Taxes Must Go Up Eventually

by Kevin on July 10, 2009

Here’s a tough pill no one wants to swallow: taxes in the United States have to go up.

Our government is in the same situation some of you are currently facing right this very moment. Some of you have conquered this moment in the past and have moved on.

But our government hasn’t. Right now we are spending more than we earn. Plain and simple.

Blame the Economic Crisis

Tax revenues down (or flat) and expenses up, up, and up some more. Sure the economic downturn has something to do with increasing the deficit. Even if you take the bailout out of the equation you would have a lot less tax revenue because revenues are down at companies everywhere. Add in that many companies have laid off workers or shut down and unemployment hits 9.5%. That’s less individual tax income. More people are on social programs, both federal and state, so you might expect a deficit.

But the economy is not the only thing to blame for our current predicament. Our spending ways are the main culprit. And it’s not sustainable.

Spend, Spend, Spend

You see we had a spending problem long before the financial crisis of 2008. Long before all the bailouts there was concern that Social Security and Medicare would run out in twenty years or so.

Did we have a solution? No, just sweep it under the rug and let the next administration and group of Congressmen deal with it.

CNN had a great article about how health care reform still won’t get rid of the deficit. I have no problem with reforming health care if it fixed our system and lowered costs across the board. Who wouldn’t want that? (Other than insurance companies.)

But it isn’t going to solve the problem!

A Taxing Solution

I see no way around this. As deficits continue to climb and the value of the dollar continues to fall (due to the deficits and international fears that we won’t be able to pay back all of those IOUs we are sending out) the tax rate will become the primary lever to make up big holes.

It won’t be a popular solution and I’m sure the political parties at the time will somberly explain to us why they need to tax us more here, here, and over there. There won’t be any grand ceremonies to sign the new taxes into law. But it is bound to happen.

Why? Because no one in Congress is going to brave enough to cut spending in such a dramatic fashion to fix our problem.

We’re spending more than we earn. We won’t spend less. There’s only one other side of the equation: earn more. How do governments earn more? Higher taxes.

As an individual there are several ways you can prepare for an America with higher taxes. I’ll discuss this on Monday when I give you tips on how to prepare for higher taxes. Stay tuned and have a great weekend!

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