Originally Posted by Villages Kahuna

You all know that I have said that maybe increasing income taxes might be a necessary element of producing balanced federal budgets and beginning to pay down the $11 trillion national debt (and growing). So I decided to figure out how much taxes might have to be increased to begin to help. Unfortunately, it looks like increasing income taxes won't help much at all.

Our total federal tax receipts are in the range of $2.4 trillion per year. Of that amount, only about $1.1 trillion comes from personal income taxes. Corporate income taxes contribute another $375 billion or so. Then there's FICA payments for Social Security that are around $900 billion, a large proportion of which we actually pay out in Social Security benefits. The remaining $250 billion or so comes from exise taxes, estate and gift taxes and import duties.

So it looks like all we would have to "work with" are the individual and corporate income taxes to begin to make a dent in deficits and the national debt.

Let's just say that a 10% across-the-board income tax increase was placed on both individuals and businesses. What sounds like a pretty aggressive tax increase would only bring in an additional $150 billion per year...peanuts compared to the federal budget ($3.6 trillion recommended for 2009) or the $11 trillion national debt (before a lot of the stimulus and bailout spending is added).

The small amount that would result from a pretty aggressive tax increase wouldn't even put a dent in our interest bill. In fiscal 2008, our government paid $412 billion in interest to those holding Treasury bonds, bills and notes. Heck, an additional $150 billion in tax revenues would only cover our interest expenses thru the first two months of 2009! (Interest payments have been $148 billion thru the end of February, 2009.)

A quick look at these numbers suggests we're in a lot deeper doo-doo than I thought or most people probably realize. Just to balance the budget would take a combination of reduced spending or increased taxes totaling about $1.2 trillion. If a 10% increase in income taxes was part of that, there would have to be a cut in government spending of over a trillion dollars a year! In terms all us corporate types understand, that would require more than a 25% across-the-board cut in the federal budget.

What can be said other than...Wow!

While all the arguing about AIG, bonuses, earmarks, Dodd amendments and yadda yadda is going on, the U.S. is sinking deeper and deeper into debt that now appears we have no way of repaying for decades to come. If the Chinese suddenly turn off the spigot that we've come to depend on when we auction more and more and more Treasury IOU's each month, our way of life is going to come to a screeching halt...big time! The entire stimulus, save the banks, save GM, restart the economy, and blah, blah, blah is all done with borrowed money. If suddenly the lenders zip up their pocketbooks, we'll find out exactly how well the free market system can cause economic recovery, because that's going to be the only alternative!

I really can't suggest how we get the attention of all those politicians who seem to be more intent on keeping the public in the dark than addressing the problem. Now I'm beginning to realize why since the Iraq War began paying for it was always handled by several special appropriations each year. That way the total spending by the government was always kind of disguised. It wasn't until a week or so ago when the $3.6 trillion budget including everything was presented by President Obama, were most people able to realize what our total spending really is--and how flagrantly we are spending beyond our means.

I'm disturbed by this and while I hope no one here gets too upset, I hope you are as well. Something really does have to change.