Unfortunately, the reality of America’s fiscal
situation has little connection to popular political opinion. Washington’s
problem is excessive spending. Period.
A cursory review of federal tax and budgetary
numbers reveals bipartisan spending that is so far detached from tax revenues
that even confiscatory tax increases on the wealthiest Americans would fail to
balance the budget.
Internal Revenue Service (IRS) filing information
for tax year 2009 provides interesting data concerning the “millionaires and
billionaires” who supposedly hold the key to America’s fiscal solvency.
Slightly more than 235,000 income tax returns were filed with taxable income of
$1 million or more. Those returns accounted for more than $623 billion in
taxable income which garnered over $177 billion in federal income tax.
In 2009, the federal government ran a deficit in
excess of $1.4 trillion. A slight tax increase on the “wealthy” would have
barely registered in the 2009 federal budget. Even if the IRS had confiscated
100 percent of the taxable income from millionaire filings, the additional
revenue would have only reduced the deficit by roughly a third.
Yet, in spite of the hard numbers, some Americans
seem to believe that the country could still tax its way out of its current
spending practices by just expanding the definition of “wealthy.” Again, the tax data suggests otherwise. If
the government demanded ALL of the taxable income from tax returns with
adjusted gross income of $200 thousand or more, Washington still would have
produced a deficit in excess of $215 billion in 2009. Even if these
confiscatory tax policies would solve the problem, there is no political will
on either side of the aisle to see them implemented.
If Washington politicians want to keep spending,
leave entitlements unchanged, and take any serious steps to rein in the
national debt, not only will they be required to heavily tax the “wealthy,” but
they will be forced to reach deep into the pockets of middle class Americans.
Regardless of marginal tax rates, Republicans and
Democrats have spent every penny raised in revenues and then some…to the tune
of $16.3 trillion in national debt. Since 2009, federal politicians have buoyed
the economy with well over $1 trillion in borrowed money each year. To suggest
that America is heading toward the edge of a “fiscal cliff” is blindly ignorant
of the nation’s current fiscal free-fall. The upcoming tax hikes and automatic
spending cuts would be more effectively described as handing the country an
anvil on the way down.
Every American who has stopped spending on credit
understands the pain of moving to live within their means. The shock of
removing deficit spending from the American economy quickly would likely be
substantial. Eliminating 2009 deficit spending by the federal government would
be roughly the same as eliminating the entire 2009 economic production of
Alabama, Arkansas, Louisiana, Kentucky, Mississippi, South Carolina, Tennessee
and Virginia from the nation’s bottom line. Winding down the trillion dollar
deficits of the last several years requires tough decisions to end
well-intentioned government programs and strong political leadership over time.
Politicians may narrowly avoid the upcoming “fiscal
cliff,” but, without sustained spending reductions that actually result in a
budgetary course correction, America may have precious little time to avoid the
long-term crash landing from the current fiscal free-fall.
About the author: Cameron Smith is General Counsel
and Policy Director for the Alabama Policy Institute, a non-partisan,
non-profit research and education organization dedicated to the preservation of
free markets, limited government and strong families, which are indispensable
to a prosperous society.
This article was published by the Alabama Policy
Institute.
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