The Tax Issue - How much should taxes be?

Today, I may well lose some friends I made in my last post but I suspect that I regain some friends I lost as well.  I waited a while before posting this because I was hoping to get some additional input.  As we enter a time where the nation will be debating our tax issues, I think that the appropriate questions should be, "what should our overall tax rate be?"

Over and over, as I read about taxes, it would seem that history has repeatedly demonstrated that, contrary to what one might expect, federal tax revenue has increased following tax cuts.    And so it would seem that prudent tax policy would dictate that any time you need more federal tax revenue, you should cut the tax rates.    I am sure that some would jump to embrace this strategy but if pressed, I think that even the most ardent  tax opponent would have to concede that this strategy could not work forever.   If it could, why would we even be concerned about having taxes at all or about the amount of our federal government's spending?    Logic would tell us that if the tax rate were zero, then we must be getting less tax revenue that if the tax rate were positive.

For both of these to be true, we have to assume that somewhere along the spectrum lies an optimal tax rate.    This rate would be the point where if you raise the rate, you actually decrease total tax revenue OR if you lower the rate, you would decrease total tax revenue.    It may well be that this rate is not constant and it may depend on several other factors.    In fact, if I had to guess, I would think that the optimal rate would be determined in part by what the public at large feels is reasonable and supportable.

In my mind, if our government is being responsible, this is the question that they have to address.  Once determined, all of the other questions can then begin to be addressed.   We would then know where to set our taxes and also where to set our spending.   While I suspect that in our current situation, this is not the case, it may well be that our Federal taxes should be increased.  It may also be true that our Federal taxes should be cut.  But it seems to me that the road to financial responsibility of  our nation should begin with this question.

Just my opinion.    Let me know what you think.  

Thanks, all and have a great day.

By the way, if you need an opinion about real estate, I would love to be of assistance.   Give me a call or shoot me an e-mail.  I am licensed in Kentucky and Indiana and specialize in commercial real estate.

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Parkway
Louisville, KY

PS - I am sure that my managing broker would appreciate me stating that these opinions are my own and not necessarily those of Commonwealth Commercial Real Estate of any of the others who work here.