In his New York Times newsletter, business reporter Peter Coy in September argued that the only real solution for the nation’s rising debt crisis is “more tax revenue.” In other words, the government needs to take more money from Americans who work for a living.
Coy, to his credit, does acknowledge what many of those who hold a similar opinion rarely admit. This would require more than just the “rich” paying their “fair share.” In order to address a problem of such magnitude — the debt now rushes toward $34 trillion — “taxes will have to go up on a sizable chunk of people in the top half of the income distribution.”
Not just on the dastardly 1 percenters, mind you. Higher taxes for Americans in the top 50% of wage earners — that would include all individual taxpayers earning more than $40,000 a year.
It’s true, as Coy notes, that members of both parties — despite the political rhetoric from budget hawks — are loath to cut entitlements and defense spending for fear of rousing powerful special-interest groups. It’s also true that any long-term compromise reached between Democrats and Republicans to impose a modicum of fiscal responsibility in Washington will likely involve higher taxes in some fashion.
Yet to downplay the role of profligate spending in deepening the country’s sea of red ink is to ignore a major part of the equation and to perpetuate the type of fiscal imprudence that has brought us to this point.
The Wall Street Journal reported Monday that U.S. tax receipts at all levels of government climbed to nearly 28% of gross domestic product last year, up from 25% in 2019. This is the highest level since 1965, according to the report. The trend is also occurring in other wealthier nations.
“The increases are worth hundreds of billions dollars in additional revenue for governments,” the Journal noted, “that are navigating an array of new spending needs.”
In the face of progressive dogma blaming tax cuts for soaring deficits, just a few years after the Trump tax reform became law, federal income tax collections set new records in both fiscal 2021 and 2022, hitting almost $5 trillion in the latter.
But what those who turn a blind eye to the spending side of the ledger overlook is that many Americans might be more comfortable sending a higher portion of their earnings to Washington if they felt that the federal government would spend those contributions wisely and efficiently. As it stands now, they have no such confidence. An actual commitment to fiscal responsibility — spending restraint — would be a start.
Cries of poverty from the federal government evaporate under even cursory scrutiny. No matter how much cash flows to the U.S. Treasury, it is never enough. Nor will it ever be.