First, a very basic and simplified primer and example of the budget process.
Revenues minus Expenditures = Budget Balance
This means that to have a balanced budget (Budget Balance = $0), the Revenues (or Income) must match the Expenditures (or Expenses).
Example of a Balanced Budget :
|
Tax Payer |
Tax Liability |
Expense |
Amount |
Balance |
1 |
Bob |
500.00 |
WIC |
100.00 |
|
2 |
Jane |
100.00 |
All others |
700.00 |
|
3 |
Alice |
100.00 |
|
|
|
4 |
George |
100.00 |
|
|
|
Totals |
|
$800.00 |
|
$800.00 |
$0.00 |
Any increase in Revenue without a corresponding increase in Expenditures results in a Budget Surplus (money left over).
Likewise, any decrease in Revenue without a corresponding decrease in Expenditures results in a Budget Deficit (money that needs to be borrowed).
Now, Republican leaders are not so obtuse as many would have you believe. They realize that in order to balance the budget, a tax-cut has to be offset by either a spending cut or an additional source of income. And they have a grand sounding plan for doing just that.
Their argument starts by promoting the dogma that a tax-cut for the rich provides them with more capital to spend to create new jobs. This, in turn, increases revenues by having more workers paying taxes.
Let's start by giving Bob (our fantasy rich person) a 20% ($100.00) tax-cut. In theory, Bob would then use his extra capital to hire Sharon, an unemployed, single mother with two children.
|
Tax Payer |
Tax Liability |
Expense |
Amount |
Balance |
1 |
Bob |
400.00 |
WIC |
100.00 |
|
2 |
Jane |
100.00 |
All others |
700.00 |
|
3 |
Alice |
100.00 |
|
|
|
4 |
George |
100.00 |
|
|
|
5 |
Sharon |
100.00 |
|
|
|
Totals |
|
$800.00 |
|
$800.00 |
$0.00 |
Even if this worked the way they claim, it would result in a regressive form of taxation and add to the already huge wealth gap. While the rich are rewarded with higher net income due to the tax-cut, the low and middle income worker realizes no net income increase.
Even if the rich do use the extra capital to invest in job creation, they are further rewarded by claiming those investments as a business expense, lowering their taxable income and resulting in additional net income. Again, this serves to widen the wealth gap
In reality, the rich have NOT been using the extra capital from tax-cuts to create new jobs (Poor Sharon is still unemployed). They have either been hoarding that money or spending it on financial investments such as Wall Street.
|
Tax Payer |
Tax Liability |
Expense |
Amount |
Balance |
1 |
Bob |
400.00 |
WIC |
100.00 |
|
2 |
Jane |
100.00 |
All others |
700.00 |
|
3 |
Alice |
100.00 |
|
|
|
4 |
George |
100.00 |
|
|
|
Totals |
|
$700.00 |
|
$800.00 |
-$100.00 |
Now, since the hoped for increased revenues have failed to materialize (no new job creation equals no new workers paying taxes), they are forced to search for other means of reducing an even larger deficit (due to lower revenues resulting from the tax-cuts).
Now, let's see....What program don't we like where we can cut the funding. Why, let's just cut $100.00 from that pesky WIC program. After all, no REAL American needs that. Right?
|
Tax Payer |
Tax Liability |
Expense |
Amount |
Balance |
1 |
Bob |
400.00 |
All |
700.00 |
|
2 |
Jane |
100.00 |
|
|
|
3 |
Alice |
100.00 |
|
|
|
4 |
George |
100.00 |
|
|
|
Totals |
|
$700.00 |
|
$700.00 |
$0.00 |
There! See how easy that was? (Stop whining, Sharon. There are plenty of dumpsters around to get that food for the kids!)
In other words, they fully intend to offset their tax-cuts with spending cuts for programs that benefit low to middle-income people.
So, stop calling those Republican Leaders stupid. Isn't the main goal, after all, to balance the budget? And as we can hear them say every day on TV : "Balancing the budget and reducing the deficit will require some tough calls on our part and some sacrifices by everyone."
Unless you're rich, of course!