Theft and Taxes

I received this short and to the point comment on a post I made on Google+ recently regarding the difference between subsidies and tax breaks: 

Ah, it's the same old 'taxes are theft' horseshit. Your kind never gets tired of that malarkey.

This caused me to stop and think.  Is the idea that "taxes are theft" malarkey or is there some basis for it in reality?

First, what exactly is theft?  Unfortunately we cannot simply go to the dictionary and find out in one quick look because the main definition of theft doesn't tell us very much.  (All definitions come from dictionary.reference.com).  The dictionary defines theft as "the act of stealing," which is not terribly helpful.  Referring back to the dictionary, we find that stealing is, "to take the property of another or others without permission or right, especially secretly or by force."  That helps, but what does it mean to do something by force?  Back to the dictionary where we find that force is “unlawful violence threatened or committed against persons or property”, “the power to influence or control”, and when used as a verb “to coerce.”

With that we have a pretty clear definition of theft:

To take the property of another or others without permission or right, either secretly or through the threat or commission of violence against their person or property.

Does our definition reflect the reality we observe when we see theft?  

“Your money or your life!”  says the mugger as he brandishes a gun or a knife. “I have a gun, put all money in an envelope, no dye packs, no alarms, no one will get hurt,” says the bank robber’s note. These examples of what I think of as “confrontational” theft certainly fit our definition.  The thief is attempting to take the victim’s property without permission by the threat of injury.

Thefts such as burglary, pick pocketing, fraud and other crimes that I think of as “non-confrontational” also fit the definition as the property is being taken without the knowledge of the victim.  In the case of fraud, it is being taken by deceiving the victim as to the nature of the reality of the situation.

Now that we have a clear idea of what theft is, let’s take a look at taxes.  Taxes are defined as "a compulsory financial contribution imposed by a government to raise revenue."  We should clarify what is meant by compulsory, which is defined as "required by regulations or laws; obligatory."  We have two choices here to clarify things - required or obligatory.  They both get is to the same place, obliged.  The definition for oblige is "to bind or constrain (someone to do something) by legal, moral, or physical means."  Constrain in turn brings us to compel which is defined as "to secure or bring about by force."    With force we are back to ground already covered in the discussion about theft.

After this, our definition of tax has become: 

The transfer of money to the government under a declared, or implied, intention to inflict legal, moral or physical punishment for failure to comply.  

As with theft, we need to look at some real examples of taxes to see whether our definition matches reality.  While there are many types of taxes they are similar in many respects.  They all involve the transfer of money to the government and they all carry the threat of punishment for failure to do so.  For property taxes, the threat is the loss of your property even if you own it without mortgage or other claim against it.  With sales taxes, individuals have no choice whether or not to pay them, but if the merchant fails to collect them and remit them to the government they can face, in Vermont, up to $10,000 in fines and 3 years in jail, depending on the amount involved.  Similarly, failure to pay income taxes can lead to monetary penalties, forfeiture of property and jail time.  

So in both theft and tax, we have a transfer of property from one person or group to another under the threat, explicitly stated or implied, of punishment.  In neither case do we need to consider what the transferred property will be used for, the victim only cares that he no longer has his property.  Also, we do not need to consider whether the government has the right to take your property or whether their use of force is lawful.  If the government has a right to part of your property, they have a right to all of it and simply haven’t decided to take it.  Yet.  As to lawful, well, who writes the laws?

In order to flourish, individuals must have a right to their property, to use and dispose of it as they see fit.   This right is not something granted by the government, but arises from the basic necessity of life.  If you lived on a desert island, you have to work to stay alive.  You would need to gather the goods necessary for your survival, be it food, materials to create shelter, tools, clothing and etc.  Imagine if periodically a canoe arrived at your island and strangers came and took part of your food, raw materials, tools, clothing, and destroyed your shelter.  If this continued, you could not flourish on your island and, if they took enough, your very survival would be in jeopardy.

It is no different in modern society.  If you do not have the right to use and dispose of your property in the way that you see fit, you are in exactly the same position as on the deserted island.  When someone else is able to take some or all of your property to dispose of how they see fit, your chances for thriving and even surviving will certainly be in question.

The Founding Fathers recognized this fundamental right of the individual and secured it in our founding documents.   The Declaration of Independence states, "endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."   Liberty and the pursuit of happiness require that man be free to work, to keep the fruits of his labor, and to dispose of them as he sees fit.  Further, the Fourth Amendment to the Constitution says, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures shall not be violated."  While this is most often quoted in terms of criminal matters, it can also be read as affirming the right of an individual to keep his property.  The Fifth Amendment contains similar language - "shall not be deprived of life, liberty or property" and "nor shall private property be taken for public use."


As the Founders noted, these rights are unalienable, i.e. they cannot be separated from the individual by any means.  We recognize, for example, that we have the right to freedom of speech regardless of whether a majority of the people disagree with what we are saying, as long as the exercise of that right does not demonstrably injure another person (the classic example of crying fire in a crowded movie theater).  In the same way, we have the right to use and dispose of our property in any manner that we choose regardless of what others may think, as long as such use does not demonstrably injure another person or actually damage their property.  

It is obvious that theft is a violation of the victim's rights and immoral.  It should also be obvious that taxes are violations of individual rights and immoral, and for the same reasons.  The fact that the government, the majority, or some group currently in power has decided that taxes are legal and "necessary" does  not make them any less so.

Regards

Government Intervention...What Could go Wrong?

So what can happen when the government interferes with the economy?  Let's take a peek at what happened in the case of health insurance, specifically employer provided insurance.

In 1942, in an effort to control costs and prevent disruptions in the labor market, the government passed the Stabilization Act which essentially froze prices, wages and salaries at the level they were at in September, 1942.  Exempted from this was insurance and pension benefits.  So to attract workers, companies began offering health insurance as a fringe benefits as they could not offer higher wages.  The next year, the IRS ruled that employer provided health care was tax exempt, further encouraging the practice.

Towards the end of the war, the War Labor Board ruled that companies could not discontinue these benefits during the life of a contract.  A few years later, in 1949, the National Labor Relations Board ruled, later upheld by the Supreme Court, that insurance and pensions could be considered wages and thus subject to collective bargaining.  During the 1950's when there was little competition for US manufacturing, companies and governments were eager to provide these tax free benefits.  This greatly expanded the number of employees covered by employer provided insurance.  In 1951 100,000 employees were covered by major medical insurance, by 1986 this had reached 156,000,000.

All of this helped increase the rate at which health care costs rose.  As a report from the Wisconsin Policy Research Institute shows:

The regulatory changes that propelled the rapid expansion of employer-provided health insurance during and after World War II helped fuel the hospital cost spiral by completely removing consumers from any contact with health care costs.

This trend was likely exacerbated by the introduction of Medicare and Medicaid in 1965 which further removed the individual from the real costs of their health care.

All of this has led to recent decades where the only real growth in employee compensation is from the increase in health care costs rather than in an increase in wages.  So the cost to the employer has gone up but the employee has received little direct benefit from it as the services he gets for his insurance likely have not improved, just had their costs increase.  For example, a USA Today report shows that from 2007 to 2011, real wages increased only 1.4% ($777) while benefits increased by nearly twice that amount, $1302.  The article does not mention how much of the $777 growth in real wages went to paying the increased employee contribution to health care.

Enter Obamacare, which was in part intended to help control the spiraling costs which were in part caused by previous government interventions.  With the Obamacare employer mandate, many employers will be compelled to provide health insurance for their employees or face fines.  While some employers already do provide insurance, many will see their costs go up due to the requirements of the new law.  This will likely further erode real wage growth for many employees.  Assuming they keep their full time jobs, which is by no means guaranteed.

Which brings me to the latest step in long chain of cause and effect.  Last week, Investor's Business Daily had an interesting editorial.  In it, Betsy Mccaughey describes a coming change we will be seeing on our W-2 forms this year, namely a box for your health care benefits.  According to the administration this is simply for information purposes so you can appreciate the value of your health care plan. The fear is that this is actually a prelude to employer provided health care benefits being taxed.

The federal government, since it is apparently incapable of actually controlling spending, is always on the look out for new sources of additional tax revenue.  It likely did not take them long to come to the conclusion that the exemption for employer provided health insurance is the single largest "tax expenditure" in the tax code.  (Interesting how a feature of the tax code that allows people to keep more of their money is considered by analysts to be an expenditure to the government.)  In 2012-2013, the CBO estimates this single item has a total "expenditure" of 1.8% of GDP or something approaching $300 billion, making it a likely target for tax reform, especially for the "rich."

If you feel that this is unlikely, I found an article detailing such a proposal in President Obama's 2009 jobs bill.  In this bill the proposal was to exclude employer-provided health benefits from itemized deductions for those making more than $200,000 while at the same time capping the remaining deductions for the same group.  It is not difficult to imagine this notion seeping down to lower brackets.  As I pointed out in "First the "Rich" and the YOU!", it simply isn't possible to fund current government spending by just taxing the "rich."

So thanks to a history of government intervention in the economy, you could end up paying taxes on benefits that government policy helped inflate the price of out of a paycheck that is likely smaller because of those same government policies.

Government intervention, what could go wrong?


Regards

Gun Control, Fiscal Cliff Cronyism and more

Some good links for this week.

Enjoy!

This is perhaps my favorite article of the week, though there were plenty of good ones, and I quite honestly lost track of some.


With Gun Control, Cost Benefit Analysis Is Amoral
Really nice take on the whole gun control issue.  I especially like his statement: "Statistics about how often gun-related crimes occur in the population is no evidence against you. That’s collectivist thinking. The choices made by others are irrelevant to the choices that you will make."


Senators, Representatives—and Americans Who Voted for Them—to Blame for Increased Spending and Tax Hikes

Obama's Debt Problem
Even Politico.com recognizes that the debt is Obama's now, not Bush's (though Bush did his share to start digging the hole.)

Crony Capitalist Blowout
Great write up of all the pork in the fiscal cliff bill.

Rum Subsidies Included in Fiscal Cliff Pork
Still more pork, or in this case rum, in the fiscal cliff bill.

Of Hurricanes, Pork and Subsidies
And yet more pork.

The Spending Cliff
The real issue facing America.  While increasing taxes is bad, not cutting spending is what will sink the country.

Has the Kyoto protocol done more harm than good?
Did the effort to fight global warming via the Kyoto Protocols contribute to "outsourcing" of manufacturing to undeveloped or developing countries?  Seems like it could very well have had a part to play.  Also, the countries where manufacturing moved too use less efficient fuels so likely have higher emissions, so overall global emissions are up.  Great example of unintended consequences.

My Boys Like Shootouts. What's Wrong With That?
Ah, the craziness regarding guns.  And apparently butter knives.

So What's Next, Mr. President?
And still more on the failure of the fiscal cliff deal to actually deal with the country's real problems: debt and out of control spending.

No Regulation, No Problem
Stossel on the need (lack there of) for government regulation.

Farm Bill Extension Better Than Trillion-Dollar Bill
Repealing the old "permanent" law regarding dairy price supports would make too much sense.  Much easier to be able to scare the public with the thought of doubling or tripling milk prices.  The government really has no place in the economy other than making sure that force and fraud are removed from it.

It’s a Spending Problem
More support for my contention in an earlier blog post that we can't tax our way out of the financial problems we have in this country.

Closing the Jobs Gap
Great little calculator for seeing how long it would take to recover all the jobs lost during the recession based on average monthly job gains.  Interesting fact is that 88,000 is the average number of new workers entering the job market each month from population growth.  So when you see 155,000 new jobs as we did in the latest jobs report, that is actually only about 67,000 net jobs recovered.  Something to keep in mind when the government claims to have created X million jobs in Y years.  Subtract 12*Y*88,000 to see how many people who lost their jobs might have found new ones.

Libertarian Purity Test
Interesting "libertarian purity" test.  My score was 98 out of a possible 160.  A number of the high value questions I didn't agree with, such as privatizing law or the police for example.

Climate Impact of the Keystone XL Pipeline
Just how little impact the Keystone Pipeline would have on the environment.

Regards

Some interesting articles

I tend to read a bunch of articles over the course of a week, so I thought I would share some of my favorites from the past week.  I am going to try and do this every Wednesday.  This is by no means a complete list, but it does include most of the articles that I had particularly made note of, at least since I decided to publish such a list.

The Battle of the Narrative: How Ordinary Americans can Fight Obamacare
While Obamacare has been upheld by the Supreme Court, the fight against it is far from over.  There are a number of lawsuits working their way through the court system.  The big battle for individuals is making sure that as the problems with the law come to light, as they are certain to do, the blame does not get placed on the remnants of the free market system, as the government (and likely the mainstream media as well) will likely try to do.

The New Abolitionism: Why Education Emancipation is the Moral Imperative of our Time
This article from the Objective Standard lays out the case for abolishing the government education system.  I was quite surprised with a lot of the quotes from this article the shed some light on how the originators of the public education system saw children and parents.  One example:

The goal of government schools is not to serve children by teaching them to think and acquire important knowledge, but to serve the state by forcing children to conform to its will. The U.S. Bureau of Education made the point clear in 1914: “The public schools exist primarily for the benefit of the state rather than for the benefit of the individual.”30 More recently, William H. Seawell, a professor of education at the University of Virginia, defended government schooling by stating: “Each child belongs to the State.”31

You do need to be a subscriber to read all the article.

Planning ahead is considered racist?
An article referenced in the above article gives another great example of why government schools need to be done away with.  The article is from 2006 but I don't anything has changed in the meantime.

According to the district's [Seattle Public Schools] official Web site, "having a future time orientation" (academese for having long-term goals) is among the "aspects of society that overtly and covertly attribute value and normality to white people and Whiteness, and devalue, stereotype and label people of color."

Fiscal Cliff Deal Raises Taxes, Delays Sequestration...And Will Cut Spending!
I am not sure that I am convinced that the fiscal cliff deal will eventually lead to spending cuts, but it is a good summary of the deal and its possible effects.  One thing that I think is particularly worth noting is the one year extension of the so-called "doc fix" which was enacted back in the 90's to help control Medicare costs by reducing payments to doctors.  Every year since the law was passed Congress has passed a "fix" that prevents the effect of the law from actually taking place.  If the law had taken effect this year, it would have resulted in a 26.5% cut in payments to doctors accepting Medicare patients.  This would likely have some pretty significant impact on access and timely treatment.

I find this of particular interest because part of ObamaCare is the IPAB, Indpendent Payment Advisory Board, whose job it is to control Medicare costs by reducing payments to providers.  Given that Congress has refused to follow a similar law for almost 20 years because of, presumably, the negative impact on seniors, how popular is Obamacare going to be when the same type cuts are required by the IPAB and the Congress has very limited options to override the cuts?

No Real Cuts in Those Fiscal Cliff "Spending Cuts"
A nice summary of why when the government in Washington (I loved the reference to Mordor on the Potomac) says they are cutting spending, the don't really mean it the way a normal person would think of it.

The Times on Taxes
One of my favorite blogs to read, The Grumpy Economist, goes over a story from the New York Times that perhaps reveals what liberals mean when they talk about tax reform.  This seems to be right in line with comments by the chairman of the Democratic National Committee, Howard Dean, that we all need to be paying higher taxes.  WCAX television from Burlington, VT reported Dean as tweeting:

The cliff bill is a fiscal disaster.  Those under 450k get permanent tax cuts.  The deficit will be fixed entirely by cuts in the future
It is worse than doing nothing.  The easy way out and will be very bad in the long run.  Deficits will grow, and key programs must be cut.

Apparently for many liberals, or at least some, the only answer is to raise taxes and keep spending money.  Also, I am not sure what world Howard Dean is in where anything that Congress does is "permanent."  In this case "permanent" simply means that the tax cuts for those who make less than $450,000 do not need to be renewed periodically.  There is nothing that says they cannot be changed at a later date.

Hugo Chavez's Last Days
This one worries me because my wife and her family live in Venezuela, so the possibility of bad things happening there when/if Chavez is gone is certain to give me some sleepless nights.  Hopefully things will be better than a worse case scenario.

Government Can’t Silence Speech Criticizing Its Actions, Even If That Speech Is 'Commercial'
A nice article of how the government tries to hide the actual extent of their taxes on the public, even to the extent of attempting to limit the First Amendment's Freedom of Speech.  Also another good example of why corporations, which are just groups of individuals who come together for a specific purpose, need to have the same rights as the individuals that make up the group.

Regards

First the "Rich", and then YOU!

Probably like a great many of you, I am getting sick of hearing about the fiscal cliff, or more accurately, of hearing about the proposed "solutions" to the fiscal cliff.

It seems that the President and Congressional Democrats, and to some extent Republicans as well, think the only solution is to tax the "rich" and maybe talk about some spending cuts, maybe, some time in the future.  I think history has pretty well shown that when the government talks about tax increases and spending cuts the pattern is usually tax cuts now, spending cuts never. 

The truth is, the United States government, and many of the states as well, have a spending problem, not a revenue problem.  According to the New York Times, the federal deficit for fiscal 2012 was $1,100,000,000,000.00, or put another way, we spent 45% more than we took in.  The President's plan to raise taxes would result in an increase of revenue of about $40,000,000,000.00 in the first year.  There has been no solid suggestion on how we would take care of the remaining $1,060,000,000,000.00 beyond a few promises of spending cuts totaling about $100,000,000,000.00.  Assuming those actually materialized (which I doubt) we would still have $960,000,000,000.00 to make up to come close to balancing the budget.  (There is no way to know if we would see the same amount of revenue in future years as the tax payers changed their finances to minimize the impact.  I suspect we would not see even that much of an increase in revenue in future years.)

Some Democrats have admitted that taxing the "rich" is just a start, but that the truth is that everyone will have to pay more in taxes.  Howard Dean, former governor of my state has said:

The only problem is -- and this is initially going to seem like heresy from a progressive is -- the truth is everybody needs to pay more taxes, not just the rich. And it's a good start. But we're not going to get out of this deficit problem unless we raise taxes across the board, to go back to what Bill Clinton had and his taxes. And if we don't do that, the problem is the pressure is going to be on spending even more.

Presumably the pressure he is speaking of is pressure to cut spending.  Heaven forbid.

Income Tax information from http://www.irs.gov/file_source/pub/irs-soi/09in11si.xls

My apologies for the readability of the spreadsheet.  You can find a copy of it here.

So just how much are we talking about having to raise taxes to balance the budget if real spending cuts are not being considered?  There are certainly a number of ways to approach it, but for simplicity I will only share a spreadsheet of one possibility, though I will mention a couple others in the text.

In the spreadsheet above, the first 5 columns are taken directly from the IRS publication linked in the caption.  I've added colored bands to the adjusted gross income levels to more or less correspond to the 6 tax brackets in the current system.  The effective tax rate is the average of the adjusted gross income paid as taxes, not the actual official tax rate.  There is a roughly 10-15% difference between the official tax rate and the effective, likely due to deductions and the progressive nature of the system (i.e. the income that falls in lower brackets are taxed lower even if your total income is higher.)

The remaining columns are calculated using the IRS information with the effective rate modified so that the total income taxes paid will offset the current deficit.  The total projected taxes collected is shown in the second column from the right in the yellow highlighted row.

In this particular solution, everyone's effective tax rate on their adjusted gross income is increased by 16.3% and we end up with a small surplus of about $3 billion.   The final column in the spreadsheet shows how much the average return for any given income level would go up.  I can pretty safely assume that no politician would ever actually suggest this solution given the pretty dramatic increases in taxes for everyone, especially those with lower incomes.  For example, people in my income level, $20,000-$25,000, would see their taxes more than quadruple.  If we wanted to actually start paying down the debt, say by about $200 billion a year (it'd only take 80 years to pay it off at that rate), we'd be looking at an increase in the effective tax rate of about 19%, which would increase the tax for my income level by a factor of 5.

Another solution I looked at was making the increase in taxes "progressive", with the higher increase going to the top bracket and each bracket lower would halve the amount of the increase.  In this solution I used we could balance the budget by raising the effective rate on the top bracket by about 46%, 23% on the next, 12% on the middle and so forth.  The lowest bracket would only see about a 2% increase.  While this would likely be a bit more attractive politically as it affects the "rich" more, people in my income level would see their taxes go up about 60% and those filing returns showing around $50,000 would see their taxes about double.  So again, this is likely not something any politician would dare suggest.

The final solution I looked at was what tax increase would be necessary if only the "rich" were to see their taxes go up to balance the budget.  If we define "rich" as the president does as only those making more than  $200,000 per year, then we would have to raise their effective rate by about 57%, making their effective rate about 80%.  Remember as noted above the official tax rate runs about 10-15% higher than the effective, so we'd be looking at an official tax rate for the highest earners of 90-95%.  While to some this might appear to be acceptable, I think most economists would agree that actually taking 80% of the income of the top producers in the country would have some pretty serious negative effects on the economy.

In fact, all the solutions I mentioned here would have a pretty extreme negative effect on the economy.  The Tax Foundation ran a simulation using President Obama's proposal and found that there would be negative effects in all parts of the economy from GDP, hours worked, pay rate, capital stock and etc.  This was at the relatively modest proposal of just raising the official tax rate 3 to 5% on the top two tax brackets and increasing capital gains taxes.  I cannot even imagine what effect a tax increase of 10 times the size would do.

Raising taxes is not a viable solution for our financial situation, especially not if the focus is "making the rich pay a little more."  But as then Senator Obama said in 2007, raising taxes on the "rich" is not about revenue, but about "fairness."  Until those in government actually agree to take serious action to cut spending, there is no real solution to the financial problems of this country.

Notes:  There is a likely a fair amount of error in the estimates I made above.  This is because the latest data I could find regarding income tax broken down by income bracket is from 2009, information about the sources of federal revenue is from 2011 and the budget deficit is from 2012.  When taken together, I don't believe this changes the overall picture, though the details would obviously be different.

Add in to that that I am looking only at increasing personal income taxes and not other forms of taxation.  However, since in 2011 income taxes and social security taxes (which to my mind are essentially the same) accounted for 47.4% and 35.6% respectively of federal revenue, I don't believe this changes the overall result either.

Still further, given my understanding and the data available, I wasn't able to accurately reflect the progressive nature of the taxes.  Meaning, even the "rich" paid a lower rate for their income that falls in the lower brackets.  I believe that this is part of the reason for the difference between the effective tax rate and the official one, along with deductions.  For the first to solutions, I don't think this is a huge issue, but it almost certainly is for the last.  The effect of this would likely be the need for an even higher increase or applying that increase to lower income levels, which just makes the solutions even less palatable.

Lastly, I have no way of knowing if it is even possible to actually collect such increases in effective tax rates as mentioned above.  There would be huge incentives, especially among the higher earners, to adjust their finances to minimize the impact.  Even those at more modest income levels might find incentives to work less, especially if they are on the bubble between tax brackets.

Regards.


Sources
http://www.irs.gov/file_source/pub/irs-soi/09in11si.xls
http://www.nytimes.com/2012/10/13/business/federal-deficit-for-2012-fiscal-year-falls-to-1-1-trillion.html?_r=0
http://www.realclearpolitics.com/video/2012/12/06/howard_dean_the_truth_is_everybody_needs_to_pay_more_taxes_not_just_the_rich.html
http://www.heritage.org/federalbudget/federal-revenue-sources
http://townhall.com/tipsheet/katiepavlich/2011/07/15/flashback_obama_says_raising_taxes_not_about_revenue_but_about_fairness
http://taxfoundation.org/article/simulating-economic-effects-obamas-tax-plan

I Like Ike's Restrained Spending

There has been a lot of talk lately about the "good 'ol days" in the 1950s, when we had good economic growth, strong labor unions and high top marginal tax rates.  One of my favorite blogs, Cafe Hayek, has done a number of posts regarding this.  I would recommend that you take a look.

Just the other night I saw a new version of this as a meme on Facebook.  It showed a picture of President Eisenhower with the following information:

"The Last Republican" - Dwight David Eisenhower
Was the last Republican to balance a budget
Refused to lower taxes
Paid down the national debt
Spent money to create jobs
Interstate highway he built returned $6 for each $1 it cost
He did not lower taxes, cut spending, kill jobs or increase the debt
He was the last fiscal conservative

Some of this is factually true.  He was the last Republican President to have a balanced budget and did pay down the national debt.  Other items I think are less clear cut, such as spending money to create jobs which is not something the government can actually do.  One item is actually false and is mentioned below.  Also, it leaves aside just how much role the president has  in any of this list as it requires Congress to actually do them.

As it is mentioned twice, I get the sense that the taxes are meant to be the main focus here, and if we'd only go back to such higher rates, the economy would be strong, we'd be paying down the debt, creating jobs and more.  I believe there are a number of factors that would tend to indicate that the prosperity of the 50's was in spite of the higher tax rates rather than because of them, but for this post I want to look at the implicit claim that if we'd just raise taxes, everything would be fine.

The graph below shows the top marginal income tax rate (the pink line) as well as federal revenue (purplish line) and expenditures (dark green line) as a percentage of GDP.  The blue line is a simple trend line for federal revenue over time.  I've also added a couple other bits of data as well.  The green vertical bands indicate major wars: Korea, Vietnam, Gulf War, War on Terror (working left to right).  The pinkish vertical band marks the period of Eisenhower's presidency.

So there are a couple of interesting things to see in the graph.  The first is that for the first 20 years indicated on the graph, federal expenditures as a percentage of GDP stayed fairly constant.  Something that wasn't mentioned in the list of Ike's virtues, and in fact is falsely stated as something he didn't do, is that he was the only president since 1950 to actually cut government spending, and not just in the modern sense of spending less than an automatically increased baseline spending.  Between 1953 and 1954 it appears that federal spending decreased in real (inflation adjusted) dollars by about 4% and was essentially flat between 1954 and 1955.

The second interesting point is that the line indicating federal revenues runs pretty consistently around 18% of GDP.  There are a few years when it gets higher, near or slightly above 20%, but it tends to drop back down to the 18% range.  This consistent level of income is despite the wide range of top marginal tax rates.  So not only do higher rates not result in increased long term revenue, they are also likely to reduce economic growth.  According to Tax Foundation chief economist William McBride, "Nearly every empirical study of taxes and economic growth published in a peer reviewed journal finds that tax increases harm economic growth."

Also note that as rates have come steadily down, the trend of federal revenues has risen slightly, seeming to indicate that over the long term, lower tax rates can lead to higher revenue as a percentage of overall GDP.

If we were currently spending the same percentage of GDP as Eisenhower did during his 8 years in office, 16.6% on average (as opposed to the current ~25%), our current deficit would be something like $190 billion instead of the $1100 billion it actually is.  If in addition revenues were at the long term trend line, we'd have a surplus of about $200 billion.  So maybe the reason Ike was able to pay down the debt was because he restrained spending rather than kept taxes high?

[Please do not assume that I think the government should be spending 16.6% of our GDP, as I believe that a lot (most?) of what the government does today it actually does not have any business or authority to do.]

One final note from the graph which doesn't have anything to do with Eisenhower is marked by the red vertical line indicating 1971.  I noticed that prior to this, the lines for federal revenues and expenditures track pretty closely together, with revenue being higher than expenditures most of the time.  After 1971, these lines diverge quite a bit and in general expenditures are always higher.  

The most likely event to have caused this was that in 1971 President Nixon took the United States off the last remnants of a gold standard, making the dollar a fiat  money.  Since fiat money is not connected to any objective standard of value, governments can create as much of it as they might want.  Not surprisingly this results in higher inflation.  In the 40 years prior to 1971 inflation averaged about 2.5% while in the 40 years since, it has averaged about 4.4%.

Regards.
Sources:

http://www.deptofnumbers.com/misc/debt-revenue-and-expenditures-as-a-fraction-of-gdp/
http://www.taxpolicycenter.org/taxfacts/Content/PDF/toprate_historical.pdf
http://www.usinflationcalculator.com/inflation/historical-inflation-rates/
http://taxfoundation.org/article/higher-tax-rates-will-sabotage-economic-growth