Friday, October 26, 2012

About Raising Taxes as the "Solution" to the Fiscal Cliff....

Raising taxes is the "solution." Too bad incomes are declining. What will raising taxes do to household savings, spending and the economy? 

We all know cutting Federal spending is politically impossible, so that leaves raising taxes as the only "solution" to the "fiscal cliff."

Since most income tax revenues flow from household income, let's look at some charts of the workforce and household income:

As a percentage of the population, the workforce has contracted to levels of the late 1970s.

As a percentage of national income, labor's share is in a free-fall:

Hourly earnings have been trending down for years:

Income for every age group other than 65+ seniors has declined sharply:

The income of those in their peak earning years 45-54 have been slammed:

Household debt loads have soared far above wages:

Meanwhile, government expenditures are up, up and away:

Yes, I know: the solution is to "tax the rich." The Problem with "Tax The Rich": It Won't Work (May 28, 2010)

The parasitic Elites should certainly pay as much as the heavily taxed middle class (The Real-World Middle Class Tax Rate: 75% (July 5, 2012), but since the parasitic Elites have captured the machinery of governance, the chances of Congress actually raising taxes on the top 1/10th of 1% are nil.

There will be noises made, of course, for perception management and public relations, but when April 15th rolls around we will find tax revenues are stagnant: loopholes and tax breaks will have blossomed like mushrooms, magically enabling the parasitic Elites to escape any serious reduction in their income.

Even if we were able to squeeze some additional taxes out of the parasitic Elites, their income stream is dwarfed by the Federal spending that looms ahead: The Fiscal Cliff and Demographic Drag. The top 1/10th of 1% cannot pay the rapidly expanding Federal benefits of the 99.9%, even if we confiscated every dollar of their incomes.

How can tax revenues increase when household incomes are declining? Transfer more of the national income to taxes and that leaves less for savings, investment and consumption. The economy contracts, reducing the workforce and wages further.

If that isn't a death spiral, it is a close approximation of one. 

Resistance, Revolution, Liberation: A Model for Positive Change (print $25)
(Kindle eBook $9.95)

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.
The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution.
Rather than being powerless, we hold the fundamental building blocks of power. We need neither permission nor political change to liberate ourselves. A powerless individual becomes powerful when he renounces the lies and complicity that enable the doomed Status Quo’s dominance.

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