Sep 17, 2008

Income Redistribution v Tax Relief

This is a more national topic than a local topic but it is important on the local level. Let’s layout our definitions here so that there isn’t any misconceptions.

Income Redistribution is the collection of money from generally income taxes that is used in the funding of programs to supply money to lower income people thru tax credits or cash payments. Refer to http://en.wikipedia.org/wiki/Income_redistribution.

Tax Relief is the lowering of tax rates in order to stimulate economic growth thru encouraging business investment and relieving the tax burden on a targeted group. The opposite of this is reflected in China’s economic and taxation system. Refer to http://en.wikipedia.org/wiki/Tax_system_in_China.


The US economic system is based mostly on capitalism, but we keep marching more towards a mixed system that includes socialism. The results of this march are appearing in our markets today, hence the real problem with our current economy. Higher taxation and more Government control and regulation lead to the problems that we see today in the financial markets.

The local flavor in all of this…Government has the responsibility to provide the citizens for which they can’t provide for themselves. Be it building roads and bridges, police protection, national defense, public works (water/sewer/trash), etc. That doesn’t include sports stadiums, crafting public behavior (self protection laws like smoking bans and idling cars), and such. As Government goes further and further into areas that it isn’t really responsible for then Government will continue to grow to meet the demand, the more expensive it will get, and the more freedoms will be lost. This trend will also result in a deepening of the economic troubles and the increasing difficulty of the capitalist system to function. Minneapolis is a microcosm of the problem. Even if our regional economy is stronger than a lot of metro areas, Minneapolis continues to be a place not to do business because of the taxes and fees that are imposed on the citizens and business community. Most of the strongest regional economy isn’t driven by Minneapolis, but increasingly becomes the greatest expense. The “elected” officials that come from Minneapolis need to realize this fact and start to turn things around before there isn’t any turning back from the economic grave.

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