Tax hikes needed with spending cuts
The total for fiscal year 2011 federal tax receipts was $2.3 trillion. Not too bad. The problem is that the federal government spends $3.6 trillion, and the additional money needed to cover the shortfall between tax receipts and spending is borrowed, which results in increasing the national debt.
The two largest sources of federal tax revenue are income tax (47 percent or about $1 trillion) and the payroll tax (36 percent or about $. 8 trillion). It is true that 47 percent of taxpayers do not pay income tax (mostly because they have low incomes), but everyone who receives a paycheck contributes to the payroll tax.
The Romney/Ryan ticket proposed the across-the-board 20 percent income tax rate cuts with appropriate elimination of tax loopholes so that the middle class does not pay any more in tax. This is improbable and without details it is impossible to believe. The across-the-board cuts will not apply to the 47 percent who do not pay any income tax, but the elimination of loopholes (tax deductions) could cause some low wage earners to pay more in income tax.
George W. Bush inherited a budget surplus in 2000, and instead of paying down the debt or maintaining the balanced budget, income taxes were reduced. This resulted in less federal revenue while federal spending was increased. The gross U.S. debt was $7.3 trillion in 2001, and it grew to $14.6 trillion by 2009 when Bush left office.
A fair budget would gradually increase taxes (mainly on those who can afford an increase) and eliminate unnecessary government spending (to include reductions in military spending). A fair budget would increase federal revenue and decrease federal spending, and in the end reduce the deficit (debt) as compared to GDP.
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