Taxes will go up. Heres why. - By Robert J. Samuelson
By Robert J. Samuelson April 30 at 8:05 PM
Let’s be clear: America is an undertaxed society. Our wants and needs from government — the two blur — exceed our willingness to be taxed. This has been true for decades, but it’s especially relevant now because the number of older Americans, who are the largest beneficiaries of federal spending, is rising rapidly. Unless we’re prepared to make sizable spending cuts (and there’s no evidence we are), we need higher taxes.
To the extent that President Trump’s proposed “tax reform” obscures or worsens this inconvenient reality, it is a dangerous distraction. We cannot afford large tax cuts, which are pleasing to propose (“something for nothing”) but involve long-term risks that are not understood by the president or, to be fair, by economists. Piling up massive peacetime deficits is something we haven’t done before. We cannot know the full consequences.
Of course, Trump proposes some good ideas. Tax rates would drop for businesses and individuals. Many deductions would end. Some tax relief would go to low- and middle-income households with children — a deserving group. There are also familiar complaints. Too many benefits, it’s said, go to the wealthy. (A similar plan by candidate Trump channeled nearly half the cuts to the richest 1 percent, said the nonpartisan Tax Policy Center.)
But the plan’s fatal defect is its effect on the publicly held federal debt. In 2016, this was $14 trillion, or 77 percent of the economy (gross domestic product). “During only one other period of U.S. history — from 1944 through 1950, because of the surge in federal spending during World War II — has that debt exceeded 70?percent of GDP,” the Congressional Budget Office says. Under present policies and reflecting the older population, the CBO projects the debt to reach $25 trillion and 89 percent of GDP by 2027.
Just how much Trump’s tax plan would add to this is unclear. We don’t yet have sufficient detail to judge. But the amount could be considerable. Lower rates aren’t matched by revenue-raising provisions. The nonpartisan Committee for a Responsible Federal Budget puts the likely 10-year cost at $5.5 trillion with a range from $3 trillion to $7 trillion.
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