By: Herbert Diamant
Paying taxes is supposed to make us feel good about supporting the needs of the United States. We get taxed as we earn a living, and again as we earn a return on our investments. We are taxed on the salary withheld for social security and are taxed a second time on these same funds when we receive them later in life. There are also hundreds of other taxes imbedded in the costs of what we buy, where the sales tax is the only one we can identify. The combination of all these taxes to run our government is much higher than we think. Which raises the question: What are they doing with our taxes?
Despite all our tax revenues, politicians of both parties are on spending sprees that trigger annual deficits that have ranged between $1.3 trillion and $3.2 trillion over the last 3 years. Their spending philosophy is known as using “other people’s money”, which of course is your money. It would not be sustainable for any of us to handle our personal finances with sizable deficits, as we would run out of money. Politician’s talking points are that deficits don’t matter as they are used to defend the United States and make the government work. Really?
What would happen if our government collected the same amount of money but instead spent it wisely? Whether we paid $2,500 or $250,000 in April, one has to wonder where this money is going. To quote former Speaker of the House Tip O’Neill, “All politics is local”, which translates into spending government money locally.
A great spending example is in our town of Ridgefield at Route 7 and the train station. Over the decades, everyone has always used cars and trucks to get around on Route 7. Nobody walks alongside this busy two-lane road because this area is a 1 ½ hour walk uphill to the center of town. Along comes the Bipartisan Infrastructure Project to solve the pedestrian problem that does not exist. Now we have new sidewalks, crossing areas, and a wide pedestrian bridge to nowhere. Six months later, car and truck traffic continued, and there were no pedestrians. And this project is just getting started as it awaits more funding.
Imagine what happens when we multiply this poor spending decision across other towns throughout the United States. Collectively, this needlessly contributes to our government deficits. We will then need higher taxes to pay the debt service, which is on track to become the largest spending item in the federal budget. If this is the way our politicians spend our tax money locally, what about the bigger spending decisions that we do not readily see? The solution is that we need elected officials to grasp the importance of spending up to the tax revenues we pay them. Until then, I invite you to stop by Route 7 and take a walk across your new bridge to watch the traffic whizzing by.
If you have any questions about portfolio advice and management, give us a call or email us at info@portfolioadvisor.com.
