GAO Chief Warns Of Substantial Tax Increases As Baby Boomers Retire

by Leroy Baker, Tax-News.com, New York

14 December 2005

United States Comptroller General, David Walker has warned a White House conference on ageing that the retirement of the baby boom generation will put a massive strain on the federal government's future resources and could lead to substantial tax increases if lawmakers don't begin to act now to tackle the demographic timebomb.

According to Mr Walker, the GAO's simulations show that balancing the federal budget in 2040 would require some tough choices and could mean that taxes will have to be increased by 2.5 times their current level, or federal spending cut by 60%.

“While nobody likes tax increases, including me . . . in the final analysis, over the longer term, you have to have enough revenues to pay your current bills and deliver on your current promises,” he stated.

However, Mr Walker believes that the challenge can be met without resorting to such drastic action if lawmakers begin to tackle the problem sooner rather than later, and he proposed a three-pronged approach to help alleviate future pressure on the federal budget including: the imposition of budgetary controls such as discretionary spending caps and expanded Paygo rules; improvements to the way financial information is reported, such as trust fund activity; and a re-examination of tax policy, particularly with regards tax preferences and enforcement programs.

“Tax preferences are largely off the radar screen even though they amount to $700 to $800 billion a year in forgone revenue," he observed.

Mr Walker has frequently gone against the grain regarding President Bush's tax policy, and earlier in the year he suggested that some of Mr Bush's tax cuts should be allowed to expire.

Recommended