Tax Cuts Increasing Government Income

One would think that higher taxes means more government income. This is certainly true to an extent. All else being the same, government income increases when tax rates increase. However, “all else being the same” is an economic impossibility. An increase in taxes necessarily has a broad, multi-layered impact upon the economy.

With increased taxes comes a decrease in net wealth production. $1 million dollars raised via taxation means $1 million dollars less for private sector spending/ventures. Had this $1 million been left in the private sector, it would have likely produced a profit, thereby causing a net gain for the whole economy. A net economic gain means more money to tax. So, while lower tax rates might mean that the government gets a “smaller piece of the pie,” it helps to make the entire pie bigger. A small piece of a large “economic pie” is often bigger than a large piece of a small pie. In fact, tax revenues are up this year compared to years past despite Trump’s tax cuts.

Taxes aren’t fun for anyone, especially if you’re dealing with tax debt. Feel free to contact our office if you owe the feds or the state money and we’ll be happy to help you figure out if bankruptcy if a good option. We have years of experience, and have helped manyAuburn bankruptcy filers and would be happy to assist you.