Why tax increases are bad for the deficit

By Tom Quiner


Republicans and Democrats both believe in excessive government spending.

Quiner’s Diner has documented the bi-partisan spending spree of the past decade complete with charts and graphs. Our data reveals, though, that Republicans are pikers in the spending department compared to Democrats.

So how do we fix this fiscal mess?

President Obama appointed a fiscal commission to come up with solutions. The co-chairs, Democrat Erskine Bowles and Republican Alan Simpson have given us a sneak preview. They call for a combination of spending restraint and tax increases to solve the crisis, and it is a crisis.

Overall, Republicans seem to be more receptive to the plan than Democrats at this point.

Democrats say yes to the idea of tax increases, but no to spending restraint. With Republicans, it’s pretty much the other way around. For example, former Congressional Budget Office Director, Alice Rivlin, a Democrat, suggests that the problem is that Americans are under-taxed, that we need a 6.5 percent national sales tax on top of our current complex and excessive tax structure.

So the question is: will tax increases help solve our debt crisis?

The answer is no according to Stephen Moore and Richard Vedder. Mr. Moore is the senior economics writer for the Wall Street Journal opinion page. Mr. Vedder is an economics professor at the Ohio University and an adjunct scholar at the American Enterprise Institute.

I will paraphrase their recent piece in the Wall Street Journal: the idea that tax increases will solve the debt crisis is a con (my word).

Erskine Bowles, the Democrat, promises their plan will feature $3 in spending cuts for every $1 in tax increases.

Congress promised the same thing to President Reagan in the 1980s. The cuts never came. What came was more spending.

Messrs. Moore and Vedder analyzed spending data since World War II and discovered tax increases, in fact, do NOT decrease deficits:

“Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.”

Taxpayers will not be suckers any longer to Democrats’ contention that tax increases are needed to get our fiscal house in order. We need to extend the Bush tax cuts now. Democrats who want to increase taxes on America’s top producers are once again trying to con us. Their history is abysmal. If we give them more money, they will simply go out and spend even more than we gave them. The numbers presented above are damning.

Long term spending restraint is the answer.