“Tax Reform” — Really?

Is the Senate tax reform bill being contemplated with or in place of the passed House bill REAL tax reform?

Let’s put this in perspective. One cannot have a serious conversation about tax reform without talking simultaneously about the Federal Budget. Basic business principles begin with an understanding of a budget — revenue and expense. Because of budget reconciliation requirements in the Senate (which I think are hogwash and simply waste coverage), this tax bill is a ten-year bill. During that time, the federal government at current revenue levels will have $43 Trillion dollars of taxes paid mostly by Americans in taxes for the federal government to operate. Keep that number in mind during this conversation.

Current estimates of varied “experts” project the House tax bill will add $1.5 Trillion dollars to the budget deficit over the decade, the Senate plan $1.3 Trillion. There are probably 300 of the 535 members of Congress screaming about the Tax Reform Bill costing the nation o $1 Trillion dollars+ over the next ten years. That is and should be a major concern for our leaders. But with our accumulated budget deficit dollars that the government has been forced to borrow money to pay at $20 Trillion, it is laughable to hear budget hawks crying about tax cuts costing any amount of money. Let’s put their cries in perspective.

I own a small company. I have clients from the medical industry for which my company provides a service and has done so for twenty-five years. For the services provided, every month each client pays a fee based on the monthly successes of my company in the services provided.

Each year for twenty-five years of providing those services, I with the assistance of managers and accountants prepare an operating budget for the next year that is a combination of projected revenues paid by clients for our services and projected expenses we must pay to various vendors and employees to be able to offer those services. Obviously the goal of implementing the budget is to successfully operate during that year paying less in expenses than the amount of fees paid by our clients for our services. The money paid to us that remains after paying all those annual expenses is our profit. Every company operates with the objective, goal, and plan to make an annual profit.

For some inexplicable reason, years ago the United States Congress made a unilateral decision that it is OK to spend more money than it collects each year in revenues. And each year it practices that principle. In doing so in recent history — specifically during the Obama Adminstration’s eight years — our government spending deficit/debt increase equalled the total deficit of every presidential administration COMBINED since that of George Washington! The lunacy of this is that American voters allow elected representatives to continue this madness year after year, after year, after year…

How did we Get Here?

First, America can no longer perpetuate the hypocritical financial operation of the federal government. Doing so is exactly the same as giving our kids a credit card with a limit, then when they exceed that limit giving them another card with a limit which they exceed, then are given a new card, and doing so again and again in perpetuity. It makes no sense.

Secondly, most Americans do not realize where our government goes to get that new credit card and how they do so: they threaten to shut down the government to get the debt limit raised. Congress has no credit card to use. They rely on the Fed to provide that American Express black card with no limit.

The Federal Reserve simply prints Treasury Bonds. Those T-Bills (as they are called) are sold at Treasury auctions to raise money for the government to spend. Keep in mind the only collateral for those bonds that are sold is the “good faith and fair dealing” of the U.S. Government! But the debt associated with and payment for the borrowed principle amounts of those bonds is REAL.

Just a thought here: how “real” is that debt? What if when it is time to pay the interest every month or quarter to those who purchased those bonds there is no money in the U.S. Treasury to pay? Default. That has never happened in the U.S. But it CAN happen. I shudder to imagine the consequences for such a default.

Here’s another example of the idiocy of Congressional spending:

“An $85 million loan for a hotel complex in Kabul, a billion dollars in missing equipment for Iraqi forces and a $30,000 grant to stage ‘Doggie Hamlet’ are just a few examples of the ‘Federal Fumbles’ a Republican senator has flagged in a new report on wasteful government spending. The 86-page report from Sen. James Lankford identified $437.6 billion in ‘wasteful and inefficient’ federal spending. ‘We’ve got every variety — from very small to very, very large areas of waste and areas where the federal government just dropped the ball,’ the Oklahoma lawmaker and fiscal hawk reported today.”

How Can we Fix This?

You know what is missing in this conversation? You and me. WE pay taxes. We pay those taxes to the government so they will have necessary resources to operate the country…..FOR US. Yet their obvious disdain and lack of concern for the consequences of their financial choices is mind-boggling. Why? THEY do not pay the price for their bad choices of spending — we pay.

Let’s digress to the part of this conversation regarding the cost of this Tax Reform. Who will pay those costs? American taxpayers. Should we be saddled with the responsibility of paying increased taxes or through reduced government services as a direct result of over-spending by the federal government? Absolutely not. But we are forced to year after year. That $20 Trillion debt is now on the back of each American living and today — approximately $62,500 owed by each American. And that does not include interest.

Have you heard anything about balancing that budget the other way: cutting government spending? Absolutely not! Their preference is for you and I to pay more so they can spend more. Let’s talk about government spending:

  • Let’s implement these tax cuts — PERIOD;
  • Let’s let government make up that $1 to $1.5 Trillion deficit from these cuts over ten years by CUTTING SPENDING;
  • “Oh no! We cannot cut spending. What government services do Americans want to give up?” Let me answer that by saying simply: “You guys in D.C. make up that difference.”

How can they do that? Plug the hole. Let’s simply immediately kill that $437.6 Billion government waste going forward….each year….for the next ten years. STOP WASTING OUR TAX DOLLARS ON THE SAME GIVEAWAYS THAT TOTAL THAT AMOUNT FOR 2016 AND ALL OTHER SIMILAR SPENDING FOR EACH OF THE NEXT TEN YEARS.

Do the accounting: $437 Billion per year for ten years totals $4.3 Trillion. “IF” the tax cuts approved by Congress go into effect and remain in place for the next decade, there will be NO deficit increase. Even if they cost $1.5 Trillion, the government waste spending stopped altogether adds an additional $4.3 Trillion in net tax revenue. After the tax cut deficit is deducted, the U.S. will have $2.8 Trillion left to pay on our $20 Trillion debt.

Is that too simple? This process with very different and much smaller numbers works in companies of all sizes throughout the United States and elsewhere in the World. Why cannot it work in Washington?

We have NO other options. We must immediately take control of the idiotic spending juggernaut in D.C.

Government Constitutionally is to be “Of the People, By the People, and For the People.” It does not say “Of the Government, By the Government, and For the Government.”

 

 

 

 


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