Cut government spending on the rich, rather than raising their taxes
To pay for a portion of its trillions of dollars in new spending the Biden administration is looking to raise taxes on an assortment of people, companies, and behaviors. While all of these hikes, be it on incomes, capital, estates, and much more, may make some in official Washington happy, they fail to check the bipartisan boxes everyone seems to think are so essential.
What might make everyone happy? The Manhattan Institute’s Brian Riedl suggests cutting spending…for the rich:
Members of Congress have increasingly demanded large tax hikes on upper-income families to finance large spending increases on top of soaring baseline deficits. But even the most aggressive tax hikes on the rich would make only a small dent in the long-term budget deficits, and they would significantly harm the economy. Before considering any new taxes, lawmakers should first reduce federal spending benefits for high-income families. This bipartisan strategy would achieve both the redistributive goals of the left and the spending restraint goals of the right.
Such upper-income spending cuts have several advantages over new taxes: 1) they will not harm economic growth, 2) they increase future policy flexibility, 3) they are better targeted, and 4) they promote political compromise.
Several programs target spending to wealthy Americans…three of the largest: Social Security, Medicare, and farm subsidies, where basic reforms could save upward of $1 trillion in the first decade, and substantially more in future decades.
That’s a good start, for a host of reasons Riedl outlines in his report. And there are other areas ripe for cutting, too, including:
…flood insurance, unemployment insurance, and several loan and loan-guarantee benefits for upper-income households, as well as corporate welfare spending in areas such as defense and energy.
Likewise, all good places to make cuts. If official Washington’s intention is to help the little guy, decrease income inequality, instill a measure of fiscal discipline, and help pay for all that spending, then the kinds of cuts Riedl suggests are exactly what should be under discussion — before any tax hikes.
Making such cuts the center of discussion would show the bipartisan political class is serious about what government does with the resources taxpayers give it. And surely, the politicians want to be taken seriously. Right?