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Originally Posted by shakran
It's all a question of balance. If I'm far in the hole financially, I am certainly not going to go to HR and ask them to reduce my salary. By the same token, if the government is in debt, it should not reduce its tax rates.
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Originally Posted by willravel
That's true, but you should actively seek out ways to stop or reduce spending as much as necessary to begin to get your credit back and keep yourself from becoming bankrupt. With the money you save by cutting back, you pay off your debts. Once you have reached 0 again, then you plan better so it doesn't happen again.
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Cutting spending is definatly an approach that will go toward reducing budget deficits. Raising tax revenues is the other. There are many ways to raise tax revenues without raising taxes themselves. An increase in investment and increasing economic output both act to raise tax revenues. Both are done without raising taxes. Actually, lowering taxes helps to increase both investment and economic output. More money goes toward things like investing in new compaines, reinvesting profits back into the company, spending money on R&D. From there we get innovation and companies become more profitable than before. New technologies and innovations spread throughout the industry helping to increase economic output overall. Not only is one company more profitable, but many companies become more profitable. When a company is more profitable it can pay its employees more. These are all things that increase income both for the business and for the individual. When income rises across the board the government collects more in tax revenues than it did previously. All this is done by lowering taxes.
If raising taxes were the answer, do you think a 75% tax rate would help or hurt the economy? thus, would a 75% tax rate raise tax revenues or decrease. I can garuntee you tax revenues would fall in the years following a 75% tax rate.