That's right cpwill. That's not the discussion. No one is attempting to raise rates. They are refusing to do exactly what you are FOR.
no, because simply stripping them out merely raises effective tax rates, just without raising nominal ones to give themselves political cover. All of the economic damage of a tax hike, but with less of the danger of being labeled a tax-hiker as we go into an election season. I want to squeeze out all those extra costs
without raising effective tax rates.
quick and easy example.
Bob makes 50,000, and his nominal tax rate is 25% (I know it's not, but I like easy numbers and it's an example, work with me here
). This would leave him paying $12,500 in taxes. Except that Bob has kids, greens his house, gives some to charity, so on and so forth, and so after all the deductions are made, he gets a check back for $4,500. Bob's
effective tax rate - what he actually sends to the
government is $8,000, or 16%. That's his real tax rate, not the nominal 25% marker. If you were to strip out all of the deductions and credits Bob gets, you would be increasing his
actual tax rate by 9%. Hiking taxes like that on the populace in the middle of an already anemic recovery is a very, very, Bad Idea, and it's one that is exceedingly unlikely to actually get us any extra revenue (but rather the opposite).
You see, tax
revenue isn't actually a function of tax
rates; it's a function of GDP:
now, it's worth noting that that line has recently dipped - we increased the size of government from about 20% of GDP to about 24.5% of GDP... and revenue fell from 19.5% of GDP to 15% of GDP..... government, you see, is not in the habit of taxing itself the same as it does for work, production, or investment, and so as government increases, taxes as a percent of GDP decreases.
If you want to boost revenues relative to government spending, therefore, you have to sharply reduce government spending and spur growth in GDP. Now, the above example with Bob had some hidden costs that we didn't discuss. He had to go to the effort and expense of greening his house
just enough to get the credit. He had to maintain all the paperwork, he probably had to use a tax service to get it all put in the system and to make sure he could "maximize his return". These are called "compliance costs", and under our current tax structure, they are huge. We are talking
$431 BILLION. That's the money that we Americans spend before the Treasury ever see's a single dime - that's how much it costs us just to figure out how to work our own tax code. The Laffer Center has estimated that you could increase GDP by fully half a percent annually, compounding, if you could cut complexity in half. I would argue that this is an underestimate because they are only accounting for saved costs, and not increased investment that would come with such an improvement. In addition, the Republican provision strips out much more than that. However, let's not add on too much, and let's only suggest that a massive in-flooding of investment and a radically simplified tax structure will only produce (say) 0.65 of a point of added GDP each year. That's low-balling, but that's okay. GDP in 2010 was about $14.7 Trillion, and we are probably going to add around 2.3% to that for this year. So let's make a couple of happy assumptions and state that as of 2012 we were able to bring down state spending to the point where we matched historical revenue returns of around 19%, and that GDP without any alteration would grow at 3% annually after that. So if we compare 3 to 3.65% rates of growth starting in 2012....
in ten years we will have collected over $1.2 Trillion in extra revenue....
while boosting economic growth (instead of dragging it, which you see with tax hikes). Assuming a populace of 310 million, GDP per capita will be increased by $4,233; that''s more than 4 grand extra for every man, woman, and child, per year, increasing. And we're not counting the second order growth that will come from increased employment, wage growth, so on, and so forth.
That's the Republican solution: Increase growth without raising real tax rates so as to provide jobs and increase revenue. The Democrat solution thus far seems to be to raise real tax rates and hope that producers and investors don't notice and change their behavior accordingly.
And many times. Someone posted all of it in this thread. Obama has publicly admitted.
I've seen him agree to take $500 Bn out in general to pay for his brand new entitlement, and I've seen him promise that the IPAB will be able to reduce costs.... somehow.... in a manner not to be mentioned before the election... But I haven't seen Obama agree to Medicare reform in the debt ceiling deal; and Google is giving me nothing. Frankly I find such a move exceedingly unlikely, as the President has already made it clear he intends to make MediScare the centerpiece of his 2012 campaign. Perhaps you could provide me with some specifics.