Restoring the Federal Revenue Base
Table of Contents
- » Introduction
- » Redefining the Challenge
- » The Problem is Overstated
- » Meeting the Challenge
- Spending Health Dollars Wisely
- Improving Longterm Care
- Promoting Better Preventive Care
- Creating a National System for Home- and Community-Based Care
- Livable Communities
- Keeping Social Security Solvent
- Helping Americans Build More Retirement Assets
- Helping Americans to Work Longer
- Restoring the Federal Revenue Base
- » Conclusion
CBO concluded that even if health care costs, which are the single most important factor accounting for projected long-run fiscal deficits, were slowed significantly from historical rates, our fiscal policy would be sustainable only if federal revenues were to rise substantially higher than they were in the past.
No realistic solution to our long-term fiscal problems can ignore the need to restore federal revenues to a level and growth path that is commensurate with our national and international commitments. By recent standards, federal revenues are well below average, at a time when federal spending is growing rapidly to meet new national and international challenges.
The importance of new revenue for sustaining vital safety-net programs was underscored in CBO’s most recent long-term examination of entitlement growth and the economy.75 CBO concluded that even if health care costs (which are the single most important factor accounting for projected long-term fiscal deficits) were slowed significantly from historical rates, our fiscal policy would be sustainable only if federal revenues were to rise substantially higher than they were in the past. Respected parties across the political spectrum all recognize that the long-term outlook is bleak unless we raise additional revenues.
The burden on American taxpayers is the lowest that it has been in nearly half a century. Moreover, the public is willing to pay more for certain purposes. It has consistently deemed tax cuts as less important than reducing the federal budget deficit.76 A Kaiser-National Public Radio-Harvard University poll found that when asked whether it was more important to maintain spending on domestic programs such as health care and Social Security, 80 percent favored maintaining spending rather than cutting taxes.77
The United States ranks near the bottom of the developed world in its social commitments and willingness to pay for them. Among the OECD countries, the United States ranks 24th out of 29 in the share of GDP going to social expenditures—14.6 percent and 25th out of 29 OECD countries in terms of total tax revenue as a percent of GDP—28.9 percent in 1998.78 This level of commitment will not be enough to sustain the entitlement programs in the years ahead as boomers and their children reach their retirement years.