December 7, 2010

Balanced budget still possible with tax cut extensions

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The reduction in the payroll tax rates moves in the right direction, and Mercatus Center scholar and economist Veronique de Rugy says that the federal budget can still be balanced without an increase in tax rates.

“The cut in rates in payroll taxes is good policy, but the implementation is bad because it is just a one year gimmick,” said de Rugy. “The temporary measures are better than tax increases, but we should really warn Republicans that next time the tax cuts need to be permanent.

“It’s unfortunate that the tax rates couldn’t be made permanent,” said de Rugy. “Taxpayers know what their taxes will be for now, but in two years the uncertainty comes back.”

De Rugy says that keeping tax rates at their current level don’t harm our ability to close the budget deficit. But now the focus needs to be on cutting spending.

“Balancing the budget without raising taxes is already doable,” said de Rugy. “It requires that we cut $128 billion every year in projected spending growth. We’re not even talking about cutting spending from the current level.”