On the Deficit Commission’s Revenues

Not long ago, a friend questioned my post when I suggested addressing the deficit through tax increasing and spending reduction. I thank President Obama’s deficit commission for supporting my point.

The leaders of the bipartisan deficit commission recently released their ideas that will serve as the groundwork for their work ahead. Erskine Bowles (D) and Alan Simpson (R) realize the fastest way out of the deficit situation is the no-brainer, two-prong approach of increasing revenues and decreasing spending. However, we must think of politicians as marketers.

Take tax cuts, which in themselves decreases government’s revenues – thus a direct contradiction to the commission’s aim. To sell it to the people, the politicians must promote cutting taxes while disguising tax increases. Although President Reagan’s tax cuts greatly reduced the tax burden on the rich – the tax at that time was ridiculously high – the middle class also received a lower tax rate at the expense of fewer deductions – and in the end, paid more taxes (amount). A brilliant bit of salesmanship.

It’s simple – lower tax rates coupled with a deduction reduction means we (taxpayers) can actually pay more taxes (amount) while believing we are paying less (a lower rate).

As the current commission examines tax cuts, they have also made it known that deductions would decrease and other taxes, such as a 15% increase gasoline tax, would take effect. To my friend and others I ask this question, “Which way do you want tax increase: overt or covert?”

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