WASHINGTON – Republicans are calling it “Taxmageddon,” the big tax increase awaiting nearly every American family at the end of the year, when a long list of tax cuts are scheduled to expire unless Congress acts. It would be, GOP leaders in Congress say again and again, “the largest tax increase in American history.”
Except it wouldn’t be, not when you take into account population growth, rising wages, and most importantly, the size of the U.S. economy. When those factors are taken into account, the largest tax increases were those imposed to help pay for World War II — back when the U.S. raised additional revenue to pay for wars instead of simply borrowing. Nevertheless, it is an exaggeration that has proved too tempting for top Republicans in Congress:
_ “Any sudden tax hike would hurt our economy, so this fall — before the election — the House of Representatives will vote to stop the largest tax increase in American history,” House Speaker John Boehner, R-Ohio, said in a May 15 speech in Washington.
_ “Before we leave for August, I expect to schedule a vote on legislation preventing the largest tax increase in history,” House Majority Leader Eric Cantor, R-Va., wrote in a recent memo to fellow House Republicans.
_ “Millions are unemployed and millions more are underemployed and the country is facing the largest tax hike in history at the end of the year,” Senate Republican Leader Mitch McConnell said Thursday in a speech on the Senate floor.
Anyone in the Republican party honest enough to recall how these tax cuts, originally, were both temporary and designed as stimulus? No….ok…just checking.
Anyone in the media going to call out these guys on camera about the reality of the extenssion? No…ok…just checking.
Before the 1940s, the individual income tax applied to only a small percentage of the population. By the end of war, the income tax was levied on most working people, with a top tax rate of 94 percent on income above $200,000.
By comparison, the current top rate is 35 percent, on taxable income above $388,350. If Congress does nothing, the top rate would return to 39.6 percent next year — the same rate that was in place for most of the 1990s.
In dollars, next year’s tax hikes would be the biggest. But the size of the economy is 80 times bigger than it was in the 1940s, which is why economists usually measure taxes and government spending as a share of the U.S. economy.
The 1942 tax increase represented more than 5 percent of the U.S. economy, as measured by the gross domestic product, or GDP. The 1941 tax increase was 2.2 percent of GDP, according to a Treasury Department paper published in 2006.
Next year’s looming tax increase would represent 2.6 percent of GDP — a huge tax hike but not the biggest.
Measured another way, the 1942 tax hike increased federal revenue by a whopping 71 percent, according to the Treasury Department paper. The 1941 tax hike increased federal revenue by 32 percent.
By comparison, next year’s potential tax hike would increase federal revenues by 16 percent, according to CBO.
Funny how when we actually use taxes to pay for wars it leads to “Great” generations. But when we use tax cuts to pay for wars, it’s obviously domestic spending that is causing the problem. The mind boggles, but when these guys keep getting away with spouting this b.s., there’s no reason to stop.
FACT CHECK: Republicans exaggerate size of ‘Taxmageddon.’