J.T. Young. a former Bush administration staffer in Treasury and the Office of Management and Budget, offers the following information in a Human Events column to those who believe “taxing the rich” will solve the federal government’s budget problems:
The most interesting part of liberals’ lament over receding revenues is their neglect of the obvious reasons for it.
First and foremost, federal revenues are where they are, because the economy is where it is. The federal tax system simply harvests income. If the nation’s income does not grow sufficiently, less rises to the height of the tax man’s scythe. Washington reaps less—along with everyone else. The proof of this came just four short years ago. In 2007, federal revenues equaled 18.5% of the gross domestic product (GDP). This is significant—besides being above the 40-year average, 18% of the GDP, according to the Congressional Budget Office (CBO)—because the above-average level was produced during the Bush tax cuts.
Liberals are exceedingly fond of blaming today’s low revenue levels on the Bush tax cuts. However, as a percentage of the GDP, the 2007 revenue level is also very close to the 19% average of the Clinton years.
Second, follow the Left’s logic: If the current tax system is the problem and the Bush tax system produced above-average revenue levels relative to the economy, then the fault lies … where? The answer would seem to be with tax changes made since Bush left office. That would mean under a Democratic Congress and administration. Strangely, the Left never makes that accusation.
Another flaw in the liberal argument is the assertion that federal revenues are low. The CBO estimates that even with a still-recovering economy, Washington will collect $2.228 trillion this year. That would have been sufficient to have balanced the 2003 federal budget.
The final flaw in the Left’s argument is that revenues are low because “the wealthy” are not paying their taxes. The top quarter of filers actually pay almost all the nation’s taxes. According to Congress’ nonpartisan Joint Committee on Taxation, the top 22.9% of tax filers pay 97.2% of all federal income taxes. More than half the population (54.2%) pays a negative share (-7%) of the federal income tax burden.