Friday, July 8, 2011

We need to control spending, but Grover Norquist's dogmatism doesn't help

As the following chart shows, the government is spending money at record levels, and that spending is expected to increase even more in the following decades:

Given this unprecedented level of spending toward which the country's current fiscal path will take us, it makes perfect sense that the Republicans should take income tax hikes off the table. Clearly, the problem is almost entirely spending. Despite all the rhetoric about raising taxes on "millionaires and billionaires," there are just not enough of them to make much of a dent in the debt even if we taxed them at 80-90%. Raising taxes to the levels shown in the chart would require suffocating tax hikes on all levels of the middle class.

What puzzles me, though, is how much resistance there has been to ending certain tax breaks for select groups of people. Consider the ethanol tax break, for instance. Putting corn-based ethanol in gasoline hurts almost everyone: it raises food prices, wears out car engines, requires tons of fertilizer (which pollutes the water), and significantly lowers gas mileage to the point where the effect on carbon emissions is practically canceled out. The Senate recently voted to end this tax break, only to be rebuked by Americans for Tax Reform president Grover Norquist. Norquist claimed that the vote was not about ethanol at all, but about raising taxes.

This seems to be going too far. If we want to balance the budget, we will need to roll back more of these tax breaks and loopholes that only serve to give artificial advantages to certain people. This is not akin to raising taxes on everyone. Quite the opposite, it will allow government to keep tax rates low by making sure that no one is able to skirt the system. It will also cut down on the crony capitalism that has become more and more endemic in Washington over the past decade.

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