THE BLOG
12/26/2012 12:42 pm ET Updated Feb 25, 2013

The Case for a Tax Hike on 100 Percent of Americans

A clarification before we get started: I do not advocate big government. In my view, the U.S. government should strive to lower tax collections and substantially lower spending.

However, in the context of Americans having voted to enlarge government, I advocate firmly for across-the-board tax hikes on 100 percent of Americans. The Bush-Obama tax cuts should be sunset in totality for every tax bracket.

Here is why: Fiscal conservatism has two components -- smaller government and balanced budgets. A tax hike on all 100 percent of Americans allows us to at least come closer to the latter goal in the absence of any political will or consensus on the former.

If Americans truly believe that governments should grow bigger to provide more services and safety nets (somewhat along the lines of a fiscally troubled European Union) then Americans must surely be prepared to pay higher taxes somewhat along the lines of the EU as well. Not just wealthy Americans, all Americans.

Many have argued that raising taxes will hurt growth. Sure it will. But chasing growth through tax policy is not necessarily effective. Robust growth has eluded the U.S. in this recovery for several years despite exceptional fiscal and monetary stimuli. More potent policy drivers of growth include skilled immigration reform, health care cost reductions, deregulation, trade treaties, education overhaul, etc. The U.S. should chase growth through these policies instead of through tax policies.

Since there is no agreement on entitlement cuts, let the fiscal cliff kick in. Let taxes rise on 100 percent of Americans and 100 percent of small businesses. Let us get a little closer to balancing the budget. Let us share the burden of our votes -- if we voted for bigger government, let us all pay for it too.

I do not know how any voter can vote with a clean conscience to increase government services from a debt-ridden, fiscally precarious government without agreeing to pay more from one's own pocket. Let us not allow the Democrats (or anyone else, for that matter) to seduce the American voter onto such an immoral free ride.

NB: Raising all tax rates will increase the taxes on the rich beyond what both parties are currently negotiating as the rich will also incur higher tax rates on their lower tax brackets.

NB: The actual quantum of the national debt is well in excess of $70 trillion, not the often cited $16 trillion number, as one has to account for entitlement spending on an accrual accounting basis. The fuzzy math that the government currently reports its numbers with is a gross misrepresentation of reality.

To read more articles by Dinkar, click here.

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