Income Taxes

Matt Miller, author of “The Tyranny of Dead Ideas”, in an op-ed in WSJ on 1/12/09 spoke with several former Congressional Budget Office (CBO) directors.

“If you do nothing on the spending side, you’re going to raise taxes whether you’re a Republican, a Democrat, or a Martian,” said Douglas Holtz-Eakin, the Republican-appointed director of the CBO from 2003-05.

Miller noted that Federal revenue today is 18.8% of Gross Domestic Product (GDP) and federal spending (excluding Fannie, Freddie and TARP bailouts) is 20% of GDP.

Holtz-Eakin notes that “pressures” (probably economic and social) could push spending and taxes to 23-24% of GDP, as much as 27% if health costs remain out of control. GDP is around $14T.

Dan Crippen is another CBO chief and adviser to McCain who predicts taxes of 22% of GDP by 2020, 24-25% by 2030. David Walker is another Republican (turned independent) who was comptroller general of the US from 1998 – 2008. Walker estimates taxes growing to 20-25% in the next 20 years, depending on how “radical” we get about cutting spending.

Matt Miller asked Holtz-Eakin why Republicans continue to tout tax cutting despite knowing that taxes have to go up. “It’s the brand,” Holtz-Eakin said, “and you don’t dilute the brand.”

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