$250,000 is the new million*

WSJ:

. “Polls consistently find that a majority of Americans believe any new taxes will be spent by the politicians,” pollster Scott Rasmussen told us recently in an interview.

Many Americans are RIGHT.

In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio University co-authored a often-cited research paper for the congressional Joint Economic Committee (known as the $1.58 study) that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Subsequent revisions of the study over the next decade found similar results.

We’ve updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.

The more of our money they get, they more they will spend. EOL. Higher tax collection results in higher spending.

Yesterday, I was reading around the internets, and a blogger noted that in times of plenty, social spending advocates insist that we need to improve our social safety nets because we can. In time of “less” (like now) we need to increase social spending because we must. Spending always goes up. It only goes up.

This is exactly the opposite of what the tax-increase lobby in Washington is preaching today. For example, Erskine Bowles, co-chairman of the president’s deficit reduction commission, suggested at a briefing several months ago that there will be $3 of spending cuts for every $1 of tax increases. Sound familiar? Reagan used to complain that he waited his entire presidency for the $3 of spending cuts that Congress promised for every dollar of new taxes he agreed to in 1982. The cuts never came.

No tax increases. Quick review – and I think every school-child should be forced to memorize these numbers:

The top 1% (those making over $380,354) pay 38.02% of the Income Taxes in this country.
The top 5% (you know, those millionaires making between $159,619 and $380,353) pay 58.72%.
The top 10% pay 69.94% of all the income tax in the United States.

The bottom 48% pay virtually NO INCOME TAXES.

Of course, a member of the deficit reduction commission is floating a wonderful new idea … a 6.5% national sales tax.

I bet those living in areas that currently ALREADY impose a high sales tax will be pleased.

*title has little to do with the post, but I read it in the WSJ comments and loved it so much I stole it.

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