How Far Can Taxes Hikes Get Us?

Apr 22 2011 @ 5:42pm

Kevin Drum, weary from his tax-battle with McArdle, provides a back-of-the-envelope tax plan. He "took the deficit reductions in the Rivlin-Domenici plan and converted them into one-third spending cuts and two-thirds tax hikes." The basics:

The poorest don't get hit at all. The 2nd quintile has to pay an additional 2% of their income in taxes. The middle quintile pays an additional 3% of their income. All the way to the top 1%, who pay an additional 12% of their income. All of this adds up to 7% of total national income.

Remember, this is only the tax half of the deficit plan. To make the numbers come out, you'd also need spending cuts amounting to about half of the tax increases.

He writes that the plan, while very rough, "does show that if we rein in the deficit with a 2:1 ratio of tax hikes to spending cuts, the tax increases can still be quite manageable."