alstry (35.50)

Who Will Be Paying Taxes????

November 09, 2009 – Comments (4)

The three primary drivers of tax receipts to government are income tax, social security tax, and property tax.

Property tax is the key driver of revenue to state and local government.  You would be amazed how much revenue is generated from property taxes.  Since 2000 property tax receipts have more than doubled due to massive building and rising property values due to very low interest rates and easy credit.

Barney Frank admitted that this was government policy to drive up real estate values.

As a result, government became dependent on its massive inflow of new income....especially state/local government and borrowed and spent trillions of dollars against this new revenue stream.  The stimulous was incredible.

However, now that the Fed rasied interest rates 17X and banks made it much harder to obtain credit.  Real Estate values have and are plunging....especially commercial real estate and land.  Now many of those properties can simply no longer support the massive tax burden that their local municipalities depend on.....

Hotels are shutting down, restaurants are shutting down, retailers and shopping centers are closing.

As a result, not only is tax revenues plunging from massive unemployment.....now tax receipts are imploding due to declining property tax revenues.......the life blood of local government...especially for schools.

LOCAL AND STATE GOVERNMENT EMPLOY MILLIONS OF PEOPLE ACROSS THE NATION.

Many of you get sick and tired of my posting strings of layoffs and businesses shutting down.  What many fail to realize is that each one of those is a tax payer not paying taxes anymore.

The reason that it is so significant is because our govenrments have become the largest consumer in the world.....and if government is not consuming our economy will crash.

With income and property tax receipts imploding...government has few choices....cut spending/raise taxes or both.  Either action will cause sales and sales taxes to decrease.

No matter how wealthy you are, or think you are....there is simply not enough cashflow in America to support governments' current appetite for money.  As more and more businesses shut down and individuals lose their jobs....just to make up for declining property taxes and income taxes....government may soon have to tax almost everything we have simply to sustain itself.

I know what I blog about is not much fun.....but it is what we confront.....and if we don't deal with it, who will?

What makes this time so different is government has grown to become a huge percentage of our GDP over the past 20 years....especially with its impact on health care and employment.  Now that revenues to government are evaporating...what will be the consequences to the nation?