The Tax Trap
Browse articles:
Auto Beauty Business Culture Dieting DIY Events Fashion Finance Food Freelancing Gardening Health Hobbies Home Internet Jobs Law Local Media Men's Health Mobile Nutrition Parenting Pets Pregnancy Products Psychology Real Estate Relationships Science Seniors Sports Technology Travel Wellness Women's Health
Browse companies:
Automotive Crafts, Hobbies & Gifts Department Stores Electronics & Wearables Fashion Food & Drink Health & Beauty Home & Garden Online Services & Software Sports & Outdoors Subscription Boxes Toys, Kids & Baby Travel & Events

The Tax Trap

what is the purpose of a tax why do we have taxes

Well tax season is over, and I am sure a great number of you are painfully aware of what tax season is all about. The purpose of this article is to give an idea as to how and why our taxes seem to keep going up, with less and less being done with our tax money. Taxes are a legal and personal responsibility that should and must be paid in order for our governments on the local, state, and federal levels, to be able to operate.

Let us first consider exactly what a tax is. A tax is simply a way for a citizen of any country to give a percentage of their earnings to their respective governments, so that these governments can provide for the building and maintaining of roads, schools, health care, police, fire, emergency medical response, and a host of other programs. Every one of these are reliant on tax dollars in order to operate and function. Imagine if you will, that you have no roads, hospitals, ambulances, fire services, law enforcement, food, medical, water, electricity, and a gazillion other things we need. Out taxes provide the funds for these programs and services. But we have fallen into the TAX TRAP. This is similar to the twilight zone ( registered trademark ), anyway the twilight zone is creepy but not painful or real, the tax trap on the other hand is both very real and very painful. So lets examine this a bit closer.

The tax trap works like this. A government decides they need more money in order to provide a service or need, so they raise the taxes on the people of their local, state, and federal levels to gain these funds. Initially they do make more money, but they see that this influx quickly starts to decrease the levels of income. So they decide  that in order to compensate, the tax level must be increased, but they see quickly that they are making less money. Why? when a person has less money to spend they hold onto it tighter. So in order to compensate again for further losses, the government again raises taxes, but make less money. I think you see the pattern emerging by now. This is the trap. The more you tax the less you make. But the big problem is that government can not seem to understand this simple concept.

To further clarify lets look at it like this. Say you have $5.00, and I am the government. I want to fund a project to create a habitat for cock roaches. So I implement a tax of say 0.07 %. That is to say 7 percent of your $ 5.00. So for every dollar you have I will take 7 cents. Out of your $ 5.00 after taxes you have $4.65 left. With less money in your pocket and winter coming up you decide you had better not buy that new pair of socks you have been wanting. I notice that you are no longer spending your money and I am not making any more money off of you so in order to compensate I raise your tax to 0.10 %. That is to say 10 percent of what you have. So lets take off 10 percent from your $4.65, that will take off 10 cents for every dollar. That extra 3 percent may not seem like much but after I take the tax out of your $ 4.65 you have $ 4.18. Wow, much more is gone, so you decide to hold onto what you can in order to feed your kids. So you refuse to spend your $ 4.18. As the government I notice that you and other have not been spending your money, and I see I am losing money, so I raise the tax to 0.15 %. So now I will be taking 15 cents out of every dollar. So you start this with $ 4.18, after I take out the 15 percent you will have $ 3.55. Alas, as your kids need to eat you refuse to spend anything except for your kids food. Darn, I am making even less now, so I am going to have to raise your tax to 0.25 %. But you are not receiving any additional income. As you see this is the reality of what is occurring with our tax system and taxes in general across the country on every level of government. Not a pretty picture is it.

So how can we reverse this trend and escape this trap. We can not do it. Only the representatives at all levels of government can do this. They must first realize that in order for them to make money, the tax payer must first have money. The exact opposite is true of the tax trap. The lower the tax, the more money the government makes. When the tax levels are lowered, then we have more money in our pockets to spend, as we spend this money, the tax coffers fill. Simply put another way, it is related to the law of supply and demand. The more supply, the lower the cost, the more that is purchased. So how can we let our governments know we have had enough? At election time and special votes, vote no on the candidates that support tax increases, vote no on local tax increases, as well as state and federal taxes. When the money hungry politicians are voted out of a job, the rest will get the message.

Additional resources:

Need an answer?
Get insightful answers from community-recommended
in Tax & Taxes on Knoji.
Would you recommend this author as an expert in Tax & Taxes?
You have 0 recommendations remaining to grant today.
Comments (0)