No New Taxes

Posted by Ray on August 4, 2009 under Main | Be the First to Comment

Give me a break, the mere fact that our government is not taking “anything” off the table is proof enough that taxes will be realigned to make sure they are “fair.” The question is what are they going to consider fair and for what income levels.

Given the projected national debt load, it can be assumed that tax rates will increase for the wealthiest 5% of Americans, as stated in Obama’s campaign. However, to assume that those who are making $100-$200K will not see tax rate increases is absurd. We know capital gains taxes are going to go to at least 20%, but some indications that 28% is not off the table. However, there is a possibility that capital gains taxes may only increase on “wealthier” Americans.

What we know is this, higher taxes are very bad for economic growth and always temporarily boost tax revenue in the short-term, but long-term tax receipts always drop. My issue is where the line in the sand is drawn as far as who is wealthy and who is not. If it is determined that those making $100K a year are wealthy then we are in serious trouble because that income range is not wealthy and more Americans will have higher tax rates.

Even if taxes are for the wealthy it is only a matter of time before those higher tax rates trickle down to lower income brackets. The AMT, alternative minimum tax, was intended for higher net worth individuals, but more and more Americans are subject to this draconian tax every year. I fear that any tax increase will have the same unintended consequences.

Although, I question whether or not higher rates on all Americans will be an unintended consequence or a carefully orchestrated maneuver. What will happen is that higher taxes will produce higher tax receipts for a year or so and then when the receipts decline, as they always do, then taxes will have to be raised for all Americans. Given our current and projected national debt load I believe we are all doomed to pay higher taxes.

There is no way out of this situation, well there is another more politically accepted way, but it is just as dangerous to America as higher taxes. The US can inflate its way out of it debt by printing money, which is currently happening. Inflating our currency may be great for paying off our debt, but it will cost us as central banks will not loan us as much money and Americans will be paying a lot more for goods and services.

No matter how we try to solve our debt problems our trying to figure out how to pay for universal health care I personally believe higher taxes are the end result. That is what is meant by Americans will have to “sacrifice” something for our new health benefits and social engineering. Unfortunately, it is the wrong choice to make and our current social programs are just more waste which will drastically increase our debt load.