Let Me Explain Taxes and Spending

Last time, we talked about how the really awesome, amazing government spending actually really awesomely causes demand-pull inflation. What we didn't talk about is how the government actually gets its money, and how it lies to everyone about the money's source.

The government gets money through taxes. It uses these taxes to spend on things that are supposed to improve our lives. I bet you've seen your taxes go up in the last few years, slowly creeping onto more and more of your income. A quick Google search, though, tells you that the federal tax levels have remained relatively stable?! It even tells you that income taxes specifically decreased when the Tax Cuts and Jobs Act was passed in 2017, and those tax cuts expire next year. Well, this doesn't make any sense, now does it?

What's going on is a big government lie: while federal tax rates have remained relatively stable, local and state government tax rates have gone up. You're paying more money to your home state, which is why paying taxes has been a nightmare recently. For example: in California, the state sales tax rate is 7.25% (one of the highest in the country), but even that regularly rises to almost 9% due to local sales taxes. California also has the sixth highest debt per capita (total debt divided by the amount of people, or debt per person) in the US. 

This is a technique the political system uses to lie to you. The government does a 3-step perfect procedure:

1. It keeps federal tax rates stable to be able to gaslight you and say "ooohhh, we're not actually increasing your taxes".

2. It embarks on massive spending projects it can't fund itself and then asks states to pay for some of it (usually around 20-30% of the expenses of an average government program are paid for by the state in question).

3. The states scramble to get money to pay for it, raising taxes and squeezing you out of your livelihood, while federal politicians go scot-free.

Then the states do the same thing to local governments, and your taxes just keep on increasing. A local government makes up reasons that they need to spend money (like "funding storm infrastructure"), most of the money doesn't get used for that goal at all, and local governments have a new reason to raise taxes. It's kind of like the government is a toddler who gets the adults to put the blame on literally anyone else for something it did.

Those of you who know something about taxes and inflation probably have some version of this question: Okay, but wouldn't cutting federal and state taxes cause both the state and federal national debts to increase? If the government can't get money to pay for its programs through taxes, it's going to borrow instead and increase the debt right?

You're half right. You're right that that cutting taxes in isolation would cause debts to balloon. Key word: in isolation. If we cut taxes, the only way to make sure that the government receives more than it spends (to reduce the national debt), is to just decrease spending. The government should start obeying the basic rule that every other family and business in America uses: don't spend money you don't actually have. Isn't that one of the hardest concepts you've ever had to grasp?! Instead of pawning off its expenses onto state taxes, and squeezing Americans financially as a result, the government can reduce the size of its bureaucracy and streamline its spending so that more money can go towards actually fixing the problems we care about. It can do far more with far less. Hopefully it gets there someday.