The Club for Growth is spinning out of control. First, we get their blog quoting the WSJ editorial page with:
But after receiving a federal bailout for a fiscal “crisis” that never materialized, America’s 50 state governments now find themselves benefiting from a revenue boom. So how about repaying the $20 billion handout they’ve received from the feds as part of the 2003 tax-cut deal? The states certainly have the money. While taking Uncle Sam’s checks last year, the states increased spending 3% and still ended up with $18.5 billion in their rainy day funds. Thanks to the economic expansion, this year Americans will pay $12 billion more to their state governments than they did a year ago, while state spending is expected to climb 4.5% and reach a total of $547 billion, according to the most recent fiscal survey by the National Governors Association and the National Association of State Budget Officers. At no point in the recession and slowdown earlier this decade did overall state spending decrease from one year to the next.
It is true that the Bureau of Economic Analysis (see table 3.3) seems to be reporting that the $25 billion total state and local deficits as of 2002 may have been virtually gone as of 2004 given the fact that the modest increases in nominal revenues were a bit larger than the increases in nominal spending. But the increases in nominal spending were less than inflation so real per capita state spending fell significantly.
Also check out Louis Woodhall’s post on the Social Security Laffer Curve. First he tries to tell us Federal tax revenue fell in 2000, which is not true – and next he is claiming Federal revenues are above their 2000 levels. Take a look at BEA’s NIPA table 3.2 and you will see this is not true either. The big picture in Louis’s rant is:
So, the reasons that Social Security reform cannot include tax increases are as follows:
1. Tax rates for the highest income earners are still above the optimum level and raising them will result in lower economic growth and lower tax revenues. Eliminating the so-called “cap” (the maximum amount of wages subject to Social Security taxes) would constitute a huge increase in the top marginal tax rate and would therefore also reduce government revenues.
2. While it would be possible to squeeze more tax revenue out of middle- and lower-income workers, it would be wrong to do so—they are already struggling financially in today’s economy.
Odd he would bring up the fact that those earning more than $90,000 a year pay a zero marginal rate as far as employment taxes. Especially since Bush’s Social Security deform will maintain this “payroll contribution” to the Trust Fund as it strips away the promised retirement benefit for middle- and lower- class workers. Paying the same level of taxes and having to augment their retirement portfolios on their own is going to increase their financial difficulties. But hey, the Club for Rich People can’t afford to pay more in taxes.