On Friday Representative Darrell Issa posted an editorial in the Washington Times about the current fiscal cliff debate in Washington.
He begins the article with some recent history on American tax policy:
Twenty-six years ago, President Reagan implemented significant tax reforms that lowered the individual income tax rate, limited deductions and brought equality to tax rates across all levels. Before that reform, there had been 15 different marginal tax rates reaching levels as high as 50 percent for top brackets. By the time Reagan left office, the number of brackets had been reduced to two: 15 percent and 28 percent.
In 1993, President Clinton raised the top two income rates to 36 percent and 39.6 percent while also raising the corporate tax rate, increasing the taxable portion of Social Security benefits and increasing income taxable for Medicare. This is what has become known as the “Clinton tax rates.”
In 2001, President George W. Bush changed the rate from 39.6 percent to 35 percent, lowered the capital gains and dividend income rates, and expanded credits and deductions such as the Child Tax Credit and the Earned Income Tax Credit.
The current discussions in Congress are centered on the idea of raising taxes–not on cutting spending. What would be the impact of raising taxes on the rich?
Representative Issa points out:
If you raised taxes on the top income bracket, you would generate around $1 trillion over 10 years. The past four years under President Obama have resulted in trillion-dollar deficits each year. At this rate, in 10 years we’re looking at $10 trillion in new debt. At best, the “tax-the-rich” proposal is just a 10 percent solution.
Government spending has traditionally been about 18 to 20 percent of America’s Gross Domestic Product (GDP). Under President Obama, it has been about 24%. Since tax revenue is about 18% of GDP for year, the source of the deficit is obvious. Even when taxes are raised, tax revenue remains about 18% of GDP.
Representative Issa concludes:
The other side tries to boil this down into a seven-second sound bite about taxing the rich and people paying their fair share. In 2009, the top 10 percent of earners in the United States already paid more than 70 percent of federal income taxes.
This isn’t about fairness and unfairness. It’s about taxing and spending, and the federal government has spent enough.
The federal government collects more tax money from all Americans than the Medieval lords collected from the serfs. It really is time for that to stop.