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The Coming Tax Hikes


Matt Miller gets three Republican budget crunchers to say that taxes are going to go up. Douglas Holtz-Eakin, late of the McCain campaign, says that if nothing is done about spending taxes will have to go up–which is perhaps not quite the damning admission Miller makes it out to be. Former CBO chief Dan Crippen says that tax revenues as a percentage of GDP might have to go as high as 24 from the current 18.8. Former GAO chief David Walker is on the same page as Crippen.

Miller concludes that

the endless fights about whether taxes should go up will soon seem passé. The real question once this recession has passed will be: Given that taxes have to rise, how should we raise the revenue we need in ways that are best for the economy? The answer will involve lower taxes on payrolls and corporations, and higher taxes on dirty energy and consumption. This adjustment will be hardest for the GOP, because the conservative mind is caught in the past.

This analysis overlooks two important points. First, taxes as a share of GDP are set to go up even in the absence of legislation, both because the Bush tax cuts are going to expire and because tax brackets are not indexed to real wage growth. The feds are set to take nearly 24 percent of GDP by 2050. Second, that level of taxation is unprecedented in this country, in peace or in war.

So both spending and taxation are set on autopilot to increase to unprecedented levels. Given that fact, which seems more urgent: Persuading Republicans to accept even more taxation, or persuading Democrats to accept some spending restraint?


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