“The price of apathy towards public affairs is to be ruled by evil men.” Plato

  • Daily Quote:

    "Intolerance is itself a form of violence and an obstacle to the growth of a true democratic spirit."

    Mahatma Gandh

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 90 other followers

  • Subscribe

  • Advertisements

Posts Tagged ‘Line 46’

Tax Reform – The Real Stimulus

Posted by Steve Markowitz on April 16, 2010

Today we have a guest-posting from Jim Mahoney that is a really good read.  Jim, a CPA, offers an alternative to the failed Obama Stimulus Plan.  While we cannot turn back the clock, about half of the Stimulus remains unspent.  Jim’s approach for that $500 billion would better serve the country and our economy.  But don’t expect logic from the Progressives in Washington whose motto seems to be: “If a governmental program fails, double-down on the bet.”

Tax Reform – The Real Stimulus, by Jim Mahoney

Ever since the “Financial Meltdown” occurred in October of 2008, there has been a concerted government effort to frighten the American people about the urgency of passing the Stimulus Bill in order to head off economic collapse.  Early in the spring of 2009, when the unemployment rate was 7%, Obama ominously told the American public that if Congress did not pass the stimulus bill immediately the economy was in danger of imminent collapse and the unemployment rate could go as high as 9%.  Well, the Bill passed and the national unemployment rate is now hovering at 10% and climbing.  If you factor in discouraged workers who are either underemployed or have given up looking for work entirely, that figure rises to over17%.  The economy remains in the doldrums and the Administration keeps telling us that the Stimulus is working, even as they move to extend jobless benefits for a total of 99 weeks.  As of now, about half of the $1 trillion allocated to the Stimulus has been spent, with very little of it being used for its original stated purpose.  Any funds that have been repaid by the financial industry have been illegally reallocated into a political slush fund, instead of being returned to the Treasury, and billions of dollars of Stimulus funds have simply vanished.  By any measure the Stimulus has been a complete failure.  You can expect the Administration to tap into the remaining $500 billion to sprinkle additional funding around in 2010 to provide a short lived economic sugar rush just in time for the mid term elections.

Now suppose that when the “crisis” was first identified, instead of shuffling money like a Three Card Monte through a maze of federal agencies headed by faceless unaccountable Czars and bureaucrats, the federal government had responded by cutting the individual income tax rates in half.  According to IRS data, the revenues received by the federal government from personal income taxes in 2008 totaled a little over $1 trillion.  By the way, this was a record level of tax revenue that was the direct result of the George Bush tax cuts for the “wealthy”, but that’s a topic for another article.

Since we’ve all just recently filed our income tax returns, let’s bring this discussion closer to home.  Take out your 2009 Tax Return and look at your total federal income tax liability.  This is Line 46 on Form 1040 (Line 28 on Form 1040-A).  More Americans need to focus on this number.  Because of employer income tax withholding and quarterly estimated payments, many Americans are oblivious as to how much they actually pay in income taxes.  Pay no attention to the relatively lower amount of any taxes due with your return or to the amount you “got back” as a refund.  Look at your total gross income tax liability before any payments or credits.  It’s a pretty eye opening amount, isn’t it?

Now imagine you had half of this amount available as cash in your pocket to use in whatever way you pleased.  You might invest it, use it to pay down debt, make additional donations to your favorite charities, start your own business, or buy the kind of new car you actually wanted, instead of some politically correct, government approved, roller skate in a Cash for Clunkers program.  In fact, how you decide to use it is irrelevant since it is your own money after all.  You would patronize businesses, restaurants and other services of your choice and inject capital into the system in the process.  These companies in turn would hire more employees to handle the increased business.  The employees hired would then begin paying taxes themselves instead of being idle workers living on unemployment benefits.  Well-run companies that provide good customer service would be rewarded and poorly run companies would go out of business.  This is how capitalism works when it is freed from government interference.  This would create a true economic stimulus because the money would have been voluntarily spent and invested by you in your local community, not confiscated by a government that seeks to create winners and losers based upon their political ideology and campaign contributions.

Now multiply this effect with taxpayers all across the country.  Giving taxpayers more of their money means that the funds would have been distributed to local communities throughout the county quickly and efficiently with no opportunity for fraud.  Cutting the personal tax rate in half would have instantly injected $500 billion into the economy without the need to establish a single federal agency, focus group, or suffer through a presidential speech.  Tax cuts have worked every time they have been tried.  Why is the government so fearful of letting the productive segment of society have control over our own money?


Posted in economy, Governmental Intervention, Stimulus Package, Stimulus Program, Taxes | Tagged: , , , , , , , , , , , , , , | 1 Comment »