The IRS and VEGAS


Blog type: politics on taxation  Humor: 1 out of 10

If you don’t understand much about taxes or our economy, this will help you understand a fundamental difference between conservative and liberal stances on both.  I will save most political rhetoric for another blog, because I want you guys to understand how different tax rates effect the economy at large and the philosophy has a lot to do with Vegas.  The problem is that everything in Vegas stays in Vegas, while their version of “taxation” on the people that go to Vegas should be extrapolated to our federal tax system.

I believe that logic points to the fact that we need a president to fix the budget, above ALL ELSE, or we won’t have money to keep the roads fixed, let alone pay social security and everything else. We are broke and that has to be fixed NOW.  Ask any family what gets cut when the family income drops.  You start by cutting all the “disposable income” items (the fun stuff), like going out to eat and the movies.  Then, you keep cutting if you have to.  If it gets bad enough, you cut all the way down to feeding your family, because food is the most important thing of all, even above shelter.  See Maslow’s Hierarchy of Needs.  In simple terms, this is where we are as a country.  We are at our borrowing limit to continue our “lifestyle”.  It is time to cut, and cut deep.  But, you and I both know, that neither party is very good at making cuts.  This often creates political enemies and loses votes no matter what gets cut.  We always say we want a tough candidate that is brave enough to cut.  That is, of course, until he cuts funding for something we like (cue the political opposition to make it extremely difficult to cut anything at all).  Assuming that no politician will be able to cut enough to balance our budget, the only other method is to increase revenue.  Without getting into how dumb it is to tax the rich more than they are already taxed (see an upcoming blog), I will explain a simple theory that will increase the federal coffers without killing all of us in a tax hike.

They bash Romney because his plan counts on a recovering economy. They ask how he will “pay” for govt programs if he is cutting taxes. Obama says it is impossible to cut taxes and lower the deficit (simple math, right?). He is DEAD wrong. Yes, it sounds like magic to increase income without increasing taxes, but it can happen.  In fact, it is one of the basis behind Reaganomics.  The problem is, or so I’ve read, that it takes longer than a couple of presidential terms to see an effective outcome.  Here’s where Vegas comes in.

Vegas increases revenue every day while actually DECREASING its “taxes” (the percentage of average income it takes in on every bet made).  Vegas was built on the very principle that if you set the odds up to take a very small percentage of someone’s money that they barely notice and tend to keep circulating their money (thus providing many “small percentages” that add up to big revenue).  We all know that we are at a disadvantage, but we still choose to gamble.  I believe that Vegas exhibits roughly the same economic principles as our tax system, but they profit and we go broke. Let me break it down for you in an explanation of slot machines.

If you have ever been to the slot machine section in any casino in vegas, you will see that they compete with each other based on how much of your dollar they give back in winnings. (98% return, 99% return) For example a 99% return machine gives 99 cents back for every dollar put in. At first glance you would think they will never make money. But, take that penny they made from every dollar put into those machines in a day and you get thousands of dollars. Consider this: if they advertised a 30% return, would you put your dollar in?  I doubt it.  Fundamentally, this idea is what sets republicans and democrats apart on the matter of taxes.  Democrats ignore this philosophy, choosing to believe that increasing overall taxes (whether by increasing taxes on the rich or otherwise) is the only way to increase total revenue.  And, they are right….to a point.  We, as a population, do not get the choice NOT to play the federal government’s “30% return” slot machine.  But, we definitely get discouraged by it.  In fact, many business deals hinge on taxation.  On a personal note, how bad the local property tax is has a big determining factor on whether or not I would put a self storage facility in that town.  The discouragement that builds manifests itself in a slower economy (less dollars put in the slot machine).  This means that taxes have to keep going up in percentage to keep bringing in the money the government needs to keep funding its budget.  Simply put, if they lowered the percentage extremely low, people would spend their money much more often and the government would get a small percentage every time money changes hands.  The total amount they take in would be much larger due to the fact that money circulates many more times when consumer confidence is up than when it is down.  I personally believe that if Vegas took a huge percentage every time you placed a bet, they would quickly end up in the same boat as our federal economy and the lights would start to dim on the sunset strip.

To put it another way, if the taxes are very low, all of us will spend more money (and not just because we have more money to spend). And, the govt gets a piece every time money changes hands.  Yes, Democrats, the govt. gets a little less, but they get a little less of a hell of a lot of transactions. This will cause the govt to make less money for a while until the economy rebounds and then we reap the rewards. This is a major difference in opinion between the two candidates. That alone is enough for Romney to get my vote. Do I agree with Republicans on abortion, religion, and most of their social policies NO (and DEFINITELY not with Romney’s religion as I believe Mormonism to be a perversion of Christianity and places their founder above Christ which is blasphomy). But, I am more concerned about our fiscal well being as should we all be.  Because, if we default on our loans, there will be NO money to fund all the programs that mean so much to all of us.

Don't act like you got nothing to say, so lay it on me!

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