","rel":"","context":"In &quot;Economy&quot;","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/img.youtube.com\/vi\/nMqcLQzD-aA\/0.jpg?resize=350%2C200","width":350,"height":200},"classes":[]}],"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/posts\/4158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/comments?post=4158"}],"version-history":[{"count":0,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/posts\/4158\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/media?parent=4158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/categories?post=4158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/tags?post=4158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}