Recent Facebook Conversation on Taxes

This is a recent conversation with a Facebook friend of mine who is a skeptic when it comes to low taxes and smaller government. His posts will not be included, so it will be a little one-sided, but I wanted you to see this discussion from my point of view.

My status update: Cutting taxes does not "give" people money, it allows them to keep what it rightfully theirs.

Response: Correct. It may anger you to know that when we declared our independence from England, federal taxes were only 10%! The Founding Fathers would roll over in their graves...

Response: I heard a brilliant idea the other day. Let's take any particular state, let's just say California for example, and have all of the conservatives, independents and moderates move out. Then the liberals can all move in and show us what Utopia is all about. The would not survive for more than a year without hard working conservatives to piggy-back on.

Response: nobody has a problem paying the minimum necessary to fund the 18 in-numerated powers granted to the Federal Government in the Constitution. Everything else should be handled at the local level. It was originally set up that way so that if the states do things against the will of the people, they can vote with their feet.

Response: Just as competition lowers prices, it would lower taxes.

Response: That price is a heck of a lot lower that it is currently. Deficit spending is not Constitutional either. If they did not have the option to go into the red, they would have no choice but to balance the budget. Less tax income leads to smarter decisions.

Response: By giving more money to big brother, even for a temporary "emergency" situation, you are only increasing the size and scope of government, which essentially creates more of a liability for future generations.

Ron Paul has some great ideas o...n how to balance the budget and eliminate the deficit. First of all, you freeze spending. You tell Congress that for every new dollar they spend, they have to eliminate a dollar from somewhere else. (sound familiar? oh yeah, that how we do our own personal budgets!) Also, you force them to make a budget decrease of say 10% each year until we are fluid again and the deficit is being paid down. It can be done.

Response: I can see your point on needing the option of deficit spending for unplanned expenses, such as war funding, etc. However, when our debt exceeds our GDP (just caught up this year), we have a MAJOR problem. My current debt to income ratio is a heck of a lot lower than 1:1.

Response: I had another thought about debt ratios. The Nat'l Debt situation is even more dire than I previously stated. See, where our debt to income ratio is calculated by our annual salary and our annual payments, the ratio I referred to above was total debt to GDP. If you look at the actual tax revenue vs. the "minimum payment" on the Nat'l Debt, it paints a far more ugly picture. We spend millions of dollars per DAY just on the interest!!

As a banker, you know that there are only two ways to improve that ratio. Increase your revenue or pay down your debt by spending less elsewhere and applying more assets to the principle. Since the current top marginal tax bracket on our progressive scale (also Un-Constitutional, but a whole new discussion) is above 50%, it is insane to think that we can increase government revenue by raising taxes.

Believe it or not, history shows that when taxes are cut, people become more productive and government tax revenue increases. So the best possible solution: lower taxes and less spending.