As we have seen this week, earnings to our major corporations are evaporating. It is these earnings that were major drivers for taxes last year.
In addition, corporate earnings are evaporating AFTER millions of workers have been fired. Not only have millions been fired and still unemployed, Tens of Millions have suffered MASSIVE WAGE CUTS!!!! Many of these workers are paying no taxes or a fraction of taxes they paid last year.
In addition to earnings, sales are predictably shrinking as well, so sales taxes are contracting materially. And as house prices crash and foreclosures keep reaching record highs, property taxes are now starting to decrease dramatically.
ALL OF THE ABOVE IS OCCURRING WHILE GOVERNMENT SPENDING IS INCREASING DUE TO A GREATER NUMBER OF PEOPLE NEEDING UNEMPLOYMENT CHECKS, WELFARE, AND MEDICARE AND MEDICAID ASSISTANCE....NOT TO MENTION SOCIAL SECURITY AND PROSECUTING A COUPLE WARS.
AND DUE TO THE CONTINUED ECONOMIC CONTRACTION, WE ARE NOW HEARING RUMBLINGS OF ANOTHER STIMULOUS PACKAGE.
The problem is if Obama tries to print TRILLIONS of dollars with little in the way of tax revenues coming in, our dollar will collapse, interest rates will skyrocket, and America will go broke at an accelerated rate.
The President's only choices are cut spending or raise taxes. Any spending cut spending will need to be large.....which will drive our economy into an immediate DEPRESSION as government spend is now responsible for OVER 50% of GDP.
The other choice is raise taxes. Since fewer and fewer are earning incomes anymore, AND our government's need for money is growing, the only place left to tax is our assets. As home prices are crashing, and so is commercial real estate, really the only place left to tax is our stock holdings and retirement accounts.
Based on my current estimates, factoring collapsing earnings and massive layoffs and wage cuts, it appears that Federal, State, and Local Deficits will materially EXCEED $3 Trillion dollars next year. Since half of America does not really pay income tax, the other half will have to shoulder the burden. And since the top 10% of tax payers pay about 80% of the tax, we will have to raise over $2.4 Trillion dollars from about 10,000,000 families....or about $200,000 per family.
Since the many families in the top 10% of taxpayers don't earn $200K, and need income to live on, the only way to raise the much needed money is to tax stock portfolios and retirement accounts.
As stock prices will inevitably crash from the mass liquidation, the next go around, there will be nothing left to tax and most of the country is broke.
There simply is not enough income/money to service debt and cover expenses at the same time.