Raising taxes of any kind is not a good move for a politician. Politicians fear that if they vote for tax increases, then they will not get reelected. The problem is, sometimes they really do need to raise taxes. In today’s demographic shift, in my opinion, there is only one direction for taxes to go, and that direction is up!
Let’s look at it this way: When JFK was in office, the highest marginal tax bracket was at 90%. Ninety percent!! Can you imagine? Can you imagine that for every dollar you earned, you only brought home ten cents? But here comes the Baby Boom. A huge mass of Americans all entering the workforce at once. As more and more Baby Boomers entered the work force, there were more and more people paying taxes. The more taxes they paid, the lower the top marginal tax bracket could go. Today, the highest bracket is right around 35% - quite a huge difference than it was during JFK’s tenure.
Now we have to realize what is happening. The Baby Boomers, as big of a blessing as they once were, are now entering into retirement. They are earning less money per year. They are paying fewer taxes than they did during their working years. Now what happens? We have a deficit. Our government is used to operating on "x" dollars, indexed for inflation of, of course, and now the Baby Boomers are being replaced by younger workers, earning lower wages than the Boomers were getting, and obviously paying less taxes than the Boomers were paying in recent years. "Houston, we have a problem!"
I believe wholeheartedly that no matter who became President, taxes would have to head north. But politicians on both sides of the fence are scared to death of raising two types of taxes: income and property taxes. They know that by raising either of these taxes, they will face a tough time getting reelected. But they need tax revenue. How can they get it? My belief is that we are seeing a huge trend toward consumption taxes.
A consumption tax is simply a tax based on the good or service that you purchase. Some consumption taxes are also called "sinners taxes" – taxes on alcohol and tobacco, for example. But there are other types: the City of Marion just recently began giving a surcharge on trash disposal. The counties surrounding Indianapolis face additional taxes when dining out. Citizens of Indiana already pay a pretty hefty bill when getting license plates.
In the future I can see more taxes for utilities, gas, license plates, trash, water, cell phones, internet access, retail sales tax, restaurants, etc. They will raise whatever they can to help prevent raising income and property taxes, since those are such critical issues. But call it what you want, disguise it however you want, a tax is a tax. Whether they put it on income or property, we are still paying it. They will be robbing Peter to pay Paul, so to speak.
One form of consumption tax that I think we will see eventually is that for Police services. It only makes sense that we will eventually be charged. When an ambulance shows up at your house, who pays for that service? We do. Some of us have insurance, some of us don’t. But we pay. What will happen when the municipalities start charging to send officers to your door? Maybe everyone gets one free visit. But think about it – the third time the officer has to come to a home because of a domestic violence dispute - that costs the taxpayers money. Why shouldn’t the disputing couple have to pay for that visit? Why should the taxpayers have to pay for the firemen to rescue a cat out of a tree?
In no way do I want you to think that I support consumption taxes; in no way do I want you to think that we should have to pay to call out the local sheriff. But I do think fees like this will be heading our way. It is a growing trend that we will unfortunately see more and more of, not just at the federal level, but state and local municipalities, as well.
Of course, these are just my thoughts, Clark's Thoughts.
