Are Higher Taxes Solving Fiscal Problems, either in Washington or California?

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Source: danieljmitchell.wordpress.com --- Sunday, July 21, 2013
The budget deficit this year is projected to be significantly smaller than it has been in recent years and some of our statist friends claim that this shows the desirability and effectiveness of higher taxes. I?m not persuaded, mostly because our big long-run fiscal challenge is a rising burden of government spending . And the fact that federal tax revenue is gradually climbing back to the historical norm of about 18 percent of GDP doesn?t change the fact that we have a looming entitlement crisis ? as illustrated by very sobering estimates from the BIS , OECD , and IMF . I discuss the implications of tax revenue in this interview Charles Payne of Fox News. There was no opponent to debate, so here are some additional details on issues that were discussed in the interview. Higher taxes lead to higher spending ? The evidence from Europe is very compelling about the tendency of politicians to spend more money whenever more revenue is an option. Heck, even the New York Times accidentally admitted that tax hikes encourage bigger budgets rather than less red ink. It?s theoretically possible, of course, for politicians to raise revenue without raising spending, but the starve-the-beast research suggests it?s quite unlikely. Retroactive tax hikes can raise revenue?in the short run ? I think California voters made a big mistake last November when they voted to impose a top state income tax rate of 13.3 percent. And that punitive regime alm ...

Source: http://danieljmitchell.wordpress.com/2013/07/21/are-higher-taxes-solving-fiscal-problems-either-in-washington-or-california/

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