Wednesday, October 5, 2005
BY DANIEL B. KLINE
President Bush must ignore those calling for a tax increase to fund efforts to recover from Hurricane Katrina. Raising taxes in this time of economic insecurity would almost surely send the United States into a recession.
Though the U.S. has minimal unemployment, historically low mortgage rates and other strong indications of a growing economy, the public clearly has fear for the future. We're paying more for gas, have seen little growth in our retirement accounts and are unsure whether the housing bubble will burst. Increasing taxes would do little to quell these fears and would likely be the tipping point that causes fear to become reality.
If the people who have money don't spend it because they're worried about tomorrow, then the economy shrinks. If middle class families feel financially pinched, they cut back on vacations, luxury items, meals in restaurants and all sorts of other things that create jobs.
The rebuilding efforts will cost billions of dollars and that money must come from other government programs, not the already over-burdened taxpayer. Increasing taxes, which Democrats have called for, but Bush has pledged not to do, would simply transfer the problem from the Gulf Coast and spread it out across the nation.
The impact of tax increases on the economy works counter intuitively. Lower taxes and you have economic growth, raise taxes and everything shrinks. If people pay less to the government they buy more stuff, giving other people money to do the same. When they must pay more, the purse strings get tighter and everyone below them on the economic ladder suffers.
No matter how you look at it, history has shown that an increase in taxes levied generates a decrease in revenues collected by the government. In addition to the public having less to spend, this decrease leads to the government spending less. That eliminates jobs, increases poverty and generally sends the whole country rocketing down a steep cliff. Many elected officials like to ignore these facts because holding press conferences where you pledge to raise taxes on the wealthy generally wins you a lot of votes.
The question of how much the government should charge in taxes generally breaks down along party lines. Democrats, who see themselves as the working class party, want higher taxes - specifically on those they perceive as rich. Republicans want lower taxes, mostly for the same so-called wealthy folks. None of this has anything to do with economic theory or what's best for the country, it's all basically a marketing plan to appeal to the most voters.
The public must remember that governments never spend money well. Since keeping your job has nothing to do with maintaining fiscal responsibility, elected officials are free to blow billions on bureaucracy, needless infrastructure and endless hearings about how to create even more roadblocks to doing things efficiently.
Politicians lack the pressures facing those running actual businesses. There are no balance sheets, no stock prices to worry about and no shareholders demanding better returns. With only the electorate to please, those in office don't have to worry about spending our money wisely. Instead, their only task is spending enough of it badly in ways that please a lot of people.
Everyone wants to help the victims of Hurricane Katrina and nearly everyone would sacrifice their money to do so. It's tempting to think that a tax increase would give the government more money to aid in rebuilding.
The reality is that higher taxes would draw dollars away from the Gulf Coast. Skip the rhetoric and use common sense. Give what you can to charities that help the victims, but fight to keep the government from taking even more of your dollars.
Daniel B. Kline is a freelance writer based in Connecticut. His book "50 Things Every Guy Should Know How to Do" will be released in April. He can be reached at email@example.com.