Taxing the Rich will have no positive effect on our National Debt

Whenever we talk about the federal debt, Democrats always respond that spending is not the reason why the debt is nearly equal to our GDP. The real reason for our debt, they tell us, is that taxes aren’t enough and the rich don’t pay their fair share. From the growth of the middle income tax to 70 percent for the highest earners, to 100 percent of incomes over $1 billion, to the recent plan of the president’s debt, the Democrats are full of ideas of how to give us more taxes.

Not only do these ideas show a complete lack of understanding of the economy, they will not have a positive effect on our credit score and will slow down the economy.

Let’s be clear: America’s debt crisis was not caused by former President Donald Trump’s tax cuts. While I believe that these tax cuts should have been eliminated by closing many of our roads and reducing government spending, they did not create economic problems. Economic inequality is not the result of a lack of income. Last year, federal spending as a share of the economy was more than a historic high.

Like Adam Michel of the Cato Institute to remind Congress recently, “It’s new spending that leads to deficits. For example, President Biden added nearly $5 trillion in unnecessary spending to the national debt. This is more than three times the 10-year reduction in the 2017 tax bill.” Trump was no better. Before the pandemic, I often complained about budget cuts under the Trump administration. And there are also many clear mistakes for the president before Trump.

Perhaps most importantly, trying to reduce the deficit by raising taxes on the rich is unfair and ineffective. Wealthy Americans already pay high taxes. This is true regardless of whether you look at the total amount of money they pay or the relative amount. It is because the federal taxes are very progressive, even compared to European countries.

European governments pay for their central governments through central taxation. In testimony before the Senate Budget Committee, Michel said that if middle class taxpayers were to move to Europe, they would pay an additional $16,000 in taxes per year. The Tax Foundation at this time few that “If the US had a personal income tax like Denmark does, all income over $82,000 would be taxed at over 55 percent.”

But even if one thinks that Congress can take more money from the rich without spending a lot of money, money, and labor, there is not enough money for the rich to pay next year’s interest. 10 years. Besides, does anyone believe that if Sen. If Bernie Sanders (I–Vt.) and friends had their way, would the rich continue to work and earn as much as they do now?

This is very frustrating because we know how to manage our debts. There is a whole book on this subject. It shows that countries that reduce their debt-to-GDP ratio adopt fiscal adjustment measures that are often restrictive of spending. On the other hand, countries that try to reduce their debts and increase taxes not only fail, but also face serious and lasting problems.

The belief that we can reduce the deficit by raising taxes also ignores how politicians spend money. Regardless of their approval of tax increases, when politicians get more money, they often spend more. The result is higher, not lower, deficits. Economist Richard Vedder and his co-authors, for example, found that in the 1980s, every $1 generated in additional taxes generated $1.58 of additional revenue. The study was repeated three times (in 1991, 2007, and 2010) and each time produced the same results.

Finally, tax reform, particularly in the case of marginal taxes, has a wide and lasting impact on the ability and earning power of workers, as well as on the efficiency of the labor market. A few years ago, Aparna Mathur, Sita Slavov, and Michael Strain showed that over time, an increasing tax system reduces people’s incentives to invest. For example, higher income taxes may help a student entering medical school to become a pediatrician rather than a high-income doctor. We need both, but that’s how the surgical shortage is created.

Here’s the bottom line: Congress and the White House need to cut the deficit, and the only way to do that is to cut spending significantly.


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