The Big Question: Will the U.S. have to raise middle-class taxes?

Peter Navarro, professor of economics and public policy at UC Irvine, said:
It’s not the U.S. that it is the issue. It is the Obama administration. If it keeps creating unfunded entitlements AND it keeps taxing capital, our economy will be choked by debt and slow growth and EVERYONE will have to pay more taxes. But that will only be self-defeating. Dumbest smart economics team I’ve ever seen.

Craig Newmark, founder of Craigslist, said:
People out here fear that we have to pay for tax breaks for the rich, and for the Iraq war somehow, and maybe raising taxes is the only way.

David Schanzer, director of the Triangle Center on Terrorism and Homeland Security, said:

Fixing Social Security, paying for Medicare, funding our military, and meeting our domestic obligations, while at the same time reducing the debt, is going to require a package consisting of both benefit and spending cuts and revenue enhancements. Everyone knows this and anyone that excludes either benefit cuts or tax increases is not being honest or is more interested in politics than problem-solving. On the revenue side, whether there will be taxes and fees on the middle class depends on how you define the term “middle class.”  The revenue burden should fall as much as possible on those who can afford it the most, but the enormity of our fiscal problem cannot be solved by targeting only the super-rich and rich. Eventually, to solve this problem, we are going to need additional revenues from two-worker families making in the low- to mid-six figures — perhaps a police officer and a teacher. Many would consider such a family to be middle class.

John F. McManus, president of The John Birch Society, said:

The national debt is so huge that paying it down cannot be done by
raising taxes alone.  The other recourse, the far more substantial
recourse, is to cut back the size and cost of government.  It is in this
area that substantial debt relief can be found.
 
Any sensible person would say that a nation so heavily indebted as ours
already is would cease a foreign aid program.  The fact that our leaders
don’t even consider this is a measure of the times in which we live. 
The United States is already the most heavily indebted nation in all
history.  We are headed for self-inflicted destruction and we give away
tens of billions each year!  Brilliant!
 
What else besides foreign aid should be abolished?.  How about the
Departments of Education, HUD, Energy, Transportation, and many more? 
How about repealing the recently enacted monster healthcare measure
before it lives up to its potential to cost more mega billions?  How
about bringing military forces home from the more than 100 nations where
we have posted them?  No one has to have a Ph.D. in economics to know
the huge cost of what has rightly been termed empire building.
 
Unemployment dogs the land but the federal payroll has risen while so
many Americans can’t find a job.  This is looneyville and worse.
 

Our situation is the equivalent of inmates running the asylum.

 
Damon N. Spiegel, entrepreneur and writer, said:

Unfortunately the answer is yes. Taxes are going to have to increase for
everyone. It is time that everyone shared in the debt and not just the
wealthy. The wealthy continue to support the mismanaged and misguided
lifestyle of millions of Americans and this government itself.

The wealthy will end up buying millions of homes, significant equity
interest in multinational organizations, paying for Healthcare and
eventually paying for Energy reform. How much longer can this continue
before the wealthy in America leave the country, Corporations move
offshore and the people of this country are so demoralized the drive for
success and entrepreneurship disappears!!! The middle class need to
share in the tax burden equally to the wealthy and in fact should
probably even be taxed more. However, what politician will step up to
the plate and do this?

Grover Norquist, president of Americans for Tax Reform, said:
 
Obama,
Reid and Pelosi are deliberately spending America into such debt that
they hope they can force America to accept a tax increase to pay for
their bailouts, payoffs and new entitlements. The alternative is to
change the government in November. Then and only then can we put a stop
to the bleeding.

We have seen the Democrats show their hand with a
series of leaks commending a European value-added tax as the way to pay
for a permanently larger federal government saddle atop the American
people.

We can have Obama-Reid-Pelosi-sized government and a VAT.
Or we can change the direction of the country in November and say no to
a VAT.

Hal Lewis, professor of physics at UC Santa
Barbara, said:

Absolutely. Give or take a few percent, half the
American people already pay no income tax.That half will always be
attracted to politicians who think of the treasury as a piggy bank to
which they have the key, and the debts they incur will have to be paid
by someone else. I like to say that our Founding Fathers had a battle
cry, “No taxation without representation,” while the current threat to
our stability is the opposite: representation without taxation. It
cannot last.

There are only two options, one being runaway
inflation (not many of us remember the Carter years, which provided a
taste of that particular Kool-Aid); the other being uninhibited
taxation, with its incentive for widespread tax evasion. From what I can
see of the Obama administration they are reconciled to the inflation
solution, but in their heart of hearts they must know that it is one or
the other, and neither can work in the long run. Was it Louis XV who is
alleged to have said “apres moi le deluge”?

Michelle
D. Bernard, president and CEO of the Independent Women’s Forum,
said:

Congress may avoid raising taxes directly on middle-class
income in the short term, but if this reckless over-spending continues,
tax increases are a certainty.

House Ways and Means Chairman
Sandy Levin (D-Mich.) has
indicated that Congress will work to extend portions of the Bush
tax cuts to preserve rate reductions for individuals making $200,000 and
couples making $250,000. Yet the middle class will be affected when
rates on higher income classes go up, since many of those top earners
are actually small employers, and increasing taxes on income and
investment will be bad news for the economy, stifling economic growth
and affecting everyone.

Ultimately, taxes likely will go up, but
they shouldn’t go up. Federal outlays increased by more than 50 percent
in real terms during the last decade  (Table 1.3).
That means there is plenty of room to cut spending, instead of placing a
larger burden on taxpayers. Yet cutting spending requires tough choices
from leaders, and that’s not exactly something Congress is known for. 

John
Feehery, Pundits Blog contributor, said:

The fact of the
matter is that close to 50 percent of Americans get more money back from
the federal government than they pay in. That is unsustainable. If
people want a government that delivers basic services, that provides for
a national defense, and for a social safety net, more people have to
pay more in than they get back. It may not be politically popular at the
moment, but that is cold hard truth.  

Dean Baker, co-director of the Center for Economic and Policy Research, said:

Let’s start with basic logic: The United States never has to pay down the debt. If I weren’t using a BlackBerry I would repeat that a few thousand times so that every reporter might at least notice the statement, even if they didn’t understand it.

The debt-to-GDP ratio fell from over 110 percent after World War II to less than 30 percent by 1980 even though the debt grew almost every year. The point was that the economy grew more rapidly. The key issue is to keep the debt-to-GDP ratio from exploding, not paying down the debt.

The most important thing that we need to do to keep the debt-to-GDP ratio from rising is to control healthcare costs. If our per-person healthcare costs were the same as those for Canada, Germany or any other wealthy country, we would have enormous surpluses for the indefinite future.

There are two other ways we can ensure that our deficits stay within a manageable range. First, we can restore defense spending to the pre-war level. This could save close to $400 billion a year. Second, we can impose a tax on financial speculation like the one in the UK. This tax could raise $150 billion a year.

Before we look to raise taxes on the middle class, these alternatives should be considered.

Bernie Quigley, Pundits Blog contributor, said:

Yes, but it may already be too late. The crisis of the dollar is already upon us. Those who we consider to have the best of minds — Robert Rubin, Greenspan — altogether now seem surprised that the financial crisis occurred. When I listen to these economists it is like trying to listen to Don Cherry talk about hockey. I don’t have a clue what they are talking about. Possibly we think they are superior because they make no sense to us proles. While others who use historic and generational models actually predicted the crash, they seem to be ignored by these economists. Especially President Obama’s most favored, Paul Krugman, who bases his thinking on Isaac Asminov science fiction from the 1950s. The Eliot Wave theory has the dollar receding in 2011, the end of a 41-year arc. I couldn’t help notice that Tibetan prayer flags suggest the same sequence of rise and decline. We’d probably do better listening to the monks. My guess is that this time they will be right on target.