Tea Party Economics

Some analysts have made the case that Americans are not overtaxed (at the federal level) and that therefore the protests were not justified. But this misses the point. Government spending is exploding, with the Congressional Budget Office projecting $9.3 trillion in deficits over the next 10 years. People know that this spending represents future taxes.

Here is an interesting set of facts. If the government increased the top tax rate from the current rate of 35% to 100% (yes, that's right 100%), it would only collect an extra $400 billion this year. In other words, confiscating all the income that is currently taxed at 35% would not raise enough revenue to cover any of the annual deficits projected in the next 10 years. There is no way that tax hikes on the rich alone can pay for proposed spending in the current budget.

In addition, state and local taxes are going up, with at least 10 states planning on hiking taxes. And promised future spending on Social Security and health care must also be paid for. Under the Obama administration's budget, federal government spending in the next 10 years will average 24% of GDP, almost triple what it was back in the 1930s. As a result, when we add together today's taxes and expected future taxes, Americans will face a bigger tax burden than at any time in history.

Meanwhile, the government is taking over private-sector companies, printing massive amounts of new money and interfering in the free market. And it doesn't help that this has happened while many government officials are running into trouble over not paying their own taxes, which undermines the Obama administration's call for the average taxpayer to sacrifice for the greater good.

In the end, the Tax Day Tea Parties are a very interesting case study for public choice theory. Whether or not they suggest a shift in the political landscape is another issue. If government continues to grow and cost more, we would expect to see more spontaneous voter response.

Brian S. Wesbury is chief economist and Robert Stein senior economist at First Trust Advisors in Wheaton, Ill. They write a weekly column for Forbes.

Cross posted from notoriouslyconservative.com