Barack Obama campaigned on a promise not to raise taxes on couples making less than $250,000 per year or individuals earning less than $200,000. But if you are counting on that pledge to protect you from a tax increase, guess again.
The second-highest-ranking Democrat in the U.S. House of Representatives, Congressman Steny Hoyer of Maryland, suggested that Washington can’t “afford” not to raise taxes on the middle class.
“As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction,” Rep. Hoyer said during a forum on deficits.
Spending cuts will eventually be necessary, he acknowledged. But middle-class tax relief is not “totally sacrosanct,” he said, and “Raising revenue is part of the deficit solution, too.”
Well then, what is the most desirable way to “raise revenue”? Rep. Hoyer believes it is through higher taxes. After all, when government needs more money, can’t it just have all it wants by increasing taxes on individuals and businesses?
Well, in the short term it can bring in more money that way, but long term, that is a recipe for harming revenue and the entire economy. The higher taxes get, the harder it is for businesses and individuals to invest and create jobs, because they have less income with which to do that. That constricts economic growth and ultimately reduces the tax dollars flowing to government coffers.
Far better is for government to slash wasteful spending — which there is a tremendous amount of at the federal level — and keep tax rates low. That leaves more money in the private sector, which can invest that money in free-enterprise efforts that create jobs and wealth — and provide sufficient revenue for legitimate purposes of government.
Unfortunately, Democrats in Washington have little appetite either for long-term tax relief or for the massive spending cuts that are necessary to rescue our flailing economy.
It has been politically popular for them to claim they want to increase taxes only on “the rich” — many of whom are small-business owners trying to make a payroll. But even if the rich were taxed at 100 percent, it would not begin to close the yawning, $13 trillion national debt gap between what Washington has raised in too-high taxes and what it has spent on unconstitutional things.
Too much irresponsible spending, not too little taxation, is America’s financial problem right now. Proposed solutions ought to acknowledge that reality.