Tuesday, October 26, 2010
I was asked about my thoughts regarding the reduced tax questions Massachusetts voters will be asked on November 2nd, they are questions 1 and 3 on the ballot. I support reducing the taxes, (obviously), but I had to explain why rather than just give a simple answer because people are facing the scare tactics against the reduction of the taxes.
It's worth noting that since the Deval raised the tax from 5% to 6.25% revenues have DECREASED. Throughout history, lower taxes have actually caused revenues to increase rather than decrease but that's not the point here so I won't get into that explanation once again. Here's how I explained why I want to lower the tax.
It's no surprise that we're in a recession. It's also no surprise that politicians are good at wasting money. They are saying that if question 3 passes then we'll have to cut things like education and cops, this is not true. Let's say that revenues decrease and Massachusetts doesn't make as much money with the lower tax rate. That will force the politicians in Massachusetts to think about priorities.
In my last post you saw some of the many ways that the Deval wasted money as governor. If we give them less of our money then they will have to make the kinds of tough decisions everyday folks are making in their own families everyday. They will have to decide what's more important, funding cops and education, or funding "pork" projects which we all know is in no short supply in government. If they cut cops and education funding but they keep all of their own special interest projects and keep hiring their friends for six figure salaries in positions we neither need nor want, then you know where the priorities are with that particular politician. It will not be a question of taxes, it'll be a question of prioritizing necessary spending vs. discretionary spending.
Think of your own family budget for a minute, times are tough, people are losing their jobs, others, (like those on social security), are seeing no increase in wages, and many are in fact seeing decreases in wages. Now, facing such situations what is it most of us have to do?
Well, since we can't vote for our own raises the way congress can, the only way for us to have more money is to spend less, (government should take a hint on that lesson). The New Dealers, (New Deal supporters who are ignorant of just how miserably the New Deal failed at handling the depression of the 30's), are telling us that the government has to keep spending and spend more and more in order to avoid this recession becoming a depression. This quote comes to mind:
"A recession is when your neighbor loses his job, a depression is when you lose yours." - Ronald Reagan
Using that explanation it's clear that many of us are in fact already facing a depression. It's true that the economy is 70% spending. What proponents of vastly increased government spending don't realize is that the economy is 70% consumer spending and it only works if consumer's are spending their own money. This is where lower taxes come in.
Let's get into detail. You're struggling to pay the bills so you look at your spending. You realize that you're going to the coffee shop everyday and spending $2.00 on coffee everyday and $5.00 a day for a sub at lunch.
You realize that if you make your own coffee and bag a lunch then your coffee costs less than .50 and your lunch is well under $3.00, (homemade sandwich, can of soup, granola bar, whatever). You've now cut your coffee and lunch budget to most likely less than $3.00 when it used to be $7.00. You're now saving $28.00 a week and about $112.00 a month. That's just from coffee and lunch everyday.
You start applying that to other areas of your life, you minimize driving as much as possible to save on gas, you rent a movie rather than go to the movies, you make dinner at home and don't go out to eat. You start to realize that those little savings made by cutbacks in everyday life start to add up. The point I'm making is that the key to making more money in a recession isn't necessarily making more, it's spending less.
There's a downside though, when you don't spend money on things like going out to eat and going to the movies etc. then those businesses get hurt by you not spending. The theory behind stimulus and bailout supporters is that if they give you other people's money then you'll go out and spend it at those businesses. The problem with that theory is that they are just creating what I'll call "shadow debt".
It's no different than you using a credit card, only it's uncle Sam's credit card. It's still debt that you can't afford, only since it's other people's money you're spending you don't think of it as debt. The reason that the solution is lower taxes rather than increased government spending is that when you are given more of your own money from lower tax rates the money you are spending is actually discretionary spending money that you actually owned.
That spending money doesn't increase anyone's debt. When you have more of your own money you are more likely to buy that $2.00 coffee, get that $5.00 sub, or go see that movie. That spending will help those businesses but not add to anyone's debt. The increased economic activity from you spending your own money will increase the revenue of businesses and yes, government.
If businesses start making more money off of the people who now have more money to spend they will need more workers to keep up with the increased business, the end result....more jobs. More jobs means more taxpayers, more taxpayers means more revenue. Have I lost you yet? Or are you starting to get how the economy really works?
Let's send a message to the politicians. Vote yes on question 3 and force the politicians to look at the budget the way we have to look at ours. Perhaps they then will truly begin to see what it's really like to live in the real world during this recession. Maybe then we'll be able to gain a bit of respect from the politicians who are supposed to work for us. We've sacrificed enough for their special interests, we've given them enough of our tax money to waste. Let's teach them a lesson and give them a little less.
After all, it's only 3.25 cents on the dollar, (6.25% down to 3%). They always use that argument when talking tax increases. It's only .5 cents here, or a dollar there. Well you know what...I'm tired of being nickel and dimed to death, how about you? Vote yes on question 3 and ignore the propaganda. Propaganda always ignores that which matters most, the truth.