July 20, 2010

Tax cut expiring... more problems...

Tax cuts are unrealized revenues, not unfunded spending.
Unfunded spending occurs when money, based on faulty premises, is secured for spending on entitlements.

Historically tax cuts have produced more revenue, because people tend to spend more for goods and services, which, in turn, creates more production and hiring, thereby increasing the tax base (revenue) for the federal government to spend.

If the Bush tax cuts are allowed to expire at the end of the year, tax payers will be paying more to the federal government and less for goods and services. That may create a bump in tax revenue, but the private sector will remain stagnant. Without a healthy private sector economy, the federal government will begin to experience shrinking revenue to pay for entitlements and the salaries of public employees.

In this country the federal government is obliged to protect the citizens from enemies, foreign and domestic. With the remaining income from tax revenues, the federal government uses the remaining revenue for goods and services as legislated by Congress. They produce the budget and the President approves or disapproves.

The budget for 2011 is way overdue for the President's signature. Perhaps they see the dilemma they may be facing by allowing the tax cuts to expire and unemployment at 9.5% and AARA not producing the intended results.

1 comment:

the WIZARD, fkap said...

I was just about to make a very similar post. This is the EIGHT HUNDRED POUND GORILLA in the room. You'll notice the GORILLA is, so far, being ignored by Congress.

The economy is already in shambles. Get a load of this story: http://www.myfoxny.com/dpp/news/politics/newark-budget-cuts-20100722

When the TAX CUTS expire, the 2nd GREAT DEPRESSION will begion in earnest.