Where Will Your Taxes Go?

December 5, 2012

The federal budget process is one of the most complex and confusing issues for every day Americans to follow.

It is made no easier by politicians who offer confusing rationales for and explanations of their spending choices.

For example, should Americans expect revenues from tax increases to go to deficit reduction, or is it more likely these revenues will be spent? According to our polling, its the latter, with 57 percent believing additional tax revenue would go to more spending while only 32 percent believe it will go to deficit reduction.

Here are the facts: raising taxes on the highest-earning Americans – families who make more than $250,000 a year and individuals who earn $200,000 – would increase revenues by about $82 billion a year. While President Obama has repeatedly said raising taxes on these Americans is necessary to cut the budget deficit (here is what he said just last month, “If we’re serious about reducing the deficit, we have to combine spending cuts with revenue and that means asking the wealthiest Americans to pay a little more in taxes.”), as part of his initial fiscal cliff proposal, the president asked for $50 billion in new spending for infrastructure, another new stimulus.

Leaving aside whether the first stimulus worked (after more than $800 billion spent the unemployment rate has barely budged), it now appears President Obama and Democrats want to spend almost every dime – at least in 2013 – that they would raise by increasing taxes.

Both parties are guilty of trying to hide their high-spending ways. As The Wall Street Journal explains this morning, both parties use “baseline” budget numbers – a made-up set of estimates about future spending – to measure their spending cuts.The Journal explains, “Both the White House and House Republicans are pretending that their goal is ‘reducing the deficit,’ … Here’s the reality: Those numbers have no real meaning because they are conjured in the wilderness of mirrors that is the federal budget process. Since 1974, Capitol Hill’s ‘baseline’ has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms.”

Here is what this type of budgeting would look like if the typical American family used it: this year the parents spent $1,000 on clothing; for 2013 they’d planned to spend $1,200. Now mom and dad have discovered they won’t be getting their annual raises or bonuses. Instead of spending $1,200 on clothing they decide to spend just $1,100. That figure is a still an increase over their 2012 spending, but is $100 less than what they had planned to spend.

Would the typical family consider the new budget a cut or increase in spending?

It’s time Washington leaders cut out the gimmicks, be up front with the American people, and get serious about spending cuts.

Tags:, , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *