READY FOR A 150 PERCENT INCOME TAX INCREASE?
August 1, 2008
For years, taxpayer advocacy groups have been sounding the alarm about serious spending problems facing the nation and the lack of attention elected officials are paying to this growing fiscal disaster. Now come projections out of the Congressional Budget Office (CBO) on what further delay means to taxpayers everywhere, says the Heartland Institute.
According to the recent CBO report:
- Rising costs for health care and the aging of the population will cause federal spending on Medicare, Medicaid and Social Security to rise substantially as a share of the economy.
- If tax revenues as a share of gross domestic product (GDP) remain at current levels, that additional spending will eventually cause future budget deficits to become unsustainable.
- Therefore, the choices are limited- revenues must rise as a share of GDP, projected spending must fall, or both.
If tax increases turn out to be the preferred solution for resolving the spending problem, the toll will tremendous:
- The tax rate for the lowest tax bracket would have to be increased from 10 percent to 25 percent.
- The tax rate on incomes in the current 25 percent bracket would have to be increased to 63 percent.
- The tax rate of the highest bracket would have to be raised from 35 percent to 88 percent.
- The top corporate income tax rate would also increase from 35 percent to 88 percent.
Such tax rates would significantly reduce economic activity and would probably not be economically feasible, says the report. However, if action is not taken to curb the projected growth of budget deficits in coming decades, the economy will eventually suffer serious damage. At some point, policymakers will have to increase taxes, reduce spending or both.
Source: Jason Mercier, "Ready for a 150 Percent Income Tax Increase?" Heartland Institute, August 2008.
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