Corporate & Securities Law

The Obama tax increases

The biggest and most important issue for the next few months won’t be immigration, the New Black Panthers, or even the war in Afghanistan. Huge tax increases are headed our way, and it raises tough questions. On the one hand, signaling we are serious about deficits is likely a good thing. But, since politicians haven’t been able to reduce spending additional income, assuming more taxes brings more income, cutting spending would be a better course. Having locked ourselves into huge spending, maybe some tax increases are inevitable.

On the other hand, raising taxes in a recession is not a good idea. Taking money out of the economy, routing it through Washington, and then hoping politicians can spend it wisely sounds like the triumph of hope over experience.

Take me. I just calculated my family tax increase at a useful website from the Tax Foundation. If the president and Congress raise taxes as expected, my family will have to pay an additional $10,000 in taxes next year.

To come up with the extra $800 per month, we can cut back on some things. The recent (legal) immigrant from Mexico who cuts our grass will suffer, as will the recent (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. We’ll have to go to skip going to the movies and eat out less, and think about skipping that vacation to Disney World. What is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions? Maybe we should ask the entrepreneurs we employ and the new arrivals they employ in turn whether they prefer to work for us or get a government handout.

Full post as published by Truth on the Market on July 29, 2010 (boomark / email).