How Will Increased Taxes Bailout the Deficit?

The Obama administration and Congress seem to being focused on catering to the populist view and move this country one step closer to Socialism. We can argue about who was at fault for the financial crisis but there is no question that poor policy from Congress clearly played a significant role in creating the housing bubble. By imploring banks and mortgage companies to make mortgages available to all potential homeowners, a set of cascading events ensued whereas many new homeowners were never financially capable of affording those houses. Cheap money and Wall Street creativity pushed the envelop to keep the financing train going to a point where the housing "house of cards" ultimately reached a peak and then came tumbling down. Hence, blame is with Congress, the Federal Reserve, Banks, Mortgage Companies, Wall Street, and many others.



A year ago, this country faced a possible financial depression and the government and the Fed bailed out many financial institutions with Tarp money and forced some healthier institutions to also take Tarp dollars. Many of those institutions have paid back the government with interest and hefty profits. Others are still floundering. Of course, the auto companies are still a wild card in the potential government losses.



The deficits in this country are out of control and the debt the United States has makes us look like a Third World Country. We need this economy to grow; we need businesses to increase profits; we need companies to begin hiring again; and we need employment to drop. We do not need to TAX, TAX, TAX.



Taxes are a drain from the economy. If businesses pay higher taxes, they invest less in their operations and reduce their available capital to invest. The government wants banks to lend more. Taxing profits of financial institutions may punish them and make the Obama supporters feel better but the unintended consequences are likely to be a drag on the economy. The same can be said for individuals. What makes America great is the ability to work hard, be entrepreneurial, and earn as much as one can. The government shouldn't penalize those who make lots of money. The more one earns, the more taxes he/she pays. If one decides to have good health care coverage, don't tax them for paying high health care premiums. In fact, high cost states like New York, may bring high insurance costs. A new tax would be a double penalty.



Why don't we just raise income taxes to 90%, capital gains to 70%, and sales tax to 30%. The incremental boost could go to the Obama Deficit bank. By using the logic of this Administration and Congress, increased taxes will pay for the wars and the deficit. Our analysis would show an economy falling off a cliff, unemployment skyrocketing, and finally the start of The Great Depression II.