Budget deficits of nearly $2 trillion—and speeding towards $4 trillion within a decade—will force increasingly difficult budgetary trade-offs. Many on the left, and sometimes the populist right, respond with: "Easy, just tax the rich. Problem solved."
But is it really that easy? Can most of these soaring budget deficits be closed by higher taxes on the wealthy and corporations? The answer is an emphatic "no." And that's not a question of ideology, or of picking winners and losers. It's just a matter of unforgiving math: Deficits have grown too big for even aggressive tax-the-rich policies to fix significantly.
Taxing the rich could be part of a broader deficit "grand deal" where all taxes and spending are up for debate. But it could only ever be a modest part of such a deal, because the potential revenue available from taxing the rich can close only a small portion of our nearly unfathomable deficits.
