“The taxpayer – that’s someone who works for the federal government but doesn’t have to take the civil service examination.” – Ronald Reagan
With the almost-certain passage of the Manchin-Schumer Bill, it appears they are raising our taxes again. But don’t worry, the new taxes will only be paid by people making more than $400,000 annually and corporations. Except it does not work that way. Those making more than $400K each year generally got there because they are smart. They will hire accountants and tax preparers to find ways to shelter that money and make less than $400K/year. As for corporations? They will pass the costs of the extra taxes to their customers in the form of increased prices. That results in inflation.
There are more pernicious effects of these tax hikes. Many of those making more than $400K are small business owners. They are likely to defer growth or even retrench. Why knock yourself out only to see your reward seized by the government. Creation of new businesses will likewise be discouraged, so the economy will grow more slowly. Production will remain stagnant or shrink.
On top of that, the bill introduces massive spending. It will pump more dollars into the economy, even as it depresses production of goods and services. More money chasing fewer goods is the definition of an inflationary trend.
Want more bad news? This trend will likely continue until early 2026. Even if the Republicans take House and Senate by solid margins, they will be unable to repeal the bill. Any repeal will be vetoed. They might be able to reduce spending, but even there, I suspect most efforts will be vetoed, and reducing spending does not cancel the pernicious effects of the high taxes.
It will take a Republican President and Republican control of House and Senate fix things. That cannot happen before January 2025. It will take a year of legislative effort to clean up the mess.
Who knows? We might get lucky. They say God looks after drunks, small children, and the United States of America. I hope so. Buckle up.
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