Taxes

Are taxes too high?

Well they aren't high enough to pay all our bills so we have to borrow and add to the national debt every month.

Some like to argue that we should spend less, but of course besides the often cited waste and abuse there is little agreement on what to cut.

The biggest components of our budget are tied up in what we call entitlements and defense with a big component for interest on the debt.

After those three things we have all the rest which is somewhere under $500 billion.  The deficit is almost twice that.  The link below gives more details.

Budget breakdown

One big problem we face is that our nation has gotten older.  The best way to pay for entitlements is to have enough young workers paying taxes to cover the outlays for retirement and Medicare.

We don't as the baby boom generation ages and the number of births decreases.

This trend is going to continue to force larger deficits every year unless we take steps to increase income or reduce payments (a suicidal political issue).

We are not going to reduce defense it seems and the rest of the budget is not enough so the simple answer is tax revenue is too low.

The two ways to increase tax revenue is to grow the economy or increase taxes.

Growing the economy sounds good, seems like everyone will benefit, but remember our tax system is primarily an income tax, so you have to grow worker's income to get more taxes, especially since we are reducing the corporate tax rates.

Where are the workers?

Unemployment has been extremely low so the only way to increase worker income is through paying the workers we have more.  Its clear that's not going to happen to the degree or level we would need to raise tax revenues by 25% or so.

Of course mandating raises of that amount for everyone sounds good to most people, but it is likely to lead to more automation and is opposed by our business dominated Government.

Immigration was a source of additional workers, but we have an anti-immigration government that is restricting it.

We are living on borrowed time and money.