Lots of people have been calling for new taxes and tax increases at the Federal, state and local levels. We also know that Washington will allow the Bush tax cuts to expire soon. So, taxes are going up. No doubt about it. But, as our taxes go up and up, will our deficits and debt decline? A brand new article in The Wall Street Journal sheds some light on this important topic that impacts both jobs and economic growth. Let’s talk more about it right now.
As first thought, it might seem to make sense that we need to increase taxes to cover Washington’s lavish spending spree. Remember all those costly stimulus bills that failed to bring down unemployment substantially? Unemployment is still around 9.9%. It’s actually 17.1% if you count all those people who have given up looking, or all those people who have settled for part-time work because they couldn’t find full-time work. Washington has spent lots of money following the discredited Keynesian policies of the past.
However, we now know that raising tax rates doesn’t necessarily raise tax revenues proportionately. Why? People look for tax loopholes, or they change behaviors, or they move to less taxing jurisdictions, or sometimes they simply cut back on working to avoid giving a larger share of their hard-earned income to the government. It’s human nature to want to keep your own money.
According to a new article in The Wall Street Journal this week, there is a practical limit to tax revenues. It’s about 18 to 19% of GDP. From 1929 – 2009, tax revenues have never exceeded 19% of GDP. What does that mean?
Even though tax rates are going up, tax revenues will hit a ceiling. We can then expect our debts and deficits will continue to increase. This means we can expect more and more unemployment, and less and less economic growth.
Increasing taxes, especially at this time, is simply the wrong fiscal policy to follow.
How do we get our deficits and debt under control? The answer is also simple. The government at all levels must CUT SPENDING and CUT TAX RATES.
By the way, cutting tax rates means more money for private sector investment in new businesses and new jobs. It also means economic growth and increasing GDP. That’s why government does better too! When GDP goes up, 19% of GDP results in increased tax revenues for the government.
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Taxes are Going Up – But Will Deficits and Debt Go Down?
Lots of people have been calling for new taxes and tax increases at the Federal, state and local levels. We also know that Washington will allow the Bush tax cuts to expire soon. So, taxes are going up. No doubt about it. But, as our taxes go up and up, will our deficits and debt decline? A brand new article in The Wall Street Journal sheds some light on this important topic that impacts both jobs and economic growth. Let’s talk more about it right now.
As first thought, it might seem to make sense that we need to increase taxes to cover Washington’s lavish spending spree. Remember all those costly stimulus bills that failed to bring down unemployment substantially? Unemployment is still around 9.9%. It’s actually 17.1% if you count all those people who have given up looking, or all those people who have settled for part-time work because they couldn’t find full-time work. Washington has spent lots of money following the discredited Keynesian policies of the past.
However, we now know that raising tax rates doesn’t necessarily raise tax revenues proportionately. Why? People look for tax loopholes, or they change behaviors, or they move to less taxing jurisdictions, or sometimes they simply cut back on working to avoid giving a larger share of their hard-earned income to the government. It’s human nature to want to keep your own money.
According to a new article in The Wall Street Journal this week, there is a practical limit to tax revenues. It’s about 18 to 19% of GDP. From 1929 – 2009, tax revenues have never exceeded 19% of GDP. What does that mean?
Even though tax rates are going up, tax revenues will hit a ceiling. We can then expect our debts and deficits will continue to increase. This means we can expect more and more unemployment, and less and less economic growth.
Increasing taxes, especially at this time, is simply the wrong fiscal policy to follow.
How do we get our deficits and debt under control? The answer is also simple. The government at all levels must CUT SPENDING and CUT TAX RATES.
By the way, cutting tax rates means more money for private sector investment in new businesses and new jobs. It also means economic growth and increasing GDP. That’s why government does better too! When GDP goes up, 19% of GDP results in increased tax revenues for the government.