The Center issued a report yesterday giving five reasons why the new congressional committee on deficit reduction must consider revenue increases as well as spending cuts in order to produce a balanced plan. In brief, they are:
Spending cuts alone can't do the job. The key fiscal policy goal is to reduce deficits sufficiently to stabilize the debt relative to the size of the economy. The only way to accomplish this without severe cuts that would hit low- and middle-income Americans hard — in areas ranging from Medicare, Medicaid, and possibly Social Security to basic assistance for the poor — and weaken core government functions like education, scientific research, and ensuring safe food and water, is through revenue increases.
The 2001-2003 tax cuts are a significant contributor to projected deficits. Letting some or all of those tax cuts expire would make a significant contribution to reducing the deficit.
Higher-income people can and should share in the sacrifices needed to reduce long-term deficits. Low- and moderate-income households shouldn’t be forced to bear a disproportionate share of the burden through cuts in Medicare, Medicaid, Social Security, and programs targeted on people who are poor or near-poor.
Taxes are low both in historical terms and in comparison with other countries. By either standard, the United States has significant room for increasing tax revenues.
Higher taxes are not an inherent barrier to economic growth. In fact, the Congressional Budget Office (CBO) has said that tax increases used to reduce budget deficits can improve long-term economic growth and job creation. The experience of the 1990s shows that claims that reasonable revenue increases will sink the economy largely reflect politics and ideology, not solid analysis.