Brummett: Jack up Taxes of Wealthy to reduce Deficit

Halting Arkansas Liberals with Truth

(Candidate Obama wanted to raise capital gains tax for purposes of fairness)

John Brummett in his article “Punish Less and Persuade More,” (December 13), asserted, “…you do not raise much money toward reducing the deficit by a nickel-and-dime tax policy on the fellow sweating his checkbook balance with an income of $50,000 a year….You jack them (now referring to those making more than $250,000) up a little more and suddenly you have generated hundreds of billions of dollars towards deficit reduction. You tax the rich more because that is where the money is and they can spare it. This is not confiscation. This is not a fine. It is common sense.”

However, the figures do not seem to back up Brummett’s assertion. The tax figures for 2007 seem to indicate that by reversing the tax cuts on the rich you could possibly pick up $36 billion while if you did the same to the middle class you could pick up $114 billion.

I am responding to these liberal assertion with a portion from an article published January 29, 2007 called, “Ten Myths About the Bush Tax Cuts” by Brian Riedl. Riedl is the Grover Hermann Fellow in Federal Budgetary Affairs at the Heritage Foundation and Riedl’s budget research has been featured in front-page stories and editorials in The New York Times, The Wall Street Journal, The Washington Post and The Los Angeles Times.

Myth #7: Reversing the upper-income tax cuts would raise substantial revenues.

Fact: The low-income tax cuts reduced revenues the most.

Many critics of tax cuts nonetheless support extending the increased child tax credit, marriage penalty relief, and the 10 percent income tax bracket because these policies strongly benefit low-income tax families. They also support annually adjusting the alternative minimum tax exemption for inflation to prevent a massive broad-based tax increase. These critics assert that repealing the tax cuts for upper-income individuals and investors and bringing back the pre-2001 estate tax levels can raise substantial revenue. Once again, the numbers fail to support this claim.

In 2007, according to CBO and Joint Committee on Taxation data, the increased child tax credit, marriage penalty relief, 10 percent bracket, and AMT fix will have a combined budgetary effect of $114 billion. These policies do not have strong supply-side effects to minimize that effect.

By comparison, the more maligned capital gains, dividends, and estate tax cuts are projected to reduce 2007 revenues by just $36 billion even before the large and positive supply-side effects are incorporated. Thus, repealing these tax cuts would raise very little revenue and could possibly even reduce federal tax revenue. Such tax increases would certainly reduce the savings and investment vital to economic growth.

The individual income tax rate reductions come to $59 billion in 2007 and are not really a tax cut for the rich. All families with taxable incomes over $62,000 (and single filers over $31,000) benefit. Repealing this tax cut would reduce work incentives and raise taxes on millions of families and small businesses, thereby harming the economy and minimizing any new revenues.

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