Tuesday, December 4, 2012

Tax Payers With Income of Only $30,000 Face Annual Tax Hikes of $1,500

We are finally getting a bit of truth from a Beltway insider. Douglas Holtz-Eakin former Director of the Congressional Budget Office in a new report spills the beans on how bad things will eventually get tax-wise if spending isn't cut dramatically from current proposed levels:
If spending plans are unchanged, it appears inevitable that the middle class will face higher taxes. Imposing the entire burden on millionaires ultimately requires tax rates exceeding 75 percent of their income, even if one-half of the adjustment occurs on the spending side. Under a similar assumption, and assuming that higher taxes are phased in slowly over the budget windows, it is reasonable to conclude that taxpayers making as little $30,000 will face higher taxes, and that the average increase for taxpayers would be roughly $1,500 annually over the next 10 years.
Holtz-Eakins continues:
 The method is straightforward.  I assume that annual spending follows exactly the trajectory proposed in the Administration’s budget proposals for fiscal year 2013. I subtract net interest spending, with the result being the programmatic plan over the next 10 years. On the revenue side, I utilize the revenues under the Congressional Budget Office’s (CBO) “Alternative Fiscal Scenario” – a sensible characterization of current revenue policy. The difference between these two represents the primary deficit over the period 2013-2022.
Note, he is not even including interest rate spending, which could soar in coming years given rates are at abnormally low levels.

Holtz-Eakins:

Using taxes alone to close the primary deficit skews the results toward large impacts on the middle class.  To gain a better feel for perhaps more realistic scenarios, I allow for the fact that some deficit reduction will occur on the spending side.  Since it is not possible in advance to know the exact mix, I arbitrarily assume a 50-50 split...as a so-called “balanced” approach – one in which equal amounts of deficit reduction come from the spending and tax sides of the budget.  
The final modification is to allow for the possibility that not all the primary deficit is eliminated immediately,but rather that the tax increases are phased in more slowly...

What do the results tell us?  Well, for example, attempting to solve the base case budget problem by taxing only millionaires is infeasible – it would require raising their tax rate to 123.9 percent.  Broadening the base to those making $500,000 or more means that their average tax rate has to rise from 30.6 percent to 95.5 percent – an increase in excess of any economic reality. 
Where could one draw the line?  There is no obvious answer, but until those making at least $30,000 are drawn into the base of the tax increase, the average tax rate rises by double digits.  

11 comments:

  1. Ahh, I see the republican game plan, talk about women's vaginas in vaguely repugnant terms, not get elected, wait for slow disaffection of public for Barry and co with economic mismanagement, get elected in 2016 with promises of reform. Go to war somewhere.

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    1. You give them far too much credit. When things go to hell the public will turn more toward the government to solve things, not the other way. There will be no more Republican Presidents and my guess is the party will split. As the collapse unfolds and things get even worse the Democrats and the government will blame "the rich" and evil corporations for all that has gone wrong and the poorly educated public will lap it up. The hard left Democrats will move us towards an economically oppressive authoritarian regime.

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    2. "the public will turn more toward the government to solve things"

      Isn't that the same thing as voting Republican? I mean, sure, they talk about economic freedom, but they're still supporters of big government, just in a different sense. Also, voting in itself is a turn toward government to solve things, it is the heart of the great fiction.

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    3. Yes Joseph, but that is now how the idiots that vote see it. They buy the propaganda of both parties and the Reps represent less government to the average stooge. My point is the reps will not see the office of President ever again.

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  2. What a mess. The era of everyone living off of everyone else is soon coming (mercifully) to an end. Only then can something promising emerge from the ashes. Meanwhile, it's going to be very, very ugly.

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    1. Its just getting started...See Yurrr-Up.
      The terrorists in DC will reach their stated goal of everyone being a 70%-80% tax slave...See Yurrr-Up.

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  3. Good. This is what it is going to take to get people to wake the hell up. Most people don't want programs cut. It will take major tax hikes before tax payers wake up and realize that there is no such thing as a free lunch.

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  4. What ever they take in taxes, the people will borrow the difference to prevent the lower standard of living. It's a great big game of musical chairs and debt chicken.

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    1. That really is the truth right their. "It's a great big game of musical chairs and debt chicken"

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  5. Who needs taxes, when they can simply print all the money needed to pay for any and everything?

    Think about it!

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  6. $4 per gallon gas tax and 20% VAT then we be just like Yurrr-Up.
    They are angry that their tax cattle are so unruly. They will win in time. Do you really think Dumocrazy was going to free you?

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