US Debt, the Millionaire Tax Failure, Declining State Revenues



Budgets and Bankruptcy:

The hot buzz issue of the 2010 election is federal spending and the national debt. In the last 30 years federal spending has increased astronomically and so has federal borrowing to pay for these programs. In the coming year’s insolvent entitled programs (Social Security, Medicaid, Obamacare) will require massive allocations of federal revenues to sustain these programs as an aging population requires increased medical and social security benefits. These increasing unfunded liabilities and a continuation of massive spending bills for entitlement, stimulus and other government programs will result in deficits that revenues cannot keep up with. The debt will balloon, making US treasury bonds unattractive to investors, bankrupting the United States and preventing the possibility of more borrowing to fund basic government.

We cannot continue on this current path! Every day we do not solve the debt crisis is a day closer to government bankruptcy. Raising taxes to meet these deficits will shut down growth and actually decrease revenues. While some say, tax the rich to fund it, this is a foolish and unworkable program. To fund these programs that mostly benefit the poor and lower middle class, the middle and upper class’s taxes must increase to massive levels that would drive the middle class into lower class income status.

Donald Trump gives an accurate picture on the wealthy international class and the effect of higher taxes:

http://video.foxnews.com/v/4294961/trump-keep-taxes-down/

If you were to tax the rich as the main source of tax revenue to fund the debt you also created a major economic problem and decrease revenues! On close examination of raised taxes on the rich such as New York State’s Millionaire’s tax, the revenues from those individuals actually decreased because those people left New York State to avoid tax hikes! Even Paterson admitted the failure of the Millionaire tax:

“Similarly, New York enacted a “millionaire tax” that raised tax rates on all residents making more than $200,000 a year. However, since New York implemented their so-called millionaire tax its state revenue has declined by 9 percent. According to New York Governor David Paterson:

We increased the income tax for millionaires last year. We projected that we would get $4 billion and we actually got well short of it. Tax the rich, tax the rich. We’ve done that. We’ve probably lost jobs and driven people out of the state.”

Source: Freedom Works

When the federal government increases taxes for the rich on a national scale, businesses and individuals make the tough decisions to move themselves or their assets overseas to protect it. Investment that could be directed to the United States will be directed at Europe or developing nations. The United States will make itself even poorer if we rely on taxes to solve debt problems.

If increasingly higher taxes won’t fix the problem creating adverse economic conditions that would demand more deficit spending to keep the economy afloat, our only option is to cut spending!

Is the “Balanced Budget Amendment” a good idea to save the deficit? Is the question I will address next post.

A future article will also address actually budget numbers and creative means for knocking down the deficit.

Sources on debt numbers from Heritage.org:

http://www.heritage.org/research/reports/2010/08/reining-in-runaway-spending-and-deficits

http://www.heritage.org/Research/Reports/2004/06/The-Laffer-Curve-Past-Present-and-Future