Why Higher Taxes Won’t Pay for New Welfare Programs


Monday June 12th, 2017   •   Posted by Craig Eyermann at 6:41am PDT   •  

Economist Tyler Cowen has a thought-provoking op-ed in Bloomberg that challenges the government bureaucrat industrial complex argument that higher taxes on the rich will provide enough money to pay for every welfare program they want. Here’s perhaps the most eye-opening part of Cowen’s article:

If we look at the overall fiscal position of the U.S. federal government, we are spending beyond our means and the future will require some mix of spending cuts and tax increases. According to a report from the Government Accountability Office: “To close the gap solely by raising revenues would require a revenue increase of about 33 percent, and maintaining that level of revenue, on average, each year over the next 75 years.” I would submit that revenue increases of such magnitude are unlikely or perhaps even impossible, and thus any new spending will have to come out of other government spending. In other words, for better or worse, we’ve already committed to spending that tax increase on the wealthy that you were planning to use for other purposes.

The same GAO report indicates that a sustained 25% reduction in the U.S. government’s planned, non-interest spending would also close the nation’s fiscal gap. The difference between using the U.S. government’s tax revenues and its spending to achieve that end is that unlike tax collections, which are periodically affected by things like recessions, U.S. politicians can always control exactly how much the government spends. But only if they choose.




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