Five reasons tax increases MUST be part of super-committee proposal

Chuck Marr at the Center for Budget and Policy Priorities offers five reasons why tax increases and other revenue enhancements MUST be part of the deficit reduction plan the super-committee must submit to Congress later this year.

1. President Bush’s tax cuts are a significant contributor to projected deficits, as this well-known chart shows. Letting the tax cuts expire would save up to $3.8 trillion over the next decade, including the savings on interest payments on the national debt...

The Congressional Budget Office (CBO) has found that extending the tax cuts would be the least effective of all spending and tax options that CBO examined for boosting the weak economy and creating jobs…

2. Higher-income people can and should share in the sacrifices needed to reduce long-term deficits.  Over the past couple of decades, taxes on people at the very top have fallen dramatically, even as their incomes have soared. Recent IRS data on the nation’s top 400 households — whose incomes averaged $270 million in 2008 — show that the average share of their incomes that they paid in federal taxes dropped from 26 percent to 18 percent between 1992 and 2008, while their annual incomes shot up by over 700 percent, after inflation (see chart)... 

3. Taxes are low both in historical terms and in comparison with other countries. While taxes have fallen disproportionately for high-income people, they also are at or near historically low levels for middle-class people, as we’ve explained.  That’s true whether you count just federal income taxes or all federal taxes, including payroll and excise taxes.  Moreover, the United States collects less in taxes than nearly any other developed country when measured as a share of the economy…

4. A large chunk of federal spending takes place through the tax code. The federal government spends more than $1 trillion a year on “tax expenditures” — credits, deductions, and other targeted tax breaks.  That’s more than it spends on either Social Security or on Medicare and Medicaid combined...

5. Taking taxes off the table would force crippling cuts in entitlement programs. To achieve $1.2 trillion in savings over the next ten years (as the debt limit deal requires) from the spending side alone would require cutting an average of roughly $110 billion annually, starting in 2013.  That’s more than the federal government plans to spend each year on all of the following combined:  the FBI, the National Institutes of Health, the Centers for Disease Control and Prevention, Head Start, and Pell Grants to help students afford college.

 Read Marr's full post here: http://www.offthechartsblog.org/category/federal-tax/earned-income-tax-credit/