Budget & Tax
Biden’s tax hikes, spending spree would cause harm
October 21, 2021
Venezuela’s recent decision to subtract six zeroes from its currency is a continuation of its attempt to deal with hyperinflation brought on by the country’s deep financial crisis. With the largest oil reserves in the world, the Venezuelan government, led by then-president Hugo Chavez, began to finance a massive government welfare system and nationalize more than 1,000 companies.
This centralized economy was built upon unsustainable revenue from high oil prices. Oil production fell after a strike at the state-owned oil company, PDVSA, and has never fully recovered. Low production, along with falling oil prices, eroded the Venezuelan economy. This didn’t stop the government spending spree as the country began to take on massive amounts of debt to continue its social programs, ultimately resulting in the collapse of these programs along with the hyperinflation seen today.
This is an extreme example of where uncontrolled government welfare combined with irresponsible debt levels can lead. Though the U.S. is nowhere close to becoming Venezuela, what is happening there should be a cautionary tale for the Biden administration.
Biden’s “Build Back Better” plan would be a two-pronged blow to the U.S. economy. First, the massive tax increases are estimated to reduce long-term GDP by 1 percent and result in fewer jobs and lower wages for those who have jobs. The revenue from these tax increases would be used to fund $3.5 trillion in spending, which is estimated to cost $27,000 per household. With inflation continuing to rise, 6.5 percent for 2021 so far, households are already facing rising prices and adding to that burden would be unfair.
While Oklahoma state lawmakers can’t do much to impact federal policy, there are ways to protect Oklahoma taxpayers. Reforming the state’s tax code so that it relies more on consumption would give the state government more stable revenue, helping to limit growth in government spending. Reducing the state’s income tax would also give Oklahoma a competitive advantage over surrounding states, while putting it on a level playing field with states like Texas and Tennessee, which have seen massive growth the last two decades.