“Fair share.” What does that even mean?
The president himself uses this term a lot to describe the amount “the rich” should pay in taxes. What is fair, though? 40% of income? 50%? 60%? Who is the discerner or fair? You, me…the President? You and I have no more credibility of knowing what’s fair than does a bum on the street.
Sure, the elimination of tax loop holes and a simplification of the tax code, is something most people would agree on. But, let’s not kid ourselves when we make the assumption that higher taxes lead to more revenue. History shows it doesn’t.
The typical argument against raising taxes has traditionally been about how “the economy cannot afford a tax hike in the midst of a recession.” This argument, while true, is insufficient in proving why raising taxes should not be considered. The real point to be made is about tax revenues — particularly concerning historical trends.
When we take a look at tax revenues as a percentage of Gross Domestic Product (GDP), and cross-reference the data with historical tax rates, we find that higher tax rates don’t lead to equally higher revenues. There are three separate time periods where I analyzed federal tax revenues as a percentage of GDP — essentially trying to determine whether or not higher taxes on everything the US economy produces, actually leads to more revenue.
The first time period I examined was from 1946-1963 (18 years), where the top tax rate for the wealthiest Americans consistently hovered around 91 percent. Throughout this period, the average tax revenue stream was 17.1 percent of GDP.
Then I analyzed 1965-1981 (17 years), where the top tax rate for the rich was exactly 70 percent. During this time period, the average tax revenue was 18.1 percent of GDP, slightly higher than the previous.
The final, slightly shorter, time period that I looked at was from 1993-2002 (10 years), where the top tax rate for the rich was at or near 39 percent. During this time period, the average tax revenue for the federal government was 18.9 percent of GDP.
Based on historical evidence, we can consistently expect federal revenues to be about the same as a percentage of GDP (about 18-19 percent); regardless of how much “the rich” are taxed. That is a fact, so deal with it.
Spending, on the other hand, is on the rise with a congress addicted to sticking their hands in the U.S. Treasury. Currently, federal spending sits at roughly 25 percent of GDP (a record high, excluding wartime spending).
These cold, hard facts suggest one thing must be done — cut spending!
Cut the outrageous military budget first; we cannot afford to police the world anymore. Get rid of the Department of Education; you know, people were educated before 1979, the year the department was assembled. Eliminate the Department of Energy; what energy has it produced? Get rid of the Department of Housing and Urban Development; since 1965 many of our great urban cities have been on the decline – no one is suggesting HUD is responsible for their decline, but they’re not responsible for their rise either. Get rid of all foreign aid; propping up dictators like Egypt’s, Hosni Mubarak, is not something tax payers are fond of. And lastly, reform Social Security and Medicare; $100 trillion — that’s with a “t” — in unfunded liabilities should speak for itself.
Now that’s how to make a dent in a $1.6 trillion deficit, a la Presidential candidate, Ron Paul. Are these cuts crazy? Yeah, probably, but running up a $14 trillion national debt is even crazier.
Grow a pair and cut spending if you want to balance the budget; because, as history suggests, raising taxes on bigwigs, is not going to cut it, no matter how desperately we want the rich to pay their “fair share.”
