Last night I thought of a way to explain how tax revenue can go up in a very simple way. It can be compared to Black Friday in the retail world. Okay, so you may be wondering how can people spending money in a shopping frenzy be compared to the government collecting taxes. First of all, the reason it is called Black Friday is because until that day, retail corporations are in the red. The amount of sales on this day is when they actually show a profit. As you ponder that for a second, think of the reason why they show a profit, people spend money. When they were afraid that people would not have the money to shop, they were concerned about being able to show a profit. So, what do they do to increase their revenue? Did they raise the prices so that they would make more money on the items that were sold? Less items sold but at a higher price so they make money on what is sold? Nope, they did the total opposite, they reduced their prices so that more people would come into the stores and shop. They may not have bought as much as they did in previous years, but with more people spending money the stores did see a profit. Thus, by lowering the tax rates the tax revenues will be raised because the lower tax rates will encourage companies to hire more people who will in turn pay taxes. They will be producers and produce tax revenues rather than only consuming products paid for by tax revenues.
Here is a reminder of how taxing some higher cost items impacted the economy. http://wp.me/plU1X-tw
On a totally different subject here is one thing to remember about budgeting, they start at current levels and increase spending from there. They spend the money in the current fiscal year to make sure they can show they need the money so they do not have to cut from current spending levels, even when budgets cuts are requested.
Also, for those who say that some should pay a higher rate, remember you can donate to the IRS. Are you doing that or deep down do you think everyone else but you should pay more but you use the royal we?