Spending Is the Problem
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The deficit will reach a stunning $1.5 trillion this year. Even after the recession ends, trillion-dollar deficits will persist, causing the national debt to double by 2020.
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Excessive spending—not low revenues—accounts for 92% of deficits by 2014 and 100% by 2017.
- Solutions that “split the difference” between tax hikes and spending cuts doesn’t really address the source of the problem: spending.
- Social Security, Medicare, Medicaid, and interest costs will surge by nearly $2 trillion by 2020. By comparison, the cost of extending the 2001 and 2003 tax cuts is 85% less at $404 billion.
Tax Increases Are Not the Solution
- Raising federal income taxes to pay for entitlement spending would require rates to double by 2050 and continue to rise thereafter.
- Balancing the budget with tax increases alone would increase the tax burden from an average of 18% of the economy to 30% by 2055.
- Layering on a value added tax (VAT)—a new national sales tax—would create a huge drag on the economy and family budgets.
- A VAT would cause the price of everything to rise by 15–20%. By 2019, 44 cents of every dollar would go to the federal government, compared to 15 cents today.
Tax Hikes Have Harmful Economic Consequences
- Tax increases take money from families and businesses, lowering savings and investment and killing jobs. This is especially harmful in the current economic climate.
- Future generations—who can’t yet vote—will be stuck paying the higher taxes and inheriting lower standards of living that go with it.
- Any new federal income taxes would be on top of state and local taxes, such as income, property, excise, fuel, and sales taxes.
- A VAT would become a cash cow for Congress to fund new spending and open the door for continued, stealthy rate increases.
- Twenty of 29 developed economies with a VAT have increased rates since passage. Denmark leads, having increased their VAT from 15 to 25% since it was enacted.
Congress has been mismanaging taxpayer dollars for decades. Can Washington really be trusted to use new revenues to close the deficit gap, or would they just spend the money on new programs?