Open letter to President Obama (Part 354)

Will Higher Tax Rates Balance the Budget?

Published on Apr 11, 2012

As the U.S. debt and deficit grows, some politicians and economist have called for higher tax rates in order to balance the budget. The question becomes: when the government raises taxes, does it actually collect a larger portion of the US economy?

Professor Antony Davies examines 50 years of economic data and finds that regardless of tax rates, the percentage of GDP that the government collects has remained relatively constant. In other words, no matter how high government sets tax rates, the government gets about the same portion. According to Davies, if we’re concerned about balancing the budget, we should worry less about raising tax revenue and more about growing the economy. The recipe for growth? Lower tax rates and a simplified tax code.

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(This letter was emailed to White House on 12-12-12.)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

Spending is out of control but some insist on just asking for more revenue.

Tax Increases Won’t Solve Washington’s Spending Problem

Emily Goff

December 11, 2012 at 5:45 pm

“We make some tough spending cuts on things that we don’t need; and then we ask the wealthiest Americans to pay a slightly higher tax rate. And that’s a principle I won’t compromise on.”

At yesterday’s fiscal cliff campaign stop in Redford, Michigan, President Obama delivered these remarks and hammered away at his “balanced” plan to avert the fiscal cliff. Balance, as defined in the President’s plan, consists of $4 in tax increases up front for every $1 in loosely defined spending cuts promised down the road. The balance scale at the White House, it seems, needs to be recalibrated.

Obama’s plan misses a crucial point: Washington does not have a problem of too little revenue. Its problem is too much spending. Though revenue has decreased during the recession, the nonpartisan Congressional Budget Office projects that revenues will return to their normal historical level once the economy fully recovers. Spending, however, is out of control. Instead of debating any variety of tax increases—hiking rates or limiting deductions—Congress and the President should be reducing spending. They can start with entitlement program reforms.

Raising taxes on more affluent Americans and businesses, as Obama’s plan would do, would not generate enough revenue to close our massive deficits. Doing so would require mathematically impossible tax rates. Any such attempt would also seriously hurt the economy and jeopardize job creation.

What if you stretched Obama’s version of balance a bit further, though, and let all current tax policy expire? Such massive tax increases—ignoring the certain economic damage that would occurwould STILL not balance the budget. Entitlement program spending would continue to rise dramatically, soaking up all available revenue and driving deficits deeper. (continues below chart)

Not even Obama is proposing this idea outright, but by virtue of Obama’s insistence on tax increases and unblushing silence on entitlement program reforms, he is leading the nation down this path.

A responsible solution exists to avoid the fiscal cliff without harming the economy. Bipartisan entitlement program reforms also exist that can begin to solve the country’s real fiscal crisis. President Obama insists on taxing his way to prosperity, dealing a blow to capital, investments, and small businesses. The only trouble is that he’s forgetting—or ignoring—that spending is the problem.

__________

___________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

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