Tax increases off the table

While talking about the GOP stance on increasing the debt limit John Boehner recently stated that "Nothing Is Off the Table Except Raising Taxes."

First it should be noted that the vast majority of Americans are in favor of raising taxes on the rich to help with our current budget deficit.

Second the effective tax rate for Americans is at it's lowest point since the end of WWII.

Third, the goal should be getting money into the hands of people who will spend it. The government and the poor are much more likely to spend every dime they get than the rich who show a high propensity for saving when taxes are cut.

So tax increases being off the table do not represent sound or popular thinking regarding the budget deficit.

The Republican stance is that we don't have a taxing problem we have a spending problem. To some extent they are correct. We have a spending problem but that problem is military spending. While our current budget deficit as a percentage of GDP is very high it was higher in the 40's. It should come as no surprise that WWII had a negative affect on our budget deficit. We should also not be shocked that all of our current military actions are expanding our deficit. The Iraq and Afghanistan wars have been the second most expensive military actions behind only WWII and similarly our current budget deficit is second only to that of the WWII era.

While we obviously have a spending problem that we need to work on we do also have a tax problem. In 2009 the tax code was filled with $1.1 trillion in tax breaks. The problem is that these tax breaks favor some segments over others. One example of this is the Drug industry which pays an average effective tax rate of 5.4% while the Electric Utilities industry pays 33.8%. I would say that sort of disparity represents a problem.

It also makes the Republican talking point of businesses fleeing the country to places like Ireland, with their 12.5% tax rate, somewhat less plausible when a number of industries actually already pay less here in America.

If the goal is to eliminate the Federal Government than taking tax increases off the table makes sense. If however your goal is to reduce the budget deficit the data shows keeping tax rates low will do more harm than good.