Increasing government spending will require an increase in taxes. Anyone who has even the simplest understanding of math will grasp that concept. So with the Democrats’ intent to increase spending where do they plan to get the money? Obama says they will get all of this money by increasing the taxes on those who make more then $250,000 per year and by eliminating business loop-holes to hide money from the tax-collectors. This way Obama is keeping his promise to the Middle-Class by taking from the rich and giving to the middle.
This situation as I explained it seems to be a great plan, so I decided to look into it further to see what history has shown us happens in situations like this and how it could pop-up in the future.
First I wanted to look at what increasing the amount of taxes that are taken from those who are making a salary of over $250,000/year would do. These households that make more then $250k per year are less then 1.5% of the population. In the past when similar methods have been used this led to creative investing that allowed individuals to pay a minimum of taxes and encouraged investing outside of the USA as a way to hide money. This is becoming increasingly easier as most large corporations become international and portions of salaries can be paid to small corporations started in countries that do not have income tax laws. This decreases the amount of taxes that one can be charged at that higher rate and allows them to be charged at the lower percentage rate that is used for funds, corporations, and trusts.
Now a way to get that money back is by closing the tax loop-holes that businesses use to hide their money. Of course this has the immediate effect of decreasing the amount of foreign investment in US companies. It also has the added effect of forcing companies to export more jobs overseas where countries that have business friendly laws will allow these major corporations to exploit the local labor force and produce cheaper products. If these companies do not export their factories overseas then they will often resort to using illegal labor that will work for significantly cheaper rates, until the factory unionizes and then forces the manufacturing site overseas.
The next step in this process is to increase the tariffs on goods coming into the USA or penalizing US companies for exporting jobs. This in turn allows foreign nations to decrease their dependency on the US and allows them to expand their markets to other nations.
After all of these affects take place the only way for a US company to succeed is to live off of government bail-outs. This will increase the total spending of the US government and create a larger need for taxation thereby forcing the country deeper and deeper into the same problem.
If we continue along a path that punishes those who get the education and training to make a lot of money and those who take the risk to start their own businesses … then soon nobody will do that in the USA. When that happens who will pay all of the money to give to everyone else?
This situation as I explained it seems to be a great plan, so I decided to look into it further to see what history has shown us happens in situations like this and how it could pop-up in the future.
First I wanted to look at what increasing the amount of taxes that are taken from those who are making a salary of over $250,000/year would do. These households that make more then $250k per year are less then 1.5% of the population. In the past when similar methods have been used this led to creative investing that allowed individuals to pay a minimum of taxes and encouraged investing outside of the USA as a way to hide money. This is becoming increasingly easier as most large corporations become international and portions of salaries can be paid to small corporations started in countries that do not have income tax laws. This decreases the amount of taxes that one can be charged at that higher rate and allows them to be charged at the lower percentage rate that is used for funds, corporations, and trusts.
Now a way to get that money back is by closing the tax loop-holes that businesses use to hide their money. Of course this has the immediate effect of decreasing the amount of foreign investment in US companies. It also has the added effect of forcing companies to export more jobs overseas where countries that have business friendly laws will allow these major corporations to exploit the local labor force and produce cheaper products. If these companies do not export their factories overseas then they will often resort to using illegal labor that will work for significantly cheaper rates, until the factory unionizes and then forces the manufacturing site overseas.
The next step in this process is to increase the tariffs on goods coming into the USA or penalizing US companies for exporting jobs. This in turn allows foreign nations to decrease their dependency on the US and allows them to expand their markets to other nations.
After all of these affects take place the only way for a US company to succeed is to live off of government bail-outs. This will increase the total spending of the US government and create a larger need for taxation thereby forcing the country deeper and deeper into the same problem.
If we continue along a path that punishes those who get the education and training to make a lot of money and those who take the risk to start their own businesses … then soon nobody will do that in the USA. When that happens who will pay all of the money to give to everyone else?
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