Tax Increases – Cumulative Impact

It strongly appears as if many taxes will increase at all levels (Federal, State, Local) in the near future.

We, as a nation, are in a quandary as taxation needs to increase if we hope to narrow deficits and debt; yet at the same time the adverse economic effects of these increases may be large, quite pernicious, and difficult to forecast.

I’ve previously commented upon various complex facets of the taxation situation given our current economic situation.  This can be seen in the February 23 post (“Tax Increases And Our Economic Situation – Follow Up“) and the “America’s Trojan Horse” article.

One would hope that some upper-level policy maker would be assessing the impact of having so many tax increases coming “online” at once.  The cumulative potential tax increases will likely be outsized and potentially staggering.

Of course, it is conventional economic wisdom that tax increases should not be done during a time of economic weakness.  This thinking is supported by research on the economic suppression caused by increased taxation (tax multipliers).

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SPX at 1197.30 as this post is written