By Brad Stevens
How often have we heard some politician proclaim that our current budget crisis is due to too little tax revenue? If only the federal government could coerce Americans into forking over more money to Uncle Sam, then this budget crisis wouldn’t be an issue.
Max Baucus, chairman of the powerful Senate Finance Committee (D – MT), joined the chorus saying, “We are simply not raising enough revenue.” The Center for American Progress, the liberal think tank, also released a paper this week to encourage us to “recognize our revenue problem.”
Yet, in reality, the “revenue problem” is a myth from those who want to see more government control in our everyday lives. We have a spending problem, not a revenue problem. It’s that simple. How can we know this?
In the past four years, federal spending has drastically outpaced revenue, signifying a severe lack of fiscal discipline on the part of our federal government. Imagine an individual making $50,000 per year and spending roughly $60,000 per year, then she would have a debt problem after a few years, but a few tough decisions could easily “balance the budget.” However, if that same individual spent to $100,000 per year while she received a slight pay cut due to rough economic circumstances, then we wouldn’t say she has a “revenue” problem. Instead, she has a spending problem that signifies a lack of financial discipline.
This scenario is almost exactly what has happened with our federal government.
As you can see in the chart, revenue and spending grew in close tandem with each other from 2002 until 2008, although the government still got used to spending beyond its means in those years. However, in 2009, federal revenues took a dip due to the housing bubble bursting. Instead of cutting back and matching the revenue coming into the Treasury, the federal government increased by over half a trillion dollars. Since that time, revenues have slowly inched back to pre-bubble levels of $2.5 trillion, but federal spending has remained in the stratosphere of $3.5+ trillion.
This year, the federal government is projected to outspend by over $1.1 trillion.
Only by Washington logic could we witness such a massive increase in spending relative to revenue and conclude that we having a “revenue problem.” Senator Jim DeMint was right earlier when he said, “This federal government doesn’t need more money.”
What it really needs is less spending.
Dumb people in the Federal government insist in following John Maynard Keynes. Ironically, the housing bubble would have been a minor blip if the Federal Government had ignored it.
Trickle down what a joke. And Drew, greedy banks caused the burst. They preyed on the weak and uneducated.
Weak and uneducated? You mean people like Drew and his posse of dimwits.
Sasha–
Why are you breathing our air. Stop it. You are being greedy.
So I need to ask, where are all of these fiscal conservative groups when the governor practices wealth redistribution. Conservatives will tell you government does not create jobs. Yet LB 775 has cost us over 500 million dollars since it’s inception. Taxes above and beyond what we receive in return for the investment. Only one of out 5 or ten jobs, depending on the year, can even remotely be contributed to the law. And those created are only said to be so by the widest stretch of the imagination. Finally, how about the Angel Investor’s act which even Pete Ricketts called dumb. Giving millions to millionaires. WOW isn’t that a great way to redistribute wealth. Yet neither the Tea Party, nor any of the other alphabet conservative groups cites it as what it is, wealth redistribution by Republicans. No one party has the answer because no one party is without their own agenda. You can not make it better and only stop it from becoming worse for a little while.
dan, I see what you getting at, but lb775 offered tax credits to encourage growth. A tax credit isn’t redistribution. It’s allowing someone to keep more of what they earned than they normally would be allowed to. It isn’t taking from someone else giving/redistributing to someone else. Now the Earned Income Tax Credit is an actual redistribution when someone actually receives a check for more $ than they paid in taxes to begin with. By your definition, tax credits for charitable giving would be considered redistributing money to the wealthy. See how absurd that is. The Angel Investment Act is the same…a tax credit. Interesting you say conservatives don’t speak up, then claim Ricketts spoke up?! The fact remains, a tax credit is NOT redistribution. You can call it ineffective but, because no money is being taken from one person and given to another it doesn’t fit the definition of redistribution.
LB 775 – Enacted the Employment and Investment Growth Act. This grants income tax credits and sales tax refunds for companies that hire at least 30 new employees and invest at least $3 million. The income tax credits are equal to 5% of the increased payroll at the project for five years and 10% of the investment in the project. The benefits also include a refund of any sales taxes paid on equipment or other taxable property purchased in connection with the project. LB 775 also repealed the two-year-old sales tax refund for purchases of industrial machinery and equipment for plant expansions.
B2. Go read the report on the Nebraska Watchdog site. The state will miss out on over 500 million of taxes due to LB 775. The important point, it creates nothing for that loss of revenue. Some one needs to make that revenue up. In the case of Angel Investors it’s the same thing. They never asked for it but will use what is given to them. Once again, someone else has to make up the loss of that revenue. The state government did not have offsets for the loss revenue and the bottom line is, government doesn’t foster economic development, it just redistributes wealth. If it were a good idea then our supposed capitalistic system would have undertaken it. Let me spend my money where I want to. Not where politicians grease their own palms.
Sasha, I am an ex-Democrat and probably know who you are. You can deride supply side economics as “trickle down” but many Democrats and ex-Democrats advocate for supply side economics because it works.
As for the housing crisis, the Federal Government has been involved in housing for decades and deliberately distorted the market by encouraging and intimidating banks to loan money to those who could not pay such loans back. Yes, there was some exploitation but it was given a green light by government officials and encouraged.
GOP Spin, thanks for proving you left wing critics never do rise above name calling and never understand the topic presented and derided it to avoid attracting attention to your ignorance.
Try this article on for size.
http://www.thegatewaypundit.com/2012/09/fact-check-obama-had-more-to-do-with-2008-economic-meltdown-than-bush-ever-did/
Dan,
Once again. I made no statement regarding revenue gain or loss. I simply corrected your assertion that tax credits equate to wealth redistribution. They do not. Redistribution requires something to be taken first. Tax credits are just the opposite of taking, they are allowing someone to keep something they earned. Taking less is not the same as taking and giving to someone else.
Drew is right Sasha and “Spin”. The housing collapse came about after the Clinton Admin pushed risky loans to increase home ownersship among low income and minorities. Fannie and Freddie are govt sponsored so they knew there was no real risk as they would be bailed out. They began pushing the subprime loans and were warned various times by the Fed Reserve. Greenspan called for regs. Even crazy Chuck Hagel introduced a bill calling for regs which was cosponsored by Elizabeth Dole and Sununu. The bill was killed by dems on a partyline vote. The Bush admin called for regs to protect taxpayers, which was rejected and dems called such proposals racist. Finally John McCain called for regs and taxpayer protection supported accross the board by Republican Senators and rejected by the dems. Interstingly enough…It was those same dems including obama, Hillary, Chris Dodd, etc. that received large donations from PAC’s of Freddie and Fannie.
B2. Taxes are not earned. They are owed and must be paid. For a business to keep taxes by the use of LB 775 costs us all something because it is not earned income, it is taxes used by several different subdivisions that they will not now get.
If giving so much to so few for so little in return is good policy, why not turn it around and give it (leave it) with everyone to spend as they see fit. It could then be called letting someone keep what they earned. Tax credits are wealth redistribution just the Republican way. The bottom line is, capitalism is really a misnomer for what we have. Because the government is so convoluted on their incoherent tax system, business can not now survive without government. Look at Nebraska. Which big business gets the tax cuts this session? It is the government picking winners and losers and that is not their responsibility. As a small business man, I wish they would go away and leave us alone. But they won’t. Be Republican or Democrat things have always ended up on a downhill slide for a long time. Great country and state? Not any more. Some day, today will be the good old days, just as there are always good old days. Because there are few good old future days left.
Dan,
You miss the point again. I am not arguing that the tax credits you mention are effective or not effective. I am not even arguing whether they are fair or not. I agree with you that many times gov’t. interferes and picks winners or losers in business and that we don’t have a true form of capitalism, but crony capitalism instead.
The only point I am correcting you on is that there is a difference between wealth redistribution and tax credits. Redistribution requires TAKING $$$ from someone and then GIVING that same $$$ to someone else. Tax credits don’t involve taking or giving at all. Tax credits are simply NOT TAKING. Letting someone keep more of the $$$ they earned. Now you can certainly argue that the govt isn’t being fair in the distribution of tax credits, but you cannot accurately and correctly argue that $$$ is being redistributed in tax credits. (Unless of course you are referring to the EIC in which money is actually taken from taxpayers and redistributed to non-taxpayers in the form of cash). The EIC clearly is wealth redistribution.
B2. I get your point, you seem to be missing mine. When we pay taxes, they are meant to go to, what I call, inherently governmental responsibilities. Such as roads, hgwy patrol etc. Instead, the government has decided to give those taxes back to a private business not for services rendered to the state but for economic development. Since the tax rebates in realty, do not create any economic development, it is taking money to be used for government responsibilities and giving it to a private business for their private use that does not benefit the general public. Therefore it is a redistribution of wealth, by taking taxes meant for one thing and doing another with it that does not benefit any one but the receiver. No different than taking taxes from the general public and giving it to those who could, but refuse to give value for the amount given. No this does not include government workers, retirees and the disabled. etc. But those who can work but refuse to do so. There is no functional difference between the two. As to the Angel investors. I have invested everything I have to make my business go. I employee about 14 to 17 employees depending on the time of year. I receive no tax breaks for my investment. Yet Angels receive 100% credit. Which means my taxes go to support their tax breaks because there are no offsets. It is only common sense that every time someone gets a bigger tax break it cost the rest of us because government is not getting smaller nor their budgets smaller.