Income Tax Increases Will be a Drag on the Economy | Man and ...

Our budget deficit woes will end up making tax increases inevitable. We are far too deep in debt to grow our way out of the problem. In addition, our deficit has become too large for spending cuts alone to fix the problem. The day of reckoning is approaching faster than anyone had imagined before the financial crisis.

Simply put, higher income taxes are a drag on economic growth. They take money away from private investors and put it in the hands of government. We know from history that governments are poor allocators of capital. Government operates at a much lower level of productivity than the private sector.

Government expenditures, unlike private businesses, have a flat to negative multiplier effect on the economy. In comparison, the private sector generally has a positive multiplier effect on the economy. That is, each new dollar invested by businesses and investors will boost economic growth. Government expenditures, on the other hand, drain money out of the economy.

Income tax rate hikes normally occur after banking crises. It is because a financial catastrophe triggers bailouts of many banks and organizations. Government authorities typically borrow a major percentage of these funds, hence elevating the national debt. Apart from bailouts, federal expenses also climb via fiscal stimulus initiatives. It is because a deep economic downturn usually comes after a financial disaster. On the other hand, income tax earnings fall right after a financial meltdown since people and companies are generating less tax revenue; therefore, from everyone having much less taxable profits. This is the reason financial meltdowns cause a downward spiral throughout the economy.

Ultimately, budget shortfalls need to be addressed. Government authorities attempt to resolve spending troubles by means of inflating the money supply, decreased spending, and income tax hikes. Income tax rate hikes frequently don?t succeed since they result in reduced economic development or might set off yet another economic downturn. The consequence of a tax increase is even reduced earnings regarding organizations and less earnings for individual people. As a result, the goal of the income tax increases may produce less income tax money for a federal government. In certain situations, this primarily helps make the dilemma worse.

Eileen E Jacobs is an accountant from Las Vegas, Nevada. Las Vegas tax preparation

Source: http://www.123manandvan.com/movingblog/finance/income-tax-increases-will-be-a-drag-on-the-economy/

lana peters jennifer nettles jennifer nettles giants vs saints suh suh lindsey vonn