5 Reasons We Shouldn't Raise Taxes Right Now

5 Reasons We Shouldn't Raise Taxes Right Now
By John Hawkins
11/16/2010

Let's start off with what has become a bit of conservative heresy these days: I don't think it's always a bad idea to raise taxes. In fact, because this country has spent so much more than we have, for so long, it's practically a given that we'll have to raise taxes at some point to help make up the shortfall. Some people reject that idea because they misunderstand how the Laffer Curve works, but unless we can get a handle on our profligate spending, there's no question that large tax increases will be in the offing.

Now, all that being said, it would be a terrible idea to raise taxes on anybody right now, whether it's by letting the Bush tax cuts expire or by putting new tax increases into place. Since the Democratic Party doesn't seem to understand this, here's an explanation of why it would be a tremendous mistake to raise taxes right now.

1) Raising taxes when the economy is doing poorly is a terrible idea: There are few things both the Left and the Right seem to agree on these days, but both sides do acknowledge that the economy is doing poorly. In recent months, Democrats have discussed a second stimulus and the Federal Reserve has talked about printing more money because it believes we need to spur economic growth.

Well, the most reliable way to goose the economy is by cutting taxes and the most surefire way to slow economic growth is to raise taxes. Since the economy is already growing so slowly, why in the world would we want to implement a 3.8 trillion dollar tax hike by letting the Bush tax cuts expire? That would be like planting a steel-toe boot to the skull of the economy when it's already on the ground, bleeding.

2) Raising taxes slows long-term economic growth: People respond to economic incentives. So, the larger government gets and the more it raises taxes, the more the economy slows down. The slower the economy moves, the higher the unemployment rate, the less competitive the business environment becomes, and the more people suffer across the board. This factor largely explains why Western European nations are so economically stagnant compared to the United States.

It's like John Kennedy once said, "A rising tide lifts all boats." You want to make sure the whole country is as prosperous as possible? You want to make sure your kids have it better than you? You want to provide opportunities for the poor? The single best way to do that is with a growing economy and the higher taxes get, the less the economy grows.

That's the key reason why we should ALWAYS be extremely reluctant to raise taxes on the American people, whether they're rich, poor, or in the middle-class.

3) Our tax system is far too progressive already: Neil Boortz once said that,

"A democracy is three wolves and one sheep voting on what's for dinner."

Well, that's essentially what has happened with our tax system today. The 47% of Americans who receive the most benefit from the public treasury pay no income taxes, while the Americans who receive the least benefit, pay their own share of the income taxes PLUS the taxes for the other half of the country.

Meanwhile, the 53% of Americans who are paying income taxes are relentlessly slandered as "greedy" and "selfish" for not being willing to hand over EVEN MORE of the money that they worked for in order to pay for benefits for other people. In other words, we have a lot of people in America who want more services from the government, but they are demanding that other people pay for it. That is not moral, it's not good for the economy, and it's simply not wise. We're already strongly motivating half the country to shelter and hide their income to keep the taxman from plundering their bank accounts. We're also driving American businesses overseas to take advantage of tax shelters and lower corporate tax rates. The more we try to fleece the successful, the more likely we are to drive them out of our country entirely, to greener pastures that have fewer ravenous wolves looking to prey on them.

4) Adding in new revenue would lock in a higher rate of spending: Since Barack Obama has been elected, the country has been treated to an orgy of spending that would make Caligula blush. Federal spending has gone up 84% under Obama. Obamacare adds another massive, budget-busting entitlement program to go along with Medicare and Medicaid. Obama's ten year budget would add more to the debt than "all previous Presidents in American history combined." This is not the baseline we should try to raise revenues high enough to meet. Yet at best, if the government increases the amount of revenue it has coming in, it would decrease the pressure on the government to reduce the deficit by cutting spending. At worst, we'd get #5....

5) Bringing in more tax revenue probably wouldn't do anything to reduce the deficit right now: At first glance, this seems counter-intuitive, doesn't it? But, we don't have a revenue problem in this country; we have a spending problem.

It's no secret that the GOP did a poor job of controlling spending when it was in charge and nobody's quite sure if the GOP has learned its lesson yet. Worse yet, the prevailing wisdom on the Left today is that government is too small and that the biggest problem we have right now is that we're not spending enough money. You may laugh, but America's premier liberal economist, Paul Krugman, is constantly saying things like this,

"It's politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold."

Since that's the case and we still have a liberal President and a liberal majority in the Senate, it's entirely possible that every new dime of tax revenue would be spent -- and then some. Until Washington proves that it's serious about deficit reduction and actually starts making painful cuts, there's no reason to believe that adding new revenue would solve or even significantly alleviate our budget problems.
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To read another article by John Hawkins, click here.