Two big, related stories today:
- Taxing overseas profits will come up $50 billion short.
- A new health care bill will require $600 billion in new taxes.
Looking at these headlines together is a great way to understand why it’s so hard to predict what taxes will be from year to year:
They haven’t just bounced because of changes in spending — the amount the government spent in 1988 certainly wasn’t less than half of what it spent in 1978, though the top tax rate certainly was.
Instead, what tugs the numbers around is how hard it is to predict how much people can actually pay. High taxes from the 40’s to the 70’s were mitigated by available loopholes. Lower tax rates later on were accompanied by closing loopholes and stricter enforcement.
The moral of the story: don’t view that “$600 Billion” headline as a firm number. View it as more of a rough guess, subject to a healthy dose of reality later on.