Are Americans Feeling Max-ed Out on Taxes?

According to a story in The Wall Street Journal this week, 29 states raised taxes a total of $24B in fiscal 2010.  These tax increases are in addition to various pending 2011 tax increases, such as the tax increases resulting if the Bush tax rate cuts are allowed to expire.  Taxes have already increased on personal income, sales, and businesses.  Candy taxes, soda taxes, restaurant takeout taxes – when will it end?  Are Americans feeling max-ed out on taxes?  Let’s talk about it now …

There’s no question about it.  Americans are feeling the burden of increasing taxes in an era of economic stagnation.  State and local governments are being forced to downsize their budgets and/or increase tax revenues by raising taxes or fees – sometimes both.  Why?  Because state and local government revenues are generally shrinking under the weight of our anemic economy.

The Wall Street Journal reports that California now has a top income tax rate of 10.55%.  Of course, those California taxpayers in this bracket also have to consider paying any Federal income taxes they might face as well.  The states of Colorado and Washington have increased their sales taxes to cover soda and candy.  Plus, Colorado has even decided to tax restaurant takeout orders.

The list of proposed tax increases, new taxes, and new fees seems limitless.  Then, there’s the expiration of the Bush tax rate cuts.  If allowed to happen, there will be an enormous tax increase on Americans.  No wonder some Americans might feel max-ed out on taxes.

But, the key point to remember is that higher taxes (pulling money out of the private sector) tend to curtail economic growth.  Taxes on income, savings, and investment are holding back the American economy from growing.  It’s clearly time to cut taxes on personal income, corporate income, savings, and investments (such as capital gains).  If we want to grow economically, we need to stop taxing economic growth.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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