Saturday, April 04, 2009

Lower Or Higher?

Here's an explanation of taxes and revenue.

TAXES by definition are the sums taken from individuals, businesses and corporation based on a little thing we like to call INCOME.

INCOME is what is earned through the production of products, sales of products or services.

PROFIT is what is left over after payroll and production and tax costs have been met.

You must understand those terms to understand anything else.

IF you LOWER the INCOME made by corporations, businesses and individuals through higher TAXES, you risk the shrinkage of REVENUE as the businesses lose the funding needed to expand or just maintain productivity. That in turn means that the businesses, corporations and individuals must do more work to get the same INCOME. And if they are working a close margin of INCOME to outgo, that may mean closure of factories, businesses and outright bankruptcy by entities large and small. That's not just a bad thing for the businesses, it's a bad thing for government, because less entities to tax means that the government must either LOWER their expectations or make taxes HIGHER.

A case in point would be plastic bags. The "greenness" of plastic bags is at question so some communities think it's a good idea to ban them. But let's suppose that one of the businesses that pays taxes is a plastic bag manufacturer. And in addition, let's suppose the factory employs 1000 people. When you ban the bags, you can feel all moral and superior, but that isn't going to help the 1000 people who are out of work. It's also going to make it where remaining businesses will have to take up the slack in terms of paying taxes if governments don't want to back down on the big ticket programs. This pushes more businesses into dangerous waters, leaving more people jobless and further pushing the need for taxes HIGHER. Are you getting the idea yet? In order for things to change, our GOVERNMENTS AT ALL LEVELS MUST STOP SPENDING ON UNNECESSARY PROGRAMS. There are lots of programs which are "feel-good" programs. They look nice on paper and make people happy. One example would be PBS. Don't get me wrong, I like PBS. I have even paid some although it was mostly to stop those annoying pledge drives. But if any program, service or even artwork is truly successful, then an appreciative market will pay them for what they do. But if the programming or service doesn't appeal to anyone, people won't pay and it will go away. That's what makes businesses.

The government has no business getting into business. Frankly speaking, GM would have been in much better shape had it been allowed to restructure under the bankruptcy laws and renegotiate the ridiculous union contracts. And while we are speaking of it, I wonder if pro sports are paying any attention to the economy. The default by the Hicks Sports Group is just the tip of a very nasty iceberg. How many pro athletes are making more in a month than a cop or a teacher will in a lifetime? This is pretty indicative of the screwed up priorities our culture has produced. It's the type of Entertainment Tonight Presidency that looks good on the TV, but does very little down the road.

Lower or Higher, which way do you want to go?

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