More Tax Hikes and Economic Stagnation on the Way?

No one should be surprised, given the vast expansion of government we’ve witnessed recently.

On June 22, House Majority Leader Steny Hoyer (D-MD) declared that still more tax increases – beyond those already imposed, being phased in, and promised – are on their way.

The Associated Press reported:

"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," Hoyer, a Maryland Democrat, told a forum on deficit reduction…

"I don't think this is the time to increase taxes," Hoyer told reporters after the forum.
But in the longer term — after the economy has improved — Congress will have to rein in spending and raise taxes to tackle the debt, Hoyer added.

"Raising revenue is part of the deficit solution, too," Hoyer said.

The Wall Street Journal noted:

House Majority Leader Steny Hoyer said in a speech Tuesday that Democrats would have to consider passing only a short-term extension of the middle-class tax breaks, which expire at the end of this year. In the longer term, taxes likely will be going up, at least for some people, he suggested.

"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about…whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," the Maryland Democrat said in prepared remarks to Third Way, a centrist Democratic think tank, in Washington…

On taxes, Mr. Hoyer was less specific. He talked about raising "revenue more fairly and efficiently," language used by supporters of a value-added tax.

Hoyer can be commended for his honesty, but certainly not for his economics. Increased taxes, including the imposition of a VAT, would only feed government’s growth, while raising costs for consumers and businesses, and reducing resources and incentives for private-sector investment and entrepreneurship. If Stoyer gets his way – and recall that he is number two in House leadership right now – it sentences the U.S. economy to stagnation and relative decline.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council