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Taxing Issues in the USA
By: Wayne Brown
Base on the psycho-babble of the weekend talk shows, etc., it appears that we are going to stop along the road to economic recovery and job growth to argue over the “Bush Tax Cuts”. You might say it is our first point of discussion with the mid-term elections outcome. As in most political discussions, the doublespeak tends to hide the truth of the matter and makes it difficult for many to see what is going on in this process.
The Bush Administration pushed through a cut in tax rates across the board which was enacted into law for a period of ten years. That period runs out at the end of this year 2010. If Congress elects to do nothing, the tax cut percentages will expire across the board in January 2011. Based on the tax rates of the past ten years, Americans will then see a tax rate increase across the board at all levels. With some compromise, these tax rates could be selectively extended…for example the rates could be maintained for those making less than $250K per year and raised on everyone with income above that level. These are the arguments one hears batted about at the present.
Obama and the Democratic side are describing the extension of the tax rates as a “tax cut” to the public. Here is where the doublespeak begins. The current tax rate has been in place for ten years now. If it is continued through approval of Congress, in effect, nothing happens except the current “tax rate” is sustained in the tax tables. Thus, there is no real tax cut.
From the Obama perspective, everything is measure from the standpoint of “how much money would we have if the tax rates were raised? Then the differential is calculated on an annual basis at $70 billion dollars times the ten year extension length and the total reduction of revenue to the Federal Government is $700 billion dollars. Now, mind you, the Federal Government has not been getting this money now for the past ten years but the fact that they will not be getting it for the next ten years is a loss. The reasoning just does not hold up. It is like saying, “Gee if we raised taxes by 10%, we would have this much revenue but since we cannot, we are losing that much money.” That’s like a retailer concluding that if he doubled his sales he could double his profits but since he cannot, he is losing money.
Let’s get an important detail on the table. Under the current Administration, there is no plan on the books or in the agenda to stop spending money or to lower the rate of spending. Therefore, the revenue stream must be grown in order to sustain the spending level. This makes it perfectly clear that allowing the tax cuts to expire will have nothing to do with attempting to reduce the national debt or even the deficit spending which has gone on for the past two years. It is nothing but a classic example of “tax and spend” philosophy.
So let’s call this what it really is. It is a debate on whether we will sustain the current tax rate or raise it. It is not about tax cuts at all. It is simply “tax rate sustainment”. Regardless of how the future is configured in regard to the taxes, one thing is clear; the money will be in one pocket or the other. If the Democrats have their way, the additional revenue collected will go into the government coffers and be spent possibly on nothing more than pork-barrel schemes and in manners which maybe highly questionable as to the value of it in terms of economic health and jobs growth. If it stays in the pockets of the taxpayers, it most likely gets spent as well but in this case it is flushed into the economy possibly creating economic growth and jobs. This in turn may expand the tax base and actually generate an increase in the government revenue stream. It also sends a positive message to small businesses which are holding off on spending and investment awaiting some clear indication of what the future holds financially.
If we, as taxpayers, can sustain our current government expense at the current tax rates, then surely there is some question as to the government’s need for an additional $70 billion dollars annually. Considering the size of government has grown by a factor of 25% in the past two years, one might conclude that there is little consideration at government levels for overhead, expenses, and growth of costs. The government, without a doubt, is at a point which a demonstration of fiscal responsibility in shrinking the size of government would be a welcome direction. Unfortunately, there is little or no talk of that at the official levels thus the taxpayer must demand it. Continuing the present tax rate is a good place to start to restrain future growth in government and spending.
There are far too many in Washington on both sides of the aisle who are willing to practice “tax and spend” philosophy on the taxpayers and then label it as investing in our future. Too often, the money goes to pork-barreling and the effort to buy voter blocks such as the unions which just received $26 billion in taxpayer dollars as bailout money so allotted to save jobs but really just a payoff for votes. Jobs exist for one reason; there is a business need for them. If the business need for the job goes away, so goes the job. This reality in not understood in the municipalities, educational institutions, or major government arms, thus our elected officials reason that we just need to throw money at the situation in order to fix it. In the end, we are simply propping up a house that is falling down with money that we do not have. In the end, the politician buys votes with our money collected through taxation.
The reasons to tax the American public grow with each passing day. It is the only source of revenue for a government that has interjected itself into far too many avenues of our lives in order to justify the continued growth of taxes. Government was never designed to be everything to everybody. It was not designed to fulfill our needs or guarantee us a safety net in our daily life. It was designed to protect our borders, sustain our military, provide a basic infrastructure, enforce the rule of law, and sustain our liberty. Our elected officials need to regain that focus and at the same time demonstrate some strong fiscal restraint in the daily operation of the federal government.
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