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. This report focuses on 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.
Author(s): Brian Riedl
Publication Date: 20 May 2021
Publication Site: Manhattan Institute