There is a spending problem. Focusing on taxes implies that the problem is how to pay for spending — taxes or debt — not the spending itself. But, as Milton Friedman constantly pointed out, the real cost of government is the size of government. According to the CBO, the federal government is on track to consume 42 percent of GDP by 2050. (State and local governments will consume another 10 to 15 percent of GDP.) Would we really be better off if we raised taxes enough to pay for all that spending?
You can’t tax enough. The president keeps talking about solving our deficit problems by taxing millionaires and billionaires. Congressional Democrats throw in oil companies. But you could confiscate — not tax, confiscate — every penny belonging to every millionaire in America and cover barely one‐tenth of our government’s total indebtedness (including the unfunded liabilities of Social Security and Medicare). Meanwhile the tax breaks for oil and gas companies amount to about $1.4 billion annually. Those tax breaks may or may not be defensible, but they amount to less than 1 percent of this year’s budget deficit.
Bait and switch. If you look at most of the deficit‐cutting proposals, including the president’s, they call for tax increases today in exchange for spending cuts somewhere in the future. I think we’ve seen that movie before. In fact, the president’s proposal actually makes the bait‐and‐switch game worse. His proposal says that if Congress didn’t actually make those spending cuts, there would be additional tax increases. So Republicans would be agreeing to tax increases today in exchange for . . . more tax increases tomorrow.
Tax hikes are bad for the economy and for freedom. Of course it’s an exaggeration to suggest that all tax cuts pay for themselves, but there is no doubt that high taxes discourage the type of investment and risk‐taking necessary to grow the economy and create jobs. Every dollar that the federal government takes in taxes is one less dollar that the private sector can save, invest, or spend as it sees fit. Unless you believe that the government knows better than the private sector what to do with that money, this exchange hurts the economy. And unless you believe that our money really belongs to the government, it means we are less free to make use of the fruits of our labor as we see fit.
Republicans should not fall into the trap of reflexively defending every special‐interest loophole in the tax code. But neither should they be seduced by the argument that we need a “balanced” approach to deficit reduction that includes tax increases. Government is too big, too intrusive, and too expensive. It doesn’t take more taxes to fix that.