Monday, December 5, 2011

Political Nonsense Of Linking Specific Taxes To Specific Programs

All tax revenues and fees go into a general revenue pot to pay for all government programs and expenses. To say that a specific tax is for a specific program is just silly political theater and under Obama, divisive class warfare.

Identifying taxes for targeted programs is like putting cash into a bank account, then making a withdrawal a few weeks later and expecting the serial numbers on the currency withdrawn to be the same as on the cash previously deposited.

It is like going on a driving trip and noticing that the gas tank is half full, filling the tank up and expecting to use the new gas for the later part of the trip and the gas that was originally in the tank for the beginning part of the trip, as if the gas did not mix in the tank.

The government works the same way. No specific tax can pay for any specific program. The government takes in a total sum of money from taxes and fees and spends that money on all its programs and expenses. Any extra money left over is a surplus and any shortfall of funds is a deficit that must be borrowed.

Opportunity Cost of Taxes And Programs

Any new tax or revenue increase whether linked to a new program or not is deficit reducing. Any new program whether linked to a specific tax or not is deficit increasing. By joining taxes and programs together as a single item, politicians are hiding from the public and media that new programs are spending and deficit increases and that new taxes and ending existing programs are deficit reductions.

New taxes justified as the basis for new programs, ignores the lost opportunity of using the new taxes to reduce the deficit. Likewise, failing to end an existing program, ignores that the termination of that program would also reduce the budget deficit.

All existing programs are deficit increases because ending any program would reduce the deficit. Likewise, any new tax revenue is deficit reducing and failing to increase revenues is an increase in the deficit.

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