When Professor Mishra and I debated the Bush tax cuts last week, he made the following point:
Should we let the Bush tax cuts expire for those who earn more than $200,000, in order to rein in the current budget deficits, at an all-time high, to pay for government spending? It would bring in revenue of only $630 billion over the next 10 years, according to the Office of Management and Budget.
In other words, we have a chance to reduce the budget deficit by $63 billion per year, but we shouldn’t do it. Not because anything bad would happen. Just because it’s “only” $63 billion.
“Because it’s too small” is not a good reason. There is no magic bullet. If you’re looking for an economically neutral way to cut $1.3 trillion all at once, it doesn’t exist. You cut $50 billion here, you raise $100 billion there, and eventually you’ve reduced the deficit significantly.
If $63 billion isn’t enough, how about nudging it a little higher? According to the Center on Budget and Policy Priorities:
Returning the average tax rate on the top 1 percent of taxpayers to its 1996 level of 29 percent could raise about $100 billion a year, or $1 trillion over the next decade.
And if we take Warren Buffett’s advice and raise the rates on individuals with income over $1 million even higher, the Tax Policy Center predicts additional tax revenue of $47 billion per year. If we apply the same rate to capital gains and dividends, that number goes up to $75 billion, bringing the grand total somewhere near $150 billion per year.
I don’t know about you, but that sounds like real money to me.
Notice Professor Mishra didn’t offer a single downside to raising the top tax rate. Notice he didn’t argue that the Bush tax cuts were effective or worth the cost — because they weren’t.
The only defense he could muster was: Why bother?
Gotta love that can-do American spirit!