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Basic Economics for the Tea Party – Balancing the US Budget

Posted in 1, economy, government with tags , , , , , , , , , , , on April 24, 2010 by Bitch Slap Poli

In honor of all those filing their taxes late, Bitch Slap Politics is going to dumb down information on how taxes effect our greater economy and analyze whether or not the Tea Party members made any sense with their Tax Day arguments.

It’s time for another installment of – Smart S*** Gets Stupid!

A Look at What the Tea Party Wanted Tax Day 2010

The New York Times recently polled Tea Party members. Two initiatives near and dear to their hearts are, of course, reducing taxes and reducing spending by the government.

They were also asked in the poll:

If you had to choose, would you prefer reducing the federal budget deficit or cutting taxes?

The results:

  • Cutting Taxes – 49%
  • Reducing Deficit – 42%
  • Don’t Know or No Answer -9%

To be fair, the general public that the NYT also polled, which consisted of Democrats, Republicans and Independents, said:

  • Cutting Taxes – 47%
  • Reducing Deficit – 45%
  • Don’t Know or No Answer -8%

 

 

 

Taxes and the Federal Deficit

 Let’s take look at history and see what it tells us about taxes and the federal deficit – two big economic factors that go hand-in-hand.

In order to reduce our deficit we need to both increase the GDP and reduce spending. (We should be saving money in Iraq soon so Tea Partiers will be throwing a party to celebrate that, right?)

Reduction of spending is possibly the only goal I see eye to eye on with the Tea Party, sort of.

We need to make sure that our money isn’t being wasted. That means cutting spending on programs and projects that aren’t narrowly focused on fixing the biggest problems in this country. But, as discussed during the 2008 presidential debates, we don’t need to simply hack away at the budget. We still need to invest some in ourselves and allocate our money correctly.

However, the cutting taxes goal, while good in theory, shouldn’t be a priority. It just isn’t logical.

The following video is a visual of the information in text below. Feel free to watch then read or just choose a preferred method of receiving your economic knowledge.

Really, we should be happy about how much we pay in taxes at the moment. Taxes have been much higher than they were in 2009/2010 and they will surely be higher in the future at some point.

For a comparison here are the tax rates for 2010, 2005, and 2000

2010 tax rate

up to $8,375  —  10%

$8,375-34,000  —  15%

$34,000-82,400 —  25%

$82,400-171,850  — 28%

$171,850-373,650  —  33%

above $373,650  —  35%

2005 tax rate

up to $7,300  —  10%

$7,300-29,700  —  15%

$29,700-71,950 —  25%

$71,950-150,150  — 28%

$150,15o-326,450 —  33%

above $326,450  —  35%

2000 Tax Rate

up to $26,250  —  15%

$26,250-63,550  —  28%

$63,550-132,600 —  31%

$132,600-288,350  — 36%

above $288,350  —  39.6%

2010 tax day is looking pretty good, huh? Show of hands for all of the Tea Party supporters and Republicans who protested about taxes in 2005 and/or 2000. No one, really? Okay, we’ll move on.

Now let’s examine the federal deficit over the same period:

As you can see, as taxes get lowered the federal deficit has expanded. This makes sense when you consider the fact that since the 1950s taxes have made up about 20% of our GDP. GDP means Gross Domestic Product, which is basically a measure of our worth as a country based on what we produce.

Since 2001 our country has been spending like crazy, not producing as much and lowering taxes. Add to that an economic meltdown brought about by unscrupulous money pushers who were de-ruglated by President Bush and there’s a perfect storm scenario going on with our federal deficit and national debt.

Of course, the Stimulus Package, which included money for tax cuts, made up the bulk of the deficit in 2009, though there was already a very high $455 billion deficit when Obama came into office on Jan 20. Hopefully, the federal deficit will be significantly improved by the end of 2010, there are signs of hope.

Interest is Crippling the Efforts to Balance the Budget

However, in the mean time since the beginning of 2010 our country has paid almost $202 billion dollars in interest on the debt we owe. That’s billion, with a B.

That’s more than the cost of the Legislative Branch, the Executive Office of the President, the Department of Commerce, Environmental Protection Agency, NASA (saving money on that soon as well), the Department of Energy and many more combined.

So no, cutting taxes isn’t nearly as important as cutting the deficit and diggin ourselves out of this hole. Even if that means more of us pay more in taxes or getting a little less in our tax returns.

I don’t think enough has been said about the recent wins in growing the GDP, especially given the economic circumstances. We just experienced the largest GDP growth since before 2006.

And, no Teabaggers, it wasn’t because of higher taxes on main street. A whooping 47% of the workforce didn’t have to pay any income taxes this year, thanks in part to 2009’s Make Work Pay tax credit.

In short, please Tea Party members do us all a favor and take up a cause that can do some significant good for our country. Be problem solvers, not problem creators. We got enough of those already.

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