Sunday, February 22, 2009

Bar Stoole Economics- I mean Taxes

I am sure you have seen the email where 10 men go to a bar each night and when the tab comes they pay in accordance with how they pay their taxes. So they drink and the tab comes to $100.00 and each is asked to pay as follows;(Read Bar Stool Economics Here)

The first four men (the poorest) would pay nothing
The fifth would pay $1
The sixth would pay $3
The seventh would pay $7
The eighth would pay $12
The ninth would pay $18
The tenth man (the richest) would pay $59

This works until the bartenders decides to give them a discount for being regular customers. The poorer men get pissed because the richest guy the most money get the point. And if you haven't read it you should it is pretty funny but also very true as evidenced here today in the following headline.

Mayor Bloomberg Finally Understands Who Pays NYC Taxes

That page is a transcript of an interview of the mayor with Rush Limbaugh. In this interview he stated that out of the people that live in NYC and file tax returns 1% of those people are paying 50% of the tab! So a little math here. He states that number of people (1%) is 40,000. That means folks that there are 4Million people in NYC that file a tax return. He goes to say that of those over 50% do not pay any taxes and another 30% get a credit, not refund, under the Earned Income Tax Credit. So a little more math? That is over 80% of the people pay NOTHING or get a CREDIT! The fiscal year 2009 has an adopted citywide budget of 60 billion dollars! Who pays?

The above can be said of the rest of country. Nationally the top 5% of the earners pay 80% of burden. The administration just announced that they are drafting a budget that will tax the rich and businesses with a goal of reducing the deficit by half in four years. This will bring this country to it's knees!

In simple terms let's look at that impact. For fiscal year 2008 the project receipts are expected to be $1,246,614,000,000.00, it is a projection because the fiscal year ends Sept. 30, 2009. Now because the economy is in the tank that number is going to be a whole lot lower. The administration claims that this fiscal year will be approximately 500 billion deficit. Between the bank bail out and the stimulus's the government has spent 1.64 trillion dollars. The cost of carrying that debt brings the total for just fiscal year 2009 to roughly 3 trillion dollars! That is about 3 times what the receipts will be for FY08!

The cost of carrying that debt brings the deficit for FY09 to about 4.3 trillion. which means the government would have to collect 2.7 trillion in FY09 to be revenue neutral. That is almost 3 times what is expected to be collected in FY08. How do you reduce the deficit by half if you going to have to raise taxes to cover what you have already added to the deficit by a factor of 3? Where does this money come from?

First of all raising taxes on businesses is just dumb. Businesses do not pay taxes! They ad that cost to the price of the product. So a business tax is paid by you the consumer. So now look at who is left, the wealthy. Already people are complaining about poor business and no one is spending money. So lets take more from them. And we haven't even started to talk about the mortgage plan or the fact the Obama said when he signed Stimulus bill that it is only start. This folks is like putting a nickle in you left pocket and taking $3.00 out of the right pocket. Bar Stool Economics....Change you can believe in.

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