Monday, August 9, 2010

What are your real taxes?

The real tax rate is equal to government spending

Reprinted from REAL REVO.

I have made similar posts in the past.

Milton Friedman famously stated that the real tax rate is equal to government spending. If you want to understand the tea party movement, you only really need to understand this one simple fact. It is really that simple. The argument that Obama hasn’t raised taxes on the middle class is factually wrong. He has raised taxes literally but he has also raised real taxes by grossly increasing government spending.

When the government spends money, it must be repaid with interest. That means that tax revenue must be raised. When government increases spending, it must be paid with an increase in taxes. Those tax increases may come in the form of tax rate increases, increases in interest rates, increases in interest paid and in inflation. They may not be immediate tax increases, but they absolutely, positively are tax increases that will be paid by the populace. It is a certitude.

Tea party activists understand that every increase in government spending is an increase in taxes whether it appears in the tax code or not. They know that, in one form or another, the tax rate will increase to pay for the spending. It has to.

When discussing the issue with family and friends, it is important that they understand this simple fact: the real tax rate is equal to government spending and government spending has exploded since the Democrats took over the congress and White House.

No Matter what you are paying now does not matter. It is the liability that incur with every dollar the government spends that matters.

Eventually, a family has to pay its bills. The same with government.