This picture is making the rounds on Facebook. To balance the budget by raising taxes would require all taxes to go up by 80%. This is not going to happen. The corporate tax rate is already among the highest in the world at 35%. Such a large increase in taxes would mean a tax rate of 65%. The Social Security tax rate is 12.8%. An 80% increase would mean an increase to 23%. The highest marginal tax rate for the income tax is 35%. Such a large increase in taxes would increase the tax rate on that income bracket to 65%.
What about a Value Added Tax (VAT)?
Canada, for example, gives up about a third of potential revenue by excusing food, drugs, and transportation from the [value added] tax. Even if the United States did the same, a 10 percent tax rate could raise $500 billion a year, according to Eric Toder, an analyst at the Tax Policy Center.
So in order to raise 1.6 trillion a year, this would require a value added tax of 30%. This would mean that all prices would go up about 35%. Does anyone think this is going to happen?
I have seen a few examples on the talking head programs of a "rich" person asking for higher taxes. A few percentage points is how one person put it. The ones suggesting this do not understand just how dire things are. When I see this talking point, I laugh. The increase, if it is to solve the problem, must be much, much larger.
The tax increase that Obama is talking about is minimal. If the Republicans were smart—they are not called the stupid party for nothing—they would embrace the rather modest tax increase Obama is suggesting—maybe a bit more. And then cut the budget. This would destroy all Obama's talking points.
While I support a rather large tax increase with the expiration of the Bush era tax cuts, this will only pay for about 20% of the next 10 years’ deficit.
Tomorrow I will talk about budget cuts.