Tax Increase Theater

In order to score rhetorical points, the Democrats are proposing raising taxes on the rich back up to Clinton-era levels. That means that the top tax rate will rise from 35% to 39.6%. That is an increase on one tax bracket of about 11%, and it shows not only that the Democrats are not interested in balancing the budget it shows that they believe the voters are idiots for thinking that 8% increase is what is needed to balance the budget.

Currently, approximately 66% of the government spending is paid for by taxation and 33% is paid for by borrowing. If the Democratic Party wants to balance the budget through tax increases, it would require approximately a 50% tax hike across the board, on all taxes and tax brackets. The top tax bracket would have to go from 35% to 52.5% which would not be displeasing to Democrats if they feel the voters wouldn’t react negatively. But that involves only taxing the rich, and a serious attempt to balance the budget through taxation will involve more than just taxing the rich.

Old rate	New rate
10%	15%
15%	22.5%
25%	37.5%
28%	42%
33%	49.5%
35%	52.5%

That doesn’t include the other taxes, which must also be raised by a similar amount. The 7% employee contribution and 7% employer contribution to Social Security must go to 10.5%, and similar increases are needed to all other federal taxes. This includes, by the way, the very unrealistic assumption that this massive across-the-board tax increase will not result in a severe and nearly immediate economic downturn.

Some Democrats will protest that tax increases on the wealthy would be enough if they were high enough, but that argument is absurd. There aren’t enough people in the top two brackets and their combined incomes are not enough to cover the 33% of the budget that is in deficit. Only by taxing the rest of the population as well, including the 42% of the public that doesn’t pay taxes at all, can the budget be balanced. The taxes have to be on everyone, which is a proposal the Democrats are not courageous enough to make.

There are two ways to balance the budget, and they are through either tax increases or spending cuts. The Democrats clearly prefer the idea of using tax increases, but if their proposal is only a mild tax increase on the top brackets, their proposal is as much about balancing the budget as the Ryan Plan is about spending cuts – theater designed to give the illusion and appearance of doing something without any of the hard work of doing something.

If the Democrats in office are serious about using tax increases to balance the budget, and do without any spending cuts, then there is only one proposal that shows they are serious. It would be the Democratic Party equivalent of the Randall Paul budget proposal which cut the budget by $500 billion and even Senator Paul admitted didn’t go far enough. The real point of the current tax increase proposal isn’t to raise revenue or balance the budget, it is to encourage class jealousy in order to increase votes this coming November.