One of the best kept secrets in America is the federal government's automatic tax increase.
Without changing a single tax rate, federal tax revenues are increasing by an average of $75 billion a year. The increase in our taxes is due to people working harder and earning more--and the more you earn, the more you pay. In fact, higher earnings can push you into a higher tax bracket, where taxes increase at an even faster rate than income.
Politicians love this kind of stealth tax increase. It all happens automatically, quietly, without anyone having to vote on it. And that $75 billion a year tax increase dwarfs the tax reduction crumbs some of us got in the recent budget deal.
But we may soon have a golden opportunity.
The U.S. economy is generating new tax revenues so fast that Washington can't spend it fast enough to keep the deficit from melting away. We may soon be faced with a new problem--what to do with a large and growing budget surplus. There will be pressure to spend that extra money on new and bigger federal programs. Some may want to begin paying off the national debt.
But there is something else we can do. How about an automatic tax cut to offset at least part of those built-in automatic tax increases? How about a law that says part of any extra tax revenues--say 50 percent--must be returned to the taxpayers by an across-the-board reduction in income tax rates?
After all, it's our money. We earned it.