It Is Possible To Balance The Budget Without Raising Taxes

On Saturday the Washington Examiner posted an editorial about balancing the American budget. The editorial reminds us that everyone–rich or poor–will pay more in taxes after January 1.

The editorial states:

Liberal columnists love to point out that the top marginal rate on personal income was 91 percent in the 1950s and in the early 1960s. But the tax code back then was also chock-full of loopholes and benefits that let top earners escape such stifling tax burdens. As high as top marginal rates were, taxes as a percentage of GDP never rose above 19 percent, and in fact fell as low as 14.5 percent.

In fact, since World War II, federal taxes as a percentage of GDP have never risen above 20.6 percent and have averaged just under 18 percent. This has been consistent, regardless of changes to tax rates.

This fact is also confirmed in the Laffer Curve. There is a point at which tax increases actually result in less revenue. We need to keep this fact in mind as we discuss what to do about the ‘fiscal cliff.’

There are two think tanks that represent the two ways of thinking about solutions to the ‘fiscal cliff’:

Obama’s favorite think tank, the Center for American Progress, submitted a plan that calls for the federal government to eat up more than 20 percent of the American economy through taxation every year, in perpetuity. Being the liberals that they are, CAP calls for even higher levels of spending — above 22 percent of GDP by 2022 alone.

Contrast CAP’s plan with that of the Heritage Foundation. It returns taxation to just above the historical U.S. average at 18.5 percent of GDP. By cutting spending to pre-Great Society levels, the Heritage plan not only balances the budget but actually begins to lower our cumulative national debt.

Taking money from people who earn it and giving it to people who don’t earn it is not a solution to anything. Until Washington stops using American taxpayers as vehicles to get re-elected, nothing will be accomplished.

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