What is greatest contributor to our deficit?

[Ogie Oglethorpe]

Need to change the entirety of 60 years of income taxation to climb above 20% of the GDP in tax receipts.

http://online.wsj.com/article/SB1000...728420184.html

To be clear, the revenues required to balance the budget long term would necessitate sustained revenues on the order of 22% of GDP (according to the revised administration budget proposal).

http://online.wsj.com/article/SB10001424052748704071704576276584062512382.html?mod=WSJ_Opinion_LEADTop

A level never before accomplished in terms of revenue generation and certainly not in a sustainable fashion.

Thus the only rationale solution is spending reductions to be in line with demonstrated sustained revenues as a percentage of GDP.

[giblets]

Why would it be impossible to tax 22% of the GDP?

[Kitschum]

Fat Americans overloading the health care system

[KrazyHorse]

Why would it be impossible to tax 22% of the GDP?

It wouldn't be impossible. However, when you add it to state & local taxes, and you take into consideration the narrow base of US federal taxes, it might be very difficult. And GDP wouldn't be close to as high as otherwise.

[giblets]

I think I see what you mean- we would have to raise federal tax rates for the middle class and not just top earners if we wanted that much federal revenue.

[Hauldren Collider]

KH, it doesn't help that there is a federal tax credit for state taxes.

[Ogie Oglethorpe]

It wouldn't be impossible. However, when you add it to state & local taxes, and you take into consideration the narrow base of US federal taxes, it might be very difficult. And GDP wouldn't be close to as high as otherwise.

Agreed. In addition and furthermore, the first article makes a point that regardless of historical tax rates, tax avoidance mechanisms were exercised such that a historical cap of no greater than 20% of GDP has ever existed. I find it impossible to conceive that lawmakers will give up the power to pick and choose winners in the tax code to remove deductions.

Be that as it may even if lawmakers stripped deductions, ultimately the last refuge of tax avoidance (for those wealthy enough to exercise the option) is flight to more hospitable tax environments (in other words "GDP wouldn't be close to as high as otherwise.")

[giblets]

Prior to Reagan, it was the norm for federal spending to not exceed 20% of GDP. So I don't see what is s surprising about how <20% federal tax revenues is also a historical norm.

[Ogie Oglethorpe]

It allows for a presumption of approximately 3.0% ish GDP growth (historically basis). Operation of economy outside/above that 20% taxation rate (actually overall taxation rate inclusive of local, state etc. taxation burden but using the federal taxation rate as a proxy) of GDP nullifies the long term assumptions of GDP growth. It will be less than that.

[pchang]

What happened to Medicare as a choice? That is the US's largest underfunded liability.

[KrazyHorse]

Including it wouldn't allow MrFun to present people ideologically different from himself with a Hobson's choice.

[KrazyHorse]

KH, it doesn't help that there is a federal tax credit for state taxes.

I agree; that is another deduction I favor eliminating. I don't know why you think it wasn't included in the "narrow base" comment. The base is not just the population to which taxes apply, but the amount of money exposed from each person.

[KrazyHorse]

Prior to Reagan, it was the norm for federal spending to not exceed 20% of GDP. So I don't see what is s surprising about how <20% federal tax revenues is also a historical norm.

Let's not forget the chart on page 2 of this document:

http://www.oecd.org/dataoecd/41/15/32504422.pdf

And that is with taxes (as a share of GDP) which increased only moderately (e.g ~10-15%% of GDP) in most Euro countries relative to the US, AND tax systems which are far less distortionary and generally flatter than that employed at the federal level in the US.

A 20% increase in hours worked (in the formal sector) for the US vs a 10-20% reduction in hours worked in most Euro countries over a time period when Euro countries significantly increased their taxes and spending.

There is a great danger that significant tax increases (especially via marginal rates) simply will not bring in that much more in revenue, in absolute terms.

[giblets]

How do you know it isn't a cultural difference? Canada has roughly the same work trends as the US, while taking in significantly more tax revenue than the US. I would expect that to be a better indication of how Americans would react than a European country.

[KrazyHorse]

1) The proper comparison is to the change in taxes raised, not the level. Please think.
2) Canada takes in just over 30% (total federal, provincial & local), the US takes in just under 30% (federal, state and local). Most continental euro countries take in from the low to high 40s.
3) Again, this is a TREND. What cultural CHANGE do you attribute the CHANGE in labor markets to?