Should Middle Class Be Paying Higher Taxes?

Yesterday, I told you that Northampton County taxpayers, some of whom are unable to afford health insurance, are nevertheless footing the bill for health care coverage for County workers. And thanks to the federal health care overhaul, the price is going up, and could easily contribute to a tax increase next year.

We are in the middle of a recession that may be turning into a depression, especially if you look at the burgeoning number of sheriff sales and our 10% unemployment rate. So is this really a good time for a tax hike?

Democratic County Execs John Stoffa and Don Cunningham are doing their best to avoid that, and are actually working with their Republican legislative counterparts (Angle and Browning) in a refreshing display of bipartisanship. But at the much more partisan national level, House Democrat Majority leader Steny Hoyer is arguing that we need to raise taxes.

Of course, Republicans are furious. LV Congressman Charlie Dent lobbed a news release stating, “Raising taxes on American workers and small businesses – to pay for continued overspending in Washington-- is not only a mistake, it is doomed to failure as economic policy. The question is not whether government can ‘afford’ to let people keep their own money; it’s whether taxpayers can ‘afford’ the government’s reckless spending. And taxpayers deserve to know where John Callahan stands.”

Dent points out that his opponent, John Callahan, has already raked in $10,000 from Steny Hoyer. And it is fair to say that Callahan is very pro tax. In Bethlehem, he has signed off on four property tax increases plus a $52 municipal service tax, and his own budgets have increased spending by 54 percent in just six years. He reneged on a promise to cut taxes using casino host fees, and instead boosted spending by 12 percent just this year. Lest we forget, Callahan is also the leading proponent of increasing the local sales tax by 17 percent to pay for government overspending.

Of course, the notion of raising taxes smack dab in the middle of a recession is idiotic, so I'm with Dent on that point. But in a way, Hoyt and Dent are both right. We do need to cut spending. But we also need to raise taxes if we are serious about reducing the deficit.

Why do I say this?

For one thing, social security is now running at a deficit. According to Senate Majority Leader Harry Reid, that wasn't supposed to happen for another fifty years. But it did. That's what 2.7 million new claims and a deepening recession will do. So instead of borrowing from social security, as we've been doing for years, we now have to use general revenues just to keep it afloat.

That's a problem, but it pales in comparison to Medicare, where the deficit is a whopping $36.3 trillion, give or take a trillion.

When pols speak about our national debt, they conveniently ignore the cost of Medicare and social security, resulting in a an artificially low figure of somewhere around $13.5 trillion, although Obama's latest budget will add between $8.5 and $9.7 trillion to even that figure over the next ten years. When you add everything together, the real national debt, right now, is close to a $56.4 trillion sinkhole.

The only way we dig out of that is by a combination of cuts and tax hikes.

David Walker, who served as Comptroller General and headed the nonpartisan GAO under both Presidents Clinton and Bush, has a sobering assessment, along with some very specific suggestions. Here are some excerpts from one of his recent speeches.