Conclusions are not necessarily right when everything is taken into consideration. Take the premise that warm water freezes faster than cold water. If you put two ice cube trays in the freezer, one with warm water and the other with cold water, they will both freeze at the same time. Conclusion: Warm water freezes faster than cold water. In reality, the warm water keeps the cold water from freezing until they are at the same temperature.
Now if we step forward to this tax the rich concept. Proponents state that lowering the tax rate of the rich from 90% to 20% did nothing economically to stimulate the economy. So let’s raise the rates back up to what they were and increase government revenues. The thing that needs to be examined, the rich will invest or not invest depending on the tax code laws. If taxes are 90% here, invest somewhere else.
If you examine the graph below, there is really no correlation between the high tax rates for the rich in the early 1950’s compared to present returns. The graph is flat. The rate of taxation on the rich appears to have had little effect on total taxes collected. You’d expect a dramatic drop in collections when rates were dropped.
Notice the red area of the graph. This represents social insurance. Figure that the new health care provision should at least double the red values. This will increase our taxes by 25%. This won’t be a tax on the rich; it will be a tax on the poor who skip health insurance because they can’t afford it without reducing their standard of living. Of course the employer pays half of that tax doesn’t he??? If you have ever worked on a commission basis, you’ll discover that you pay both sides. It isn’t hard to figure what this new tax will cost $2,000 to $5,000 per employee. Figure more than you presently pay for private insurance.
The real problem lies in the fact that Congress may believe that raising taxes during these harsh times is a real solution. Common sense suggests this should increase taxes collected. In reality, the net result will be little change in revenue. It’s a little like that house you bought that everyone told you would never drop in value. Well it has dropped quite a bit and the property taxes on your home have dropped also. Unemployed people pay fewer taxes. So at this point raising taxes further restricts taxpayer consumption (a reduced standard of living) and Government revenues drop even further.
The Democrats want to increase taxes on the rich and the Republicans are dead set against it; the only real people it will affect are sports players and movie stars. The Republicans ought to let the Democrats win this one and let them go for it, see if the dollars roll in. It’s just political posturing on both sides.
What can we look forward to in 2012? A lot of belt tightening! A lot of political squabbling and finger pointing. An election is coming up, is Obama destined to be our Herbert Hoover? Will health care pass a Supreme Court review? Will the Euro survive? Can we increase the national debt one trillion dollars a year forever. Will civil war triumph over democracy in the Middle East? Could several States in the coming year need a Federal government bailout? I don’t mean to be pessimistic, but once we get all of this under our belt, it may be up instead of down from there.
None of our problems have been solved, they have only been ameliorated (to make more tolerable). What will happen in the coming year is veiled in uncertainty. But even so, here is wishing every reader Seasons Greetings and the hope for a successful and Happy New Year.