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Raising Taxes Only on the Rich? April 8, 2009

Posted by thestellaranomaly in Economic Stimulus, Obama.

obama_changeI don’t usually read The Daily Beast to get my hard news or political analysis, but I did read a very interesting article today by Matt Miller, a former Clinton adviser and senior fellow at the The Center for American Progress.  Miller argues that President Obama will eventually have to raise taxes on everyone, because he can’t possibly pay for all of the provisions in his domestic agenda by only raising taxes on the richest 2 through 5 percent of the population. You may read the article here.

Mr. Miller’s argument is something that I have argued for a while now as well.  I find it especially interesting because Miller is no right-wingnut; he refers to himself as “progressive.”  In the article, Miller states,

…Obama never answered the question of how his epic debt can be squared with his call for generational responsibility. He can’t, because it can’t.Behind this fudge is a secret: Obama and his advisers expect to limit such debt via broader tax increases, presumably in a second term. As every honest observer knows (and as I show in this chapter of my book The Tyranny of Dead Ideas), once this recession is past, taxes will go up in the years ahead no matter who is in power. John McCain’s top economic advisers from the campaign say so themselves. That’s because we’re retiring the baby boom, which means we’ll be doubling the number of people on Social Security and Medicare. We already have trillions of dollars in unfunded promises in these programs. The math simply doesn’t work at current levels of taxation.

Miller goes on to say that he believes raising taxes will be necessary to pay for our huge debt that is growing ever more gargantuan by the second. This argument has its merits, but we differ on whether or not raising taxes does anything positive during either prosperous or rough economic times.  Raising taxes makes everyone less productive and if the President continues to only tax the rich, revenues would eventually start to get smaller, because there would be a smaller pool of rich people to tax.  According to the Wall Street Journal, even if Obama took 100% of the incomes of people making over $500,000 a year, he still wouldn’t be able to pay for everything he’s promised.

The government already taxes us into oblivion. Most people work until April to pay for all of the items that they’re taxed on.  How about we reduce our debt by not spending so much?  Would anyone counsel a friend with a huge amount of credit card debt to spend more money?   You’d probably tell him or her to spend less.  Why the same logic doesn’t apply to the state is beyond me.

This argument basically comes down to the old fight over whether or not the state should have an active role in regulating the economy.  I know a lot of people feel comforted because they at least know that the people “running” things are doing “something.”  Quite frankly, I’d be a lot happier if the people running things would stop meddling and let the economy fix itself.  People are smart; they what to do when times get tough.  If the government would get out of the way and stop trying to fix everything, I guarantee that the free-market would correct itself in a much faster time than if the state tried to fix it.  Tea party anyone?



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