Friday, July 07, 2017

More Taxes Create Problems

Tax cuts for the Rich and 20 million people will lose their health care coverage. The headline kind of makes you wonder. If they repeal Obamacare, this is the declared outcome.

For some reason, it doesn’t hold water. A tax cut for the rich means they’re going to be taxed at a lower rate. How can 20 million people lose a benefit if they paid for it? If they didn’t pay for it, now that’s a different story.

When you lose a free government benefit, a taxpayer had to be paying for it. So, giving the rich a tax break limits the amount of largess the government has to spend on those who are broke. I get upset when I realize that food stamps allow a family the ability to have a cell phone and cable TV. Of course, you don’t see it from the kid’s side, “milk toast for breakfast and hot dogs and macaroni and cheese for dinner” every day until you graduate high school or run away from home. Many states have renewed the work mandate for food stamps that Obama ignored, and it looks like there has been a 50 % drop in food stamp applicants.

Notice how there is contempt projected from our Congressmen for giving the rich a tax break and how there is the implied request for sympathy for people who stand to lose their coverage. Your Congressmen mentally weights the issue and comes to the conclusion, “By God I want to get reelected!” and this should do it.

A new mind set is in the mix. The one issue voter. Guns, gay rights, black lives matter, abortion, save the earth, health care, etc. are gone. The Christian religion appears to be the new touchstone of American politics.

In the last election, the tables were turned upside down. The rich were represented by the Democrats as were the poor. Kind of a confusing mix. Big business and socialism don’t mix. On the other hand, the Republicans lost the Rich and gained the middle-class voter who felt that they were being neglected because of all of the special interest groups. I don’t think that it will be politically incorrect to wish someone a “Merry Christmas” this year.

The big thing to notice that just happened is the passage of the Illinois State budget over the governor’s veto. The state will increase the state tax rate about 32%. Another way of stating it, is that the present rate for individuals rises from 3.75% to 4.95% and businesses rise from 5.25% to 7%. The problem here is that you will be paying more and receiving even less in benefits than before. This is what happened during the great depression. States and Municipalities raised taxes expecting to increase their tax revenues. The net result, tax receipts declined, it was the exact opposite of what the legislators had expected. People voted with their feet and moved.
If you go back to President Eisenhower, we had a tax rate on the very rich of about 80% and it generated very little tax revenue. Rich people then were not stupid, they bought stocks and paid 15 percent in capital gain taxes.

In today’s world, governments need to live on more realistic budgets and that is just not happening. Reality is starting to settle in. When your police force or fire department pull up for gas in Illinois, it is cash on the barrel head no state credit cards accepted.

So here is what we can conclude. 20 million people on free health insurance is not even feasible in any government budget. The assumption that raising taxes will increase the amount of tax collected is false. The opposite is more likely.

The neat thing about states that run out of money is that there are no bankruptcy laws to expunge the debt. States can’t file for bankruptcy so you could have a long wait, to get paid. I believe that Missouri just recently paid off a delinquent state bond issued 120 years ago.

Where to from here? It is kind of one of those questions without an answer. We borrowed too much and have no way to pay it back. The 1964 dollar has gone to a dime, inflation wise. I guess the 2017 dollar will also go to a dime and if my math is right, that’s a 1964 penny.

“A penny for your thoughts.”


aim said...

Hi JIm -- We live in an era of fake news, fake government, fake politicians, fake central banks, fake religion, fake freedom and fake liberty. Criminals and vested interests are in control of our country. Economic history shows very plainly that raising taxes lowers revenues and lowering them increases revenue. They know this. And they don't think that we are stupid either... they think we are COWARDS... they know we won't rise up and do anything about anything. That is why they continue to encroach upon our liberties and freedoms and enrich themselves personally. They use the media to spread their propaganda and cover things up, they use their insane financial engineering to keep things floating along, despite the awesome crash that will result from this behaviour. Corruption to the max. The Federal Reserve has a record over the last 100 years of wrong forecasts, poor prediction and causing every recession, panic, depression we've ever had in this time period. Right now they are raising rates into an unstable, low growth economy. Prepare for our next heavy duty recession.

Jim in San Marcos said...


Since my readership has dropped, I hate to disagree with you. I believe that the people in charge are incompetent morons with good intensions or people who think we can afford every program under the sun and still function normally.

I believe that you are right that no one will rise up and complain, complain to whom?

I also agree that the system could collapse. I believe that this whole mess is a result of gross incompetence and pure stupidity rather than some intelligent scam

dearieme said...

"I don’t think that it will be politically incorrect to wish someone a “Merry Christmas” this year." It has been my established practice for years that if I speak on the phone to anyone in the US in December I wish them a Merry Christmas. Just because.

I consider myself the founder of Atheists for Merry Christmas. My brother is the founder of Atheists for Evensong. We fight the good fight, or at least a good fight.

As for the public finances - everywhere in the West they are in ruins, it seems. Are there exceptions? Norway, maybe, and those honorary westerners in Singapore. Switzerland perhaps? How about Denmark or Sweden? But then Sweden is going to fold anyway, albeit for different reasons. In the US you seem to have three layers of ruin: city, state and federation. It won't be a pretty sight as the collapse spreads. No doubt it will all be blamed on Trump even though he obviously will have had nothing to do with it. And also the Russians, of course.

I search for a metaphor: shall we say that the burning jet fuel of debt has weakened the structural steel so that collapse is imminent?

aim said...

Jim: I will hazard the opinion that you suffer from a bit of naiveté as regards your fellow man. There is a small category of humanity that are anti-social in nature. They have destructive or evil intentions. They are the ones responsible for broken homes, collapsed businesses, chaos and war. It is easy to see this in the Hitlers, Stalins and Pol Pots of the world, yet these types of personalities also exist in all areas of life (could be a CEO of a major corp, your boss, or your mayor, or a neighbor, etc.). So yes, I agree that we have stupidity and incompetence but we also have these anti-social personalities that cause the most trouble. And they are attracted to the powerful and creative and see them as targets to destroy. That is why there is so much chaos in government and in their foreign relations. That is why so many celebrities have marital, alcohol or drug problems. Whenever something is failing, or wherever there is destruction and violence you can bet there is one of those personality types hiding around the corner. So to me it is incompetence... stupidity... and people with evil intentions.

aim said...

I forgot to add that this personality type wants to keep people down, wants to control the population, the money, the assets, the communications, etc. That is why they seek positions of power and sometimes can rise to head of state heights. This is a mental phenomenon we are dealing with. These types of people have certain, specific attributes that make them recognizable. A smart population should learn to recognize, label and remove these people from positions of power.