Soaking the Rich Would Not Solve the Long-Term Deficit Crisis
Kathryn Nix /
Earlier this week, we reported on The New York Times’s “deficit puzzle,” which allows you to close both the short-term and long-term budget gaps for the years 2015 and 2030 using cuts to domestic and defense spending, Medicare and Social Security reform, or tax increases.
We used the puzzle to close the long-term budget gap completely while also extending the 2001 and 2003 tax cuts—using only the available spending cuts. Though deficit reduction must occur immediately, long-term deficits are the real crux of the matter. In 2030, the federal deficit will be more than 10 percent of gross domestic product and will continue to climb to unprecedented levels. If tax hikes alone were used to pay for spending on Medicare, Medicaid, and Social Security, in 2050, the lowest income tax rates would rise from 10 percent to 19 percent. The middle income bracket would see a hike from 25 to 47 percent, and the highest income rates would go from 35 to 66 percent. And rates would continue to climb to meet increasing levels of spending. This level of taxation is unsustainable, which is why spending reduction is the only plausible solution. (more…)