The proposed Debt Ceiling Deal to be voted on by Congress this afternoon includes a couple of substantial cuts to the IRS $80B funding increase pushed by the new administration last year which was to be funded over ten years. The funding increase for 2023 was ratified in a bi-partisan effort from a lame duck congress.
The first cut is $1.4B to the monies allocated for fiscal 2023. Also there’s another $20B in cuts for 2024 and 2025.
It should be noted that the additional cuts for 2024 and 2025 could vanish like Casper’s ghost. Each annual budget is its own fight, with both sides pushing their own agenda. If these budget cuts are ratified and signed into law, it would mean that the new IRS budget would simply run out of money faster.
I’m hoping that some or all of these funding cuts will stick. I wasn’t looking forward to fighting through more audits with twenty-three-year-old trainees. I hate pulling out master tax guides so that I can explain tax law to auditors.
Let me leave you with this.
What I worry about is what happens when the music stops and there aren’t enough chairs to go around? Sooner or later it will happen.
Deficit spending has happened for so long in our country that most Americans don’t understand why it’s fundamentally bad. Our economy, like any other, has limits.
Take a moment, and think about our economy in terms of your own small business.
It’s one thing to go into debt while your company is growing. You need money to build infrastructure, buy machinery, and put new employees to work. At that point it’s easy to pay down your debt because your sales from a percentage standpoint are growing faster than your liabilities.
Many would look at this as being “Good Debt”.
It’s another thing altogether to go into debt when your company isn’t growing quite as fast. If your debt percentages are growing faster than your company’s sales and profits, then you’re obviously losing ground.
This would be the definition of “Bad Debt”.
What happens when companies go too far into debt? Banks stop lending to them. Many think that this could never happen to America, but don’t kid yourself my Brothers and Sisters. It’s quite possible.
Sooner or later all companies have to balance their books. The debits have to equal the credits. America may be much larger and have substantially more resources than your average small business, but it isn’t that much different.
Interest payments on our debt already account for 8% of all Federal Tax Revenues. That doesn’t account for bond redemptions which vary by year and total another substantial sum. These numbers do nothing but increase year after year.
We can only hope that our elected officials will come to their senses before it’s too late.
We’re all going to get through this. Let’s get through it together.
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