Taxes:                                                                                Back

George Bush promised to make the tax cuts permanent how will that effect you?

A lot of you think that the tax cuts are a great thing, you'll have more money. Well let's take a good look at the effect they will have on the average American.

Tax cuts, unless you have a large economic growth, will add to the national debt. The national debt is now at an all time high and the only reason that isn't effecting the interest rates is that Alan Greenspan has been able to control them. He won't be able to, much longer, unless we can maintain the debt at it's present level or reduce it. (The government can't loan money it doesn't have.)

Increasing the interest rates will spur inflation, we're already seeing that in health care, gas & oil prices, food. etc.

The tax cut has been in effect for almost four years and we've seen very sluggish growth, so we can't really expect the growth to lower the debt.

So what can be done. We can raise taxes or we can cut spending.

Let's say, since George Bush wants to make the tax cuts permanent, that we cut spending. Where do we make the cuts? We can't at the present time cut the defense spending, not while we are at war & we shouldn't cut intelligence or homeland security. We've already under funded the "No child left behind act" and if we maintain the standard without the funding the average person can look for a property or school tax increase. So the average American will probably pay more in school taxes then they will gain from the income tax cut.

We could cut spending on programs such as HUD, Medicare, Environmental Protection, The Space Program. There are a lot of places we could save money but they would all effect the average person negatively.

Say we cut the Space Program. "How" you ask "will that effect me?" It will effect you by cutting jobs, maybe not your job, but somebody, somewhere won't be producing the rockets, spacesuits, or whatever NASA has to cut & that will cause more unemployment & less tax revenue.

In any scenario you use. The rich will get richer & the middle class will get poorer. That's the final effect of the Bush tax cuts. We the middle & lower classes will either loose income or services.

I've also heard George Bush mention simplifying the tax code & a flat tax. So let's look at a flat tax.

I used to work with a guy that bought into Ross Perot's flat tax. He kept telling me what a great idea it was. He changed his mind real fast when I showed him what it would cost him. We'll keep it simple. take yourself and three other people.

Three of you make $500 a week and the last person makes $5,000 you each pay 20% of your income, so three of you pay $100. & and the last person pays $1,000. a total of $1,300 seems fair right.

The way a progressive tax works is that the last person will pay $200 on his first $1,000 then 25% on his income up to $4,000 then 30% up to $,5000. Or $200 + $750 + $300 or $1,250 total

Now let's say that the country needs a total of $1,500 and we decide to go back to a flat tax. Your combined income is $6,500 and we need $1,500 with a flat tax you'll each pay 24% so you'll pay $120. or twenty dollars more. The last person will pay $1,200 or $50 less & we'll have a $60 surplus.  If we give each of you a tax refund of $15. three of you will pay $105 or $5 more & the top guy will pay $1,185 or $65 less. That's the effect of a flat tax, the middle class will lose again.