Raising Taxes Generates Less Revenue

This health care plan being pushed through Congress is pretty much nothing more than a tax hike on the young paying for the benefits of the old. The additional funds raised and not paid out could be "borrowed" by Congress, just like our Social Security taxes were.

Look at the picture below. 23 percent of our budget is for Medicare, 21 percent is for Social Security, 10 percent is other, and interest on the debt is 8 percent. The only things Congress can "adjust" (cut) are the 21 percent for defense or the 17 percent of discretionary spending. Good luck there.

In the second chart look at the sources of income; Social Security provides 36 percent of tax revenues. Notice, the government is only paying out 21 percent in benefits to Social Security recipients; the other 15 percent is "budget money." Note: FDR claimed that Social Security would only amount to a 1 percent tax (Democrats seem to have a problem with math and that goes hand in hand with voters having a bad memory).

This is where the health care tax will be the new revenue generator. Just like Social Security was during the Great Depression. But this time it will back fire on them. Congress in its infinite stupidity thinks this will solve all of our country's budget problems. They raise taxes and the taxpayer gets “free” health insurance. But there is one little item, that right now is insignificant, but will rise up to bite them. It is the assumption that most families will continue to have two wage earners.

The government has failed to realize the game rules have changed. We are in a depression with high unemployment and decreasing tax revenues. Your dollar has to go further when you have less of them to spend. Government spending has to be cut drastically, how likely is that to happen? Many families now only have one wage earner and it looks as if it will get worse. The government needs to raise taxes by 25% and health care will do just that. The real health insurance costs are for those over the age of 60 and that program is already “funded.”

The younger generation may be able to beat this tax. When our son was born, I became Mr. Mom. My wife had a real good job and at the time, my real estate career wasn’t setting the world on fire. My wife wanted me to get a “real” job and put our son in day care. I mentally figured it out, day care would cost about $18,000 per year and gas to drive to my job would probably be $2,000 per year. Plus we would both have to do the cooking, cleaning and shopping; figure that has to be worth about $5,000 per year. Add it up and it totals up to $25,000 (after tax income) so in reality, you need to earn $30,000 (before taxes)to justify getting a job. On an hourly basis, that figures out to about $14.42 per hour (figure $15.50 if health insurance passes). Being a house wife, may be a big positive for family financing especially if the prospective employer is only offering $9.00 per hour.

Government health insurance would be one less worry for the wife and kids. The husband could come home for “lunch.” Their actual standard of living would be better than the family with two wage earners. The net effect of this health insurance could inadvertently reduce the number of working women (with young children), which would be a reduction of taxpayers paying into the system.

Any way you look at it, there will be more people “not working,” or working under the table. Social Security collections as well as the new Health care tax could probably decrease well below anticipated government expectations.

Tax increases did not work during the Great Depression, including the Social Security tax. I read history, I don't interpret it. Congress needs to share a cell with Bernie Madoff. They both played the same game, the only difference, Bernie knew his investors.