Federal tax increases still off limits

By Tom Hintgen (Contact) | The Daily Journal

Published Monday, February 11, 2008

Campaign calls for higher federal taxes, for the most part, have been off limits for most politicians since 1984. That year Democratic presidential nominee Walter Mondale told American voters that a federal tax increase would be necessary to pay for government services that people demand.

Mondale lost in a landslide to Ronald Reagan. Since then, honesty — when it comes to fiscal responsibility — is seen as the wrong approach by many politicians.

In theory, no tax increases and implementation of tax cuts are expected to be accompanied by cuts in government spending. Many politicians also point out that lower taxes will, down the road, result in more money for the public coffers.

“Real conservatives have always supported low taxes and low spending,” GOP presidential candidate Ron Paul said. “But today, too many politicians and lobbyists are spending America into ruin. We’re nine trillion dollars in debt as a nation. Our mounting government debt endangers the financial future of our children and grandchildren.”

A week ago President Bush submitted a $3.1 trillion budget for the next fiscal year. The blueprint, in part, calls for substantially boosting military expenditures, reining in domestic spending and more than doubling the deficit.

White House budget director Jim Nussle acknowledged that the federal deficit will double from $162 billion in fiscal 2007, which ended last September, to more than $400 billion in both fiscal 2008 and 2009.

Candidate Paul said the Federal Reserve, our central bank, fosters runaway debt by increasing the money supply.

“This makes each dollar in your pocket worth less,” Paul said. “The Fed is a private bank run by unelected officials who are not required to be open or accountable to we the people. Worse, our economy is increasingly in the hands of foreign governments such as China and Saudi Arabia, because their central banks also finance our runaway spending.”

Paul also said we cannot continue to allow lobbyists and others dictate the size of our ballooning budget.

Former Arkansas Governor and GOP presidential candidate Mike Huckabee was soundly criticized by fellow Republican candidates for raising taxes. However, Huckabee said that increased taxes had popular support in Arkansas and that a modest sales tax increase approved by the state Legislature in 2003 was a response to court-mandated education reforms.

Huckabee said many tax-cut proponents don’t understand what it takes to run a state government. He argues that his policies of taxing gasoline sales to pay for road construction and using state revenue — through higher taxes — to pay for poor children's health insurance did not ravage the pocketbooks of Arkansans. Rather, he said higher taxes provided desperately needed services to his state.

Reaganomics supporters, on the other hand, point out that tax cuts during the Reagan administration replaced the deepest recession since the Great Depression — with the largest 20-year boom in American history. They said that tax revenues actually grew faster in the low-tax 1980s than in the high-tax 1970s.

Former Treasury Secretary Robert Rubin points out that baby boomer retirements could lead to a reduction in Social Security and Medicare benefits. That could necessitate tax hikes — much to the disdain of Republicans and Democrats alike.

In the end, Mondale might be right. Federal tax increases could be necessary to pay for government services that people demand.

Tom Hintgen is a reporter with The Daily Journal. His column appears Mondays.