Taxes, it has ever been the bane of the American people. This was true even before the American people were the American people. Though it was not solely the catalyst for the American Revolution, it did play a major part in our breaking with the Brits. Taxes are as certain as death it is said. Indeed, in a manner of perspective, they are more certain than death. But what is the effect that a government’s policy on Tax on the public and ultimately itself?
Well here’s the rub. Higher taxes do not equal higher revenue for the government. Sounds odd right? Well think about it this way. This is a diagram of a basic economic principle.
What is shown here can pretty much be found in any elementary Economics textbook. There is an optimum price, and X marks the spot, in this case. Deviation from this point reduces revenue either by having too few buyers at a cost to make the optimum or having too low of a cost for the buyers to make the optimum. The optimum point for revenue is where the price is set to maintain the most buyers, and therefore the highest revenue. Basically this shows that raising prices doesn’t always increase yield of cost. This works with taxes as well "lower taxes." That is, by raising taxes you do not necessarily create higher revenue, nor does a lower tax mean lower revenue. In fact, historically, the opposite is true. President Ragan new this, even the Democrat of Democrats John F. Kennedy knew this. Both were aware that lowering taxes, not only generated greater revenues for the government, but that it also stimulated a stalling economy, and their policies reflected this during times of economic woes, which are certain to come And they are certain to go if the markets are allowed to regulate themselves.
Yet in the midst of what President Obama has dubbed “the worst economic crisis since the great depression, a point that I might point out isn’t historically accurate either, the present administration sees fit to tax everything and everybody in sight? For instance, when my company health insurance begins next month it will be a pre-tax payment. That is I will pay my portion of the insurance before taxes are taken out. At the beginning of next year, due to the wonderful healthcare legislation provided by Obama, Pelosi and Reed, it will be taxable. In essence I am paying more for healthcare because a plan that was supposed to help with the cost of healthcare, and have less money in my pay-check. But that is just me. With the pending expiration of the “Bush” tax cuts, taxes will go up on Individual income tax, capital gains taxes, dividends and estate taxes generally speaking.
This situation is a lot like burning the candle at both ends. Besides the fact that some 47% of Americans do not pay taxes, and many of them received Tax credits from the IRS, there is a serious problem here "tax Credits". While, however, the top 5% of earners account for around 60% of the tax revenue "tax the rich". Now you might say, so what, they make more money they should pay more taxes. Well fair enough. But keep in mind that, though the top %5 percent of earners includes Bill Gates, Warren Buffett, many movie stars musicians and so on. It also includes relatively small successful business owners making around 200k per year. It is these that feel the greatest pinch when they a lumped together with the former. On the individual side, if a person’s taxes increase, he or she will have less money to spend and likely be more tightly fisted with what they do have. They buy fewer products, which decreases demand, lowers production quotas and profits for companies, who now have to lay people off to accommodate for falling profit margins. Now there are less employed people to pay any income taxes that are now drawing unemployment! Might we say “trickle up poverty?” We have seen this in Europe where there are high income taxes and Value Added Taxes (VAT). All this to support ever increasing entitlement programs, but that is a topic for another day. On the other end you have the small business owner and the “wealthy elite.” The small business owner has to pay more in taxes. I know for a fact that a couple of self employed friends of mine have a nearly 30% tax on there business at present. With the higher taxes there is less money for them to put towards growing there business, hiring new people etc. The economy stagnates and we go the way of Greece
Alternatively, as History has shown, lowering taxes stimulates real grown. Not the artificial kind that we saw with the New Home Buyers tax credit, Cash for Clunkers and other such programs that caused a momentary spike in the sales of their respective products. No, real economic growth does not come from government meddling. The government is the problem not the solution. With lower taxes individuals have more money to spend, which they typically do. The wealthier among us use this money to invest in the markets, business ventures, research, or their own small business. All of which has been the cause for the vibrant, innovative and cutting edge economy that America
So we return to the question of why. Well there are a few options I suppose. One is simple ignorance. Though this is somewhat of an amusing thought, it is likely not the case on most counts. I find it hard to believe that so many individuals who have been elected can be ignorant of both basic economic principles and historical facts. So that leaves us with two other options. That is on the one hand, that they, that is that the Liberals, really truly believe that the government can solve these issues, this is called “statism.” They seem to think that if they just throw enough money at a problem, then they can fix it. So they create more bureaucracy, with more entitlement programs which cost more money and so on. For my part it seems almost laughable that anyone with and mind for history could seriously entertain such notions for longer than a second or two considering that it has never worked. The last and scariest possibility is that they aren’t ignorant, nor do they truly believe that big government is the answer. But rather, it is a malevolent agenda to purposely retard the economy brining as many people under entitlement programs as possible that their hold over the government would likely see no end for a long time. Though I have my own ideas about this to be sure, this, of course, is not my call to make.
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