It's easy to get cynical about government and those who run it. But here is some tax information that should send shivers up your spine:
It matters who wins elections. Your pocket-book will be directly affected by the Democrats who will presumably be roosting there for the next long while.
Look for higher taxes and spending ahead now that Democrats are putting the finishing touches on their budget blueprints for fiscal year 2009.
Senator Judd Gregg of New Hampshire, a Republican, grouses that the Senate Democrats' budget documents contain more than $100 billion of spending that is "paid for" only by budget tricks and gimmicks, such as changing the timing of payments so they don't happen inside the budget window. This doesn't save any money, it just camouflages the total spending Congress is doing. An even taller tale concerns some of the Democrats' revenue assumptions. They claim to be keeping the party's pledge of fiscal balance in five years, but that's possible only by assuming that 30 million Americans will pay the Alternative Minimum Tax in 2013. As Rep. Paul Ryan of Wisconsin notes, "There aren't 30 million rich people in America." That means a giant tax increase on the middle class five years from now.
Democratic budget plans also anticipate cancellation of the Bush tax cuts -- another major tax increase on all tax filers. Those in the lowest bracket would see their tax rate climb to 15% from 10% and the marriage penalty tax would also be reinstated. House Budget Committee Republicans calculate this will mean about a $3,000 average increase for every income-tax filer in America. If you live in New York, congratulations, you will see your tax bill inflate by $3,658. If you reside in New Jersey, your annual tax liability will rise the most of any state -- more than $3,700. Democrats in Congress will certainly be getting their money's worth from the blue state voters who sent them there.
In the Senate, Democrats at least say they will keep the Bush middle-class tax cuts after 2010. But gone will be the capital gains and dividend cuts and the income tax cuts for the highest income earners. This means a new top rate of 39.6% from 35% today. As former General Electric CEO Jack Welch notes, it will be hard for the U.S. to compete when "we're raising tax rates while the rest of the world is cutting them."
So this is the "change" Democrats have been promising this election season? Hmm, doesn't seem that different from the way Washington has been doing business for twenty years.
A few predictions: Draconian tax increases will cause people to hide income. The government coffers will be reduced. Right now, New York faces a huge budget short-fall and the state isn't growing. People are moving out. Just like Michigan where corruption and mismanagement result in a hostile business environment. Here's the deal in New York and this will filter through the rest of the country:
Administration officials said the adjustment to general fund revenues was the result of declining employment and wage growth, lower-than-expected corporate profits, and the anticipation that Wall Street bonuses will be flat in December.So, not only will New Yorkers be paying higher state taxes, they can expect their Federal income taxes to increase in the next few years. Dramatically.
What this means, of course, is that $5,000 of income will be going to pay for government programs instead of buying new things and boosting the economy. I'm concerned for the economy long-term. Right now, people are tightening the belts which will constrict the consumer-driven economy. Add in government largess that, of course, must be paid for. Those damn Boomers are going to be the end of us, I tell you. (They're retiring. Who is going to pay for them? Can you say "Me!" Generation X? Cuz that's the answer.)