The WSJ does have one fact on its side when it sees taxes going up rather than down on the rich: “the draft proposal recommends overall that taxes go up by $751 billion by 2020,” it says. But that’s a cumulative figure, not an annual figure. Overall, taxes would be unchanged in 2012, go up on a net basis by a mere $20 billion in 2013, and rise as far as $160 billion in 2020. That’s substantially less than the $241 billion the chairmen want to cut in discretionary spending this year: their plan concentrates much more on spending cuts than it does on higher taxes to achieve deficit reduction.
The fact is that a net increase of $160 billion in 2020 is so small, compared to the overall tax base, and so far away in time, that it’s impossible to tell with any certainty at all who would be the winners and who would be the losers. Some taxes will go down, some deductions will go away, and other taxes will go up: it’s a complicated plan and the effect on various income strata is likely to depend enormously on how much any given taxpayer currently itemizes, and how much tax they currently pay on capital gains and dividends.
And the big picture is that the chairmen do not propose to reduce the deficit by raising taxes: indeed, they propose a hard cap on how much the government can get in tax revenue. This is a cost-cutting proposal, rather than a tax-hiking one. It also has zero chance of ever making it into law. But as an idea of where some kind of hypothetical bipartisan consensus might exist, the message is clear: no one’s interested in innovative new taxes, least of all a carbon tax. If the deficit’s going to come down, the technocratic elite wants to see that happen from spending cuts instead.
(This is cross-posted at Reuters.com)