Against The Revenue Cap

The worst thing about the Bowles-Simpson plan is that for a deficit reduction plan it took the odd step of asserting that the federal government ought to implement a permanent arbitrary cap of revenue at 21 percent of GDP. Fortunately, Michael Linden, our Associate Director for Tax and Budget Policy at CAP released a paper on November 1 about why this kind of thing is a bad idea. So read what he has to say.

Let me just note separately that it’s especially ridiculous to look at the federal government in isolation. State and local government activity counts, too. If you “cap” federal spending, then congress will just spend more time dreaming up ways to semi-coerce state government into spending more money. If we’re trying to ask what kind of tax burden the country can afford overall, we need to look at the whole picture.