Friday, October 23, 2009

Tax Collapse

Megan McArdle:
I've talked a lot about the way that making our tax system more progressive has made tax revenues more volatile--they're higher when the economy is booming, and lower when the economy is in depression. But even I am struck by this image from the Congressional Budget Office:

Income taxes, especially corporate income taxes, are sharply off. But revenue from the payroll tax, which is our most regressive, basically hasn't dropped at all.

There are a lot of reasons why we can't pay for all the new spending Obama wants just with taxes on the rich, but this may be one of the most compelling: if we do, we'll be forced to borrow massively every time there's a slowdown.

1 comment:

thinking said...

Megan falls into the same myth about "all of new spending Obama wants."

Nevermind that the vast majority of the deficit Obama inherited.

And I wonder where Megan was during the Bush years, while record deficits piled up. Remember, Bush turned a budget running yearly surpluses into huge deficits.

It's a fact that in the post WWII era deficits are far smaller under Democratic Presidents than under Republican Presidents.

The last 3 Republican Presidents, including Reagan, all took deficit spending to new heights. And Reagan arguably was the one who set the template for today's sky high deficits. Before Reagan, there was far more fiscal restraint.

Then let's consider the money squandered on the Iraq War and the Bush tax cuts. Without those, we'd be in a lot better fiscal shape today.