Frail economy sign taxation has reached limit

By Freedom New Mexico

For the second time in six years, President Bush proposed a tax rebate program to jump-start the economy.

In fact, many analysts believe his plan actually comes too late. They fear people have gotten themselves so deep in debt that instead of using the money to buy stuff, which is the officials’ hope, Americans will first pay down on their debt.

Congressional Democratic leaders are on board, saying they understand the need and urgency for such action.

You know things are bad when the Democrats are willing to give money back to the taxpayers.

In fact, Senate Majority Leader Harry Reid said the president’s request to return about 1 percent of the total U.S. gross domestic product — about $140 billion to $150 billion — is “a good number.”

The issue clearly shows that American taxpayers have hit the upper limit of how much they can afford to lose to the taxman. It’s safe to assume, in fact, that people wouldn’t be so debt-ridden if lower taxes enabled them to keep, and spend, more of their hard-earned money.

Economists are well aware that virtually all aspects of production and spending — and taxation, for that matter — has a point of diminishing returns. It’s obvious that with respect to taxation, we have crossed that point.

High taxes combined with increased costs of living are taking so much money from Americans’ pockets that they can’t afford to buy the goods and services that keep the economy running. Even the government loses out, since the loss in sales tax is greater than revenue that’s generated from income and other wage taxes.

That’s already happening, prompting many economists to say the country already has entered into a recession, which officials call “negative growth.”

Simply put, it means people are spending less money, which leads to less demand for new goods and services. Unable to clear existing inventories, companies reduce production, which often means laying off workers. The laid off workers have less money to spend, and thus buy less, creating a downward economic cycle.

Of course, government officials are quick to blame the higher cost of gasoline and other items, but taxes are a major part of the equation.

Tax increases have also added to the recent wave of property foreclosures, which officials blame largely on home buyers’ inability to cover increases in variable tax rates many of them agreed to in return for low initial home payments.

Naturally, the officials fail to mention that property tax and insurance increases have been just as steady, and in many cases even larger in amount, than the interest rate changes.

You’d think that our elected officials would learn from this, and recognize the need to stop robbing their constituents in order to fund their pet projects, appease donors or buy votes.

Unfortunately, history has shown that even if they see the logic in Bush’s tax rebates, they won’t see how much more the country would benefit from permanent reduction and even divestiture from many federal programs that the government has no business funding in the first place.