HOLD ON TO YOUR WALLET…..The Tax Man is Coming

“Money is not an issue”….anonymous Democrat

I am neither Republican nor Democrat. I’m a Capitalist. I believe that government’s duty is to provide basic services. The rest of my well being is my responsibility. Since neither party seems to care for my opinion, my political leanings are mostly “away”.

As a CPA, however, I am in a position to offer an informed opinion on financial matters. I am a numbers person and the numbers that I see today coming out of Washington scare me to death.

The current Congress is spending our children’s money at an unbelievable pace. Let’s call these “expenditures”. They are proposing to pay for these expenditures by increasing taxes on a select few citizens. Let’s call these “revenues”.

Several years ago David Walker, the former head of the Government Accountability Office, noted in his “Fiscal Wake-up Tour” that the U.S. was in an imprudent and unsustainable fiscal path. Mr. Walker’s focus at that time was on Social Security, Medicare and Medicaid.

The statistics presented by Mr. Walker revealed that the costs for just these programs would exceed projected revenues by $50 trillion (yes, that’s with a “T”) over the next 75 years, if unchanged. Now add the current Federal bailout program to this, and you have yourself some serious expenditures.

According to S. J. Leeds, a finance professor at the University of Texas at Austin, the original estimated cost of the bailout at a paltry $1 trillion was probably not accurate. Although he failed to make an educated guess, he suggested that trillions (plural) would be a better estimate.

The current budget forecast for this year is a deficit of $1.84 trillion.

And where is the revenue going to come from? Here is the plan. The current budget agreement calls for $861 billion in taxpayer cuts over the next 5 years with $97 billion in increased revenues. Unless my math is flawed, that is a $764 net reduction in revenue!

There is only ONE cure, and that is higher taxes. Tax revenues can increase from two directions. You can increase the effective tax rate and you can decrease the available deductions. The latter will create more taxable income while the former sends more to the government. Make no mistake, government can’t keep its promises of “only increasing taxes on the rich” and still spend at the rate it’s been spending.

I don’t know what the rest of the story is, but I will be hanging on to my wallet with both hands.

--Steve Cook