Higher taxes, more deficit; lower taxes, less deficit

By Jim Killebrew

[January 27, 2015]  The other day Scott Walker, Governor of Wisconsin, said that over the past couple of years he has reduced the taxes in Wisconsin by about two billion dollars. Think about it, two billion dollars less the working citizens had to pay to the government through a confiscatory process that takes the money from paychecks even before they arrive in the earner's mailbox or bank account. And guess what? The Governor also has said even with the reduction in taxes, an idea that many in Wisconsin thought was the worst thing to do since the state was in debt when Governor Walker took office, the state is now out of debt, is not running a deficit, and financially is in the black.

Now, Governor Walker has not been without his problems in trying to reduce taxes on Wisconsin citizens. It is difficult to imagine, but there are a lot of people in Wisconsin who believe the only way an economy can grow is for the government to grow by raising taxes on every worker and corporation so the government can collect more money to spend. Then, in order to reduce the debt, there are many who believe more and more has to be spent from the higher taxes to "pay down" the deficit. At the same time, however, the budget of the state continues to grow and more money is borrowed, so even with more taxes the deficit continues to grow to amounts that cancel out the increased taxes.
 

What the Governor has explained about the methods he uses in his state is that by reducing the tax burden on individuals and corporations, it creates a chain reaction of economic growth. On the national level that formula has been seen to work when President John Kennedy reduced the taxes in his term in office. The same economic growth was experienced again when President Ronald Reagan reduced the tax margins and individual taxes during his terms in office.

The reason that happens is increase in cash for the individual to spend on products and services. When that individual spending increases it creates more demand for those products and services. With the higher demand comes more investment from business owners to increase their production and services. That means more people are hired for jobs created and more money is spread out over a greater number of workers. When the number of workers grows, the number of people on government subsistence begins to decrease. Those people begin to make more than a subsistence amount, but rather, have salaries based on their work, skills and experience. Additionally, when corporate taxes are reduced the products and services begin to be reduced to lower, more affordable prices. This process grows the tax base because of significant increases in tax payers, even when they are allowed by the government to pay less taxes. The state makes more money by collecting 15 percent from a thousand workers, rather than 60 percent from 50 wealthy people.

So now that Illinois has elected a republican governor we will see if he tries to follow the lead of Governor Scott Walker. Even with the majority of the General Assembly in Illinois being democrat, one would think they would want to be cooperative with implementing economic actions that have a proven record of effectiveness and give those proven methods a try in Illinois to grow the economy rather than continue the nose-dive toward economic collapse.

Simply put, the liberal thinks the economic "pie" is finite because they see the economy with a view of socialist thinking and believe it can never grow. A conservative, on the other hand, believes that through free market capitalism the economy can continue to grow and the wealth spreads naturally, hence the pie gets bigger and bigger as people work, invest and grow their businesses. The greatest killer of "pie-growth" is to adopt the values of a liberal's economic principles. The most effective "stimulus" is for each American who pays taxes to be allowed to keep more of the money earned. Simply put, earned salaries and money received by those workers allowed to remain in the hands of those millions of working Americans across the land create a great boon to the economy when they spend it on products and services. They spend it simply living life; by doing so, they grow the economy. When politicians refrain from overspending, the deficits begin to vanish.

[By JIM KILLEBREW]