“Most Americans expect higher taxes”
When I read that headline on the LA Times website, I first thought that all the warnings about impending fiscal doom had finally struck home. People realize that current trends in taxes and spending cannot continue forever. Their tax bills have to go up.
Then I read the sub-head: “Nearly 70% of all Americans surveyed by Gallup say they expect higher taxes by the end of Obama's term.” Oops—it wasn’t the long-run fiscal problems at all.
One bit of fallout from healthcare debate is the pervasive view that everybody’s taxes have to go up to cover the cost of any reform, that there’s no other way to come up with the $1 trillion plus that CBO says a major reform plan will demand over the coming decade. That may or may not be true—there are proposals that would tax only the rich or cut spending in some segments of the healthcare market—but the issue is far broader than just healthcare.
In a recent op-ed, Len Burman related CBO’s dire long run predictions if we continue current policies: our debt will exceed 60 percent of GDP next year, 100 percent by 2023, and 650 percent by 2076—assuming our economy survives that long. Run up that much debt and our creditors will run too—as fast as they can away from our Treasury bonds.
In recent TaxVox posts, Rosanne Altshuler and I have warned that neither incremental tax increases nor spending cuts will solve our fiscal problems. We need a major overhaul of our federal tax system, both domestic and international, as well as a thorough scrubbing of the spending side of the budget. And we’ll still need to look for some other way to raise revenue, like a VAT.
In any case, we will get what most Americans expect: higher taxes. And most Americans will feel the pain.