Apparently, The New York Times‘ resident conservative, Ross Douthat, thinks that slightly higher taxes are outrageous.
Paul Krugman rightly disagrees.
Douthat corrected himself, saying that $94,900 is the “median income” for a family of four based on a presumption that the median income includes “the estimated value of the median family’s health care plan” and “the employer’s share of payroll taxes.” While Douthat “apologize[s] for the confusion” caused by using the CBO figures in his earlier column, those figures seem to contradict what Douthat said.
Such a number isn’t particularly helpful because, in a column about tax burdens, the value of the health care plan should be excised, since it’s paid for with pre-tax dollars. So, too, should the employer’s share of the payroll taxes. What we’re left with is the family’s disposable income, on which it’s taxed. That’s what we’re really talking about: how much tax burden the “average American family” will shoulder.
Median household income in the United States (where a “household” is two adults and at least two children) in 2005 was $67,019, at least according to the Department of Health and Human Services’ income estimates for the Low Income Home Energy Assistance Program. (The estimate for the current Federal Fiscal Year is $74,985.)
To make matters worse, the CBO report Douthat cited says that “the budget outlook is much bleaker” under an alternative scenario where Medicare payment rates increase, non-Social Security spending drops below historic levels, and “most of the provisions of the 2001 and 2003 tax cuts would be extended.” Under this alternative scenario where the Bush tax cuts are extended, “federal debt would grow much more rapidly than under the extended-baseline scenario” due to “significantly lower revenues and higher outlays.” We’d be in much better fiscal shape if we just did nothing.
Thus far, the Republican budget plan has focused exclusively on spending. In fact, the Ryan plan calls for more tax cuts. As it turns out, that won’t work. You can cut spending, but you also have to raise taxes. Republicans who claim to be deficit hawks can’t have it both ways.
Basically, all the scary things Douthat said (“By 2035, under the C.B.O. projection, payroll and income taxes would claim 25 percent of that family’s paycheck”) were wrong. Instead of an apology, the column should be retracted because the facts underlying the argument were erroneous.
If you want to balance the budget, tax rates will have to increase. And not across the board, either.