Guest opinion submitted by Idaho Senator Mike Crapo
President Obama has promised that anyone who makes under $250,000 a year will not see their taxes raised by a "single dime," and that 95 percent of working families will receive a tax cut. The Office of Management and Budget (OMB) recently released its mid-session review, which projects a 2009 budget deficit nearly triple that of 2008 and larger than those of 2002 through 2007 combined. On top of this, trillions in new spending would be added by the proposed government takeover of health care and cap and trade bills in Congress.
To pay for this spending, taxes paid by those earning over $250,000 would have to rise to well above the already-high level paid now, with 55 percent of the increased revenue coming from small businesses. In reality, not enough revenue can be gained from increasing taxes only on the so-called wealthy; eventually, taxes on middle income earners would have to go up, too.
Additionally, the 2001 and 2003 tax cuts, which were proportionately larger for middle income earners, are set to expire over the next few years. The current budget, which both the President and Congress are working from, clearly contemplates allowing these tax cuts to expire. If these tax cuts are not extended, middle income earners will see a substantial increase in taxes.
According to the Tax Foundation, recently released IRS data show that the top one percent of taxpayers already pays more than the bottom 95 percent combined. In 1987, the wealthiest one percent paid 24.8 percent of all income taxes. Today the top one percent (1.4 million people) pays 40.4 percent of all income taxes while the bottom 95 percent (134 million people) pays 39.5 percent.
According to the Tax Foundation, "We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation." A recently released Congressional Budget Office (CBO) study shows that in 2006, the latest year for which there is data, the top 20 percent of income earners paid more than the bottom four quintiles combined. From 2000 to 2006, even after tax cuts in 2001 and 2003, the share of income taxes paid by the top quintile rose from 81.2 percent to 86.3 percent.
Based on the latest IRS data available, from 2006, the Heritage Foundation says that assuming income levels remain as high today, during a recession, as they were then, taxes would have to rise to 80 percent of taxable income for those above $200,000 just to cover this year's deficit. Clearly, taxes on middle income earners would also have to rise.
Raising taxes in a recession will impede growth and push the recovery even further into the future, especially now, where current proposals would cause most of the burden to fall squarely on small businesses. During a recession, businesses are unable to expand and create jobs, and individuals earn less or lose jobs. Raising taxes will make this worse.
Regardless of the claims of those pushing for an expansion of big government in Washington, continued overspending cannot be sustained by raising taxes on only the so-called wealthy. If Congress and the President do not control the unrestrained appetite for spending in Washington, all taxpayers are going to suffer increased taxes, which, especially during a recession, will harm the economy and further reduce the amount of income available to tax. We need to live within our means and spend responsibly. This is the way to spur growth and create the jobs the economy needs. Please visit http://crapo.senate.gov to see my record and policies on taxes.
Word Count: 602