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Tax Increases Won't Help Revive Economy

By Denis Kleinfeld
Monday, 27 Jun 2011 08:19 AM Current | Bio | Archive

What is a "tax increase"? Is it an increase in marginal rates? Perhaps an increase in revenue? Or maybe something else like the cost of complying with an ever growing pile of regulations?

Like you, I watch some of the opinion shows on television at night. This includes the overtly opinion entertainment shows, and also, other channels which purport that they are news shows but are, in reality, just another format for an opinion show. Both regularly have on expert talking heads, political figure, political advisors of all kinds and description, and manufactured news stories to reflect the ideological fad of the day.

Tax is always a good topic for heated and irresolvable conflict. Advertisers love the audience this generates. But none of these shows advance a serious discussion of tax.

Tax which creates increasing revenue to government may be good where the growth is due to a booming economy.

It's not good at all when it causes an additional burden to already overburdened taxpayers. In this sense, increasing tax means one side of the argument is expressing the ideological position that tax rates should be increased on certain "rich" taxpayers for political-social reasons, even if it doesn't make economic sense.

The fervent believers regularly, and fallaciously, argue that the marginal tax rates were once a lot higher. Cutting the rates cuts resulted in gifts to the rich with the implication that it was to the detriment of those not paying any tax.

This, of course, ignores the fact that when rates were higher the people who paid tax were also allowed tax deductions. With the marginal rates lower and with fewer deductions, the top taxpayers, with lower marginal rates and fewer deductions, actually pay a greater amount of the income taxes in relation to the total of all income tax paid by taxpayers.

The net effect is that the top few percent of taxpayers — the so-called rich — now pay most of the income tax while the bottom 50 percent group now pays no income tax at all. The bottom 25 percent even gets tax credits which allow them to claim refunds.

The obvious conclusion in this "rates are lower today than previously" argument is that the talking head experts, congressmen and congresswomen, and so-called political strategists are lying to a national television audience. And the moderators of the shows are an integral part of the whole facade and sham.

On the flip side, what about tax increases meaning an increase in revenue? Clearly, it is a demonstratable fact that tax revenues go up when marginal rates on the people who actually pay tax goes down below a certain rate. This effect is called the Laffer Curve. Similar concepts go back to the 14th century and, also, were recognized in the modern era by John Maynard Keynes.

What really is involved in a tax increase is the situation where the government takes more money out of the productive economy. The government is a really expensive way to accomplish anything. As Art Laffer noted in an article, "Whenever the government bails someone out of trouble, they always put someone else in trouble, plus of course a toll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion is the cost of getting the government involved."

That $30 billion toll is a real tax increase. Everything the government spends money on results in that extra toll tax.

What about tax credits? That's money that Congress passes out to pay for votes or rewards campaign contributors. Food stamps serve much the same purpose. It's just pure welfare or payback. Nothing more than a redistribution of money from the productive sector of the economy to the unproductive but voting sector.

Basically it's a recognition there are two kinds of people in the United States as one commentator observed recently. There are people who work for a living and the others who vote for a living. Whichever way you look at it, tax credits and programs like food stamps represent another just another form of tax increase.

The most insidious form of tax increase is government created inflation. That is, when a dollar loses value and people can buy fewer goods and services. This is occurring rather dramatically now as the Treasury prints up paper and calls it Treasury notes. And then the Federal Reserve prints up paper and calls it dollars.

The Treasury then exchanges its paper for the Federal Reserve's paper. The government then spends the dollars mystically created. This form of fraud is called quantitative easing. The result is that the value of a dollar goes down and people to spend more dollars today for the same amount of goods and services that they bought yesterday.

This is true tax equality. Everyone, regardless of race, creed, color, religion, gender or sexual preference, is paying more money for less in return. When Americans have less currency value because the government is spending more made up money, it's a tax increase.

Tax, and any increase in tax, is unquestionably necessary in a limited amount to pay for the organization and maintenance of an orderly society and defense of our country.

Taxes are, however, a burden on productivity and stifles the ability of the United States to have a growing economy which can provide jobs and entrepreneurial opportunity for every level of our American society.

All government can do is tax, create debt, and spend. Nothing productive for the economy is created. We should always remember that tax in any amount, and governments desire to increase the tax burden, are inherently detrimental to a healthy, free-market American economy.

Enough with this talk which presumes that tax increases are necessary for government to stimulate the economy. Look around, after $14 trillion is the economy prospering? What is true, and our votes should reflect this, is that limited government and limitations on all forms of tax are the only way for America to survive and prosper.

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What is a tax increase ? Is it an increase in marginal rates? Perhaps an increase in revenue? Or maybe something else like the cost of complying with an ever growing pile of regulations? Like you, I watch some of the opinion shows on television at night.This includes the...
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2011-19-27
 

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