You deserve a bedtime story. Uncle Gary has a good one for you.
Once upon a time, there were two United States Senators. One was a Democrat. The other was a Republican.
They were very concerned. The government’s deficit was up again this year. Of course, it was always up again, every year. But this was becoming a problem. It was making it harder to borrow money. Creditors wanted evidence that the government could pay its bills without facing the nasty trolls called bond vigilantes.
They had to find ways to bring in more revenues.
B. We’ve got to get more money out of them. Any ideas?
A. We can give them a tax deduction each year to invest money for their old age.
B. Why would that get more money out of them?
A. We’ll tell them they can defer paying any income tax on the profits until age 70.
B. But then we can’t get their money.
A. Sure we can. We’ll borrow against it. We’ll use their future tax payments as collateral.
B. You mean the old “full faith & credit of the United States” routine?
A. You’ve got it.
B. Then what?
A. We’ll raise the tax rates later. We’ll tell them it’s necessary for debt reduction.
B. But we never reduce the debt.
A. Of course not. But the suckers always go for it. They’ll pay more taxes “just this once.”
B. So we can borrow even more.
B. But they may start hiding their profits. Money will get hard to collect.
A. That’s the beauty of giving a tax deduction now. We will tell them they have to report whatever they invest in every year until they cash out.
B. So, they can’t hide it.
B. I am beginning to understand this. How about this? We can tell them their money has to go into government-approved investments.
A. You’re right. The investments must be Wall Street approved. We’ll go to the Wall Street political action committees and ask for some advance money.
B. But can it really work? Won’t the rubes know the taxes must be paid eventually?
A. That doesn’t matter.
B. Why not?
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