Republicans Have Lost the Tax Fight: Politico's ... - Yahoo! Finance

A major story in Friday's New York Times confirmed something that most Americans understand, which is that today's tax rates are low compared with tax rates in the early 1980s.

They're also low when you compare the United States to other developed countries.

And they're low when you include state and local taxes, which the New York Times study did.

The reality of this, of course, hasn't stopped a lot of Americans from complaining that taxes are way too high and, therefore, that government spending must be cut.

Related: Obama Wins 2012 Election: Why You're Taxes Are Going Up

But the problem says Ben White, the chief economic correspondent at Politico, is that Americans also like the benefits that they get from the government. And if the country is going to have any chance of ever balancing its budget, taxes are going to have to go up.

(Most economists agree that spending growth will also have to be reined in, and Republicans are right that most of the growth is coming from social programs like Medicare and Medicaid. Defense spending has also ballooned in recent years and needs to be trimmed).

The Republicans' plan in recent years, White says, has been to "starve the beast": force Congress to cut government spending by keeping taxes low and creating huge budget deficits. The budget deficits have materialized, but the spending cuts haven't--because Americans like the benefits they get from government spending.

So there's simply no way to avoid increasing taxes.

The Republicans have conceded that, White says. And a deal on the fiscal cliff will ultimately include some tax increases. It will also likely include some spending cuts.

Related: Politico's Ben White: Get Ready for a Market Rally Because a Fiscal Cliff Deal Is Coming

Importantly, the tax increases being contemplated still won't make the U.S. a high-tax country relative to many other developed countries. That's something that any critic of tax increases needs to keep in mind.

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Source: http://finance.yahoo.com/blogs/daily-ticker/republicans-lost-tax-fight-politico-white-165134864.html

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