As the tax base falls, government spending keeps rising.
As the unofficial end of summer arrives this Labor Day weekend, the Delta Variant is rapidly spreading, and chaos is running rampant as a result of the abrupt withdrawal from Afghanistan. Meanwhile, fires and floods are raging across the country, and ongoing problems continue at our southern border.
And, oh yeah, prices are exploding everywhere you shop, and dysfunctional dithering among politicians accomplishes very little. In short, there is no shortage of issues to worry about.
There is some good news, however, as many are beginning to return to work as the economy starts to power up and all levels of education are at least attempting to reopen.
But is there more bad news around the corner? Many are waiting for another shoe to drop, fearful that we will once again be locked down and home bound, which would likely create an economic slow down.
I recently came across some interesting data from the Tax Policy Center. In 2019, there were 76 million households that paid no federal income taxes. In 2020 that number increased to 107 million.
That means a staggering 61 percent of all eligible taxpayers paid no federal taxes. And 20 percent paid neither federal nor payroll taxes (Social Security and Medicare.) However you look at it, the message is clear. Job losses fueled by the pandemic and Uncle Sam’s benefit checks and tax credits have spiked the number of people paying no federal taxes.
Some argue that they’re taking advantage of “free” money and lack the will to work. Others claim increasing federal government programs will help put people back into a situation that enables them to return to work. That’s a debate for the economists and politicians.
But according to the Tax Policy Center, the top 20 percent of the taxpayers are paying 78 percent of the nation’s bills. Simply stated, a small percentage carrying such a large tax burden isn’t healthy for our country’s long-term economic wellbeing.
When I think of Labor Day, the men and women in the automotive industry come to mind. Henry Ford’s production line and the incentive of $5 a day were instrumental in bringing organized labor to his workers.
Over the years, there have been many tugs of war between labor and management. At the end of the day, however, differences were resolved and many believe this helped establish a solid middle class.
Much of our nation was undoubtedly built by organized labor and most not only earned middle class wages, but also got exceptional healthcare and retirement benefits.
With the onset of robotics and other technologies, the labor force has become more technical and specialized. But there will always be a place in the workforce for dedicated, hard-working men and women.
I’m a firm believer in free markets. More often than not, competition results in more efficient production and new, innovative products. With so many help wanted signs in front of businesses, I have to believe there are great, well paying opportunities for those who want to work.
On the flip side, I don’t believe politicians can legislate a middle class lifestyle. As summer winds down this Labor Day, there is no shortage of issues that could keep Uncle Sam in the spending mode. The question is, who is going to pay all the bills?
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Ken is a registered representative of LPL Financial. Securities and financial planning offered through LPL, a Registered Investment Advisor, member FINRA/SIPC. Ken is Vice-President of the Society for Lifetime Planning in Troy. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Investing involves risk including loss of principal. No strategy assures success or protects against loss.
