The Cruelest Tax of All-No Return on Savings

Now that the “Super Committee,” or perhaps I should say “Stupor Committee,” has failed to come up with any sort of compromise regarding deficit reduction, we can continue merrily down the path to insolvency.  All congressional (and presidential) eyes are focused on next November.  Apparently both Republicans and Democrats have similar strategies.  First, join together to create an economic crisis, and then play the blame game.  Just once wouldn’t it be refreshing to see our politicians join together to accomplish something good, and then they could fight over who should get the credit.

The Republicans on the Super Committee would not agree to a tax increase under any circumstances.  And evidently they have all signed a pledge to never increase taxes, and those pledges are held by a lobbyist named Norvor Norquist, who heads up the Americans for Tax Reform.  If that pledge is broken, the attack ads will be launched.  The pledge signers include all but one of the Republican presidential candidates, Jon Huntsman.

I am not an economist, nor am I in favor of higher taxes to fund big government spending, but I am in favor of everyone paying their debts.  Too much debt will always economically destroy an individual, a family, a company or a country.

Think about taxes this way for a moment, and decide which you would rather have?  A tax increase of 2% a year accompanied by an annual return on your savings of 10%; or no new taxes and an annual return on your saving of less than 2%.  Hmmmm?

Since the Bush tax cuts were put in place 10 years ago, we have experienced the worst 10 years of performance from the stock market since the Great Depression, less than a 2% annualized return.  And with the failure of the Super Committee to accomplish anything we had a “Black Monday” yesterday which is not going to encourage shoppers on “Black Friday.”

I know it’s not that simple, and there are many factors contributing to the huge deficit we face.  But that is the precisely the point. This rigid, unflinching opposition to any sort of tax increase does nothing to solve the problem, and we won’t have to wait until next November to see the result.  The Market will tell us long before then.

3 Comments

Filed under Politics

3 responses to “The Cruelest Tax of All-No Return on Savings

  1. Jeff

    Notwithstanding your subsequent qualifier, “I know it’s not that simple…”, I find the “Since the Bush tax cuts were put in place 10 years ago, we have experienced the worst 10 years of performance from the stock market since the Great Depression, less than a 2% annualized return…” really disturbing coming from you. Sounds more political than serious financial analysis. Ok, it’s a personal blog, but come on.

    Even the Washington Post (no bastion of conservatism) stated: “The cuts lowered tax rates across the board on income, dividends and capital gains; eventually eliminated the estate tax; further lowered burdens on married couples, parents and the working poor; and increased tax credits for education and retirement savings.”–all things, except maybe the “elimination” of the estate tax, I think you would find beneficial.

    We can quibble about the “right” or “fair” tax on high income earners, but are you taking the position that our current economic problems have more to do with not enough taxes from “rich” people than from run-away spending from an enormously wasteful government making entitlement promises it can’t possibly keep? Or from a government/Wall Street complex that gave us Fannie and Freddie, foolish Fed policy, more useless and expensive financial regulation that didn’t even prevent one of its crafters (Corzine) from crashing and burning a 200+ year-old company in six months while “misplacing” $1.2 billion of client assets that were supposed to be segregated and protected?

    Hmm.

    • Jeff

      You miss the point. I am not advocating higher taxes, there is no evidence to show that higher taxes or lower taxes will solve the problem, what I am trying to point out is that the deficit problem is real and that politicians have been on a spending spree for the past 11 years with no idea how to pay for it. All your observations must have been between the lines but I can’t find where I said that our current problem is the result of not enough taxes.??????

      Jeff, please read my post again, especially the para starting, I am not an economist………. How you arrived at you conclusions about what I wrote are a mystery to me.

      Glad you are reading and I do love the feedback.

      Dan

  2. Jeff

    Dan

    Thanks for the response back. I guess I did miss the point (because I agree with much of the rest of the post), but when you take the previous paragraph illustrating a two percentage point increase in taxes and then a sentence that suggests a cause and effect of tax cut = bad stock market returns, do you see how I might be confused? 🙂

    I guess I’m also sensitive to the fact that one side of the political spectrum uses the Bush tax cuts as a simplistic sound bite to drive their class warfare engine (not suggesting that the other side doesn’t do the same). Like you, Im sick of shallow thinking and pandering that gets us no closer to solutions for massive problems.

    In any case, I enjoy your perspectives. Keep them coming.

    Jeff

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s