Falling Taxes Doom the U.S. Economy

Falling-Taxes-Doom-the-U.S.-Economy

Taxes — a “four-letter word” for most people who bring home a paycheck.

But the reality is that taxes are also a measure of your prosperity. The more taxes you pay, the more income you bring home that year.

While I hate paying taxes, mainly because of the wasteful spending our government uses it for, I know that as I pay more taxes, I am making more money.

When compiled on a large scale, it is a sign of how strong the economy is as a whole.

As the government collects more taxes, it means our economy is growing.

As the government collects less taxes, our economy is shrinking — which is exactly what we are seeing now.

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Specifically, we’re seeing less corporate income taxes.

The U.S. economy is now in its fifth consecutive quarter of a corporate earnings recession.

That means income being paid to the government is in decline — the kind of decline that has preceded the past two recessions, and will likely precede the coming recession as well.

Not only are falling corporate income taxes leading to a recession, but they are also leaving the Fed with no choice but to keep rates at these extremely low levels — an environment that is set to remain for an increasingly long time.

Let me explain…

The Risk of Falling Taxes

Taxes are somewhat like the lifeblood of our economy. While our government may not use them efficiently, they are a clue as to how well our underlying economy is faring at the moment.

Right now, corporate taxes are in borderline recession territory, and, by the end of the year, they should clearly be there. Take a look:

Federal Government Corporate Tax Receipts

The red shaded bars represent the past two U.S. economic recessions. As you can see, corporate tax receipts have fallen in a similar fashion going into these recessions.

If the second and third quarters of this year come out with lower corporate income taxes, it’s likely the consumer won’t be strong enough to keep us out of a recession — an increasingly likely scenario.

We all know by now that it was the consumer who supported the economy in the second quarter. Even so, corporations continued to struggle, leading to yet another fall in corporate income tax.

But, as we claw through yet another earnings season of falling profits, it seems our corporate earnings recession may linger on until the end of the year. In other words, third-quarter tax receipts will also continue to fall.

If we chalk up a decline in tax receipts for the second and third quarters, the U.S. economy looks increasingly like the recession of 2000 on the chart, with a beeline for a 2008-type of recession.

Need for Unconventional Yield

This sluggish, recession-like economy is not one in which the Federal Reserve will be gung ho about raising interest rates. Rather, the Fed is likely to join the rest of the world in what has become a race to stimulate individual economies — be it with negative rates or ramped-up versions of quantitative easing.

In short, there is no end in sight for the decrepit interest-rate environment we are in. What that means is that your need for income from unconventional sources will not let up.

A few weeks ago, I mentioned three possible ETFs that were ripe for opportunity once they reached certain levels.

While we are not there yet, those three — the Utilities Select Sector SPDR (NYSE Arca: XLU, buy below $48.50), the SPDR Dow Jones REIT ETF (NYSE Arca: RWR, buy below $95) and the iShares Core High Dividend ETF (NYSE Arca: HDV, buy below $79) — have declined 3.8%, 2.1% and 0.88% since then, respectively.

So these ETFs are clearly reacting as I expected they would post-Fed meeting, as expectations for another interest-rate hike this year creep back into investors’ realm of possibilities.

Just give it a little more time, and these ETFs will fall into our buy range, allowing you to scoop them up and begin picking up strong dividend yields and share-price appreciation.

Regards,
Falling Taxes Doom Economy
Chad Shoop
Editor, Pure Income

  • Miles Southworth

    I don’t seem to have a copy of Profits Unlimited for March. Can I still get a printout of that issue?
    Miles

  • Thomas Corcoran

    …. it stimulates and increases business activity

  • George Pestik

    That is standard GOP dogma.

  • Thomas Corcoran

    …. and reality

  • duckusucker

    Good god, man, you must have been in a coma during 8 years of W. When you start in the deepest of holes, progress of any kind is wonderful— and we’ve had sure-and-steady growth, the sustainable and healthiest kind, during Obama’s golden era.
    No wars, no scandals, no cabinet convictions, no drama. Golden years.

  • Quartermaster

    No drama? You must have slept through the last 8 years. There was plenty of drama. There is plenty of drama now, all generated by leftists and Donks.

  • duckusucker

    Gulf War: drama.
    Afghan War: drama.
    Failure to respond to a hurricane: drama.
    President during 9/11: drama.
    Collapsed economy, worse since the Great Depression: drama.
    Nothing in any scale similar to any of these happened during the calm, peaceful years of Obama whose 8 years will always be seen as one of the best presidencies.
    Perspective is all, isn’t it?

  • Quartermaster

    Yep. You slept through the last 8 years.

  • duckusucker

    I can appreciate how you’d be struck dumb. Really, I can. Next up: why you believe a billionaire who’s made a career of defrauding folks and never given or demonstrated ANY concern for anyone but himself has fooled so many into believing he feels their pain.
    Say, you didn’t vote for W twice, did you? Just wondering the level of discourse you’re able to attain.

  • Quartermaster

    You’ve made a common libtard error. I said all that needed to be said, not all I could have said. Obama’s maladministration was full of drama. But, like the typical libtard, you confuse what you want with the facts.

  • duckusucker

    You said nothing. Obama: the Golden Years’ Man.
    Meanwhile, your man Trump continues to be the laughing stock of the world. Germany, England, France, Scandinavia (remember those terror attacks? Ha, ha!)— all the leaders of those nations can’t believe what a fool he is. Only a guy fooled by a fool is more foolish than the fool. How does it feel?

  • Quartermaster

    Sorry that you have no reading comprehension. Even Clinton’s maladministration, and he was pretty bad, had better times than The idiot Obama. And that was in spite of the repeated drama and scandals.
    Your last two sentences are best directed to yourself. Libtards are very good at lying to themselves.

  • duckusucker

    You’re pretty smart.
    For a dachshund.

  • Dean O.

    No scandals? no Drama? No convictions? Are you a complete idiot?

  • Dean O.

    Oh now i get it. You listen to CNN and their line of BS. Trump has been received very well in Europe except by the Muslim scum and liberal scum of these nations yet CNN and the rest of their Comrades are reporting (as they always do) the complete opposite, going so far as to edit film to show what they want you to believe. Keep drinking the Kool aid moron !

  • CSMOccupiedNorthernVA

    Silly. Taxation should follow the Laffer Curve. The available tax base varies and so should the rate of taxation–but the system isn’t that flexible.
    More importantly taxes are a poor means of shifting funding from one part of the economy to another because government always takes its cut and spends it irresponsibly. For example, why is there a 3% investment income tax buried in the ACA (Obmamacare) ? Not a penny of that money will ever go to healthcare.
    Here is an idea to improve government and the economy. No spending authorization/entitlement or otherwise should continue more than five years without renewal by Congress, Each spending item should have a sunset clause, and no tax shall be levied for a period of more than four years without sunset if Congress does not vote to renew it.

  • Phillip Charles Mejia

    No wars? Obama doubled down on Afghanistan, and the only reason he withdrew all but 5000 troops from Iraq was because the Iraqi government wanted troops to fall under Iraqi law, but Obama would have none of it, he obilerated Libya, made it into a failed state ruled by warlords, and has been arming and training ISIS fighters trying to overthrow Syria’s Bashar al Assad. It is ******** that few believe that the US has been fighting ISIS, it has in fact been providing ISIS with valuable air cover. As far as scandals go, what about Operation Fast and Furious, where the US let guns “walk” into Mexico where they were used by the drug cartels? The Congress was investigating this stupidity when Obama withheld vital evidence, saying it was a matter of “national security.” Must be living under a rock not to know this.

  • Phillip Charles Mejia

    The reason why Trump is president is because the voters knew that if Hillary was at the Helm they would have another Clinton-Obama presidency, where they whisper sweet nothings in our ears as candidates, but once safely esconced in office, do what their Sponsors tell them to do.

  • duckusucker

    You appear not to know what war is. It is not a limited troop deployment of a few thousand, my friend. And Obama inherited both messes, made infinitely worse by your man, W, and his attempt to nation-make in Iraq. I won’t reply to the ridiculous claims we helped ISIS. Next, you’ll claim OBL still is alive, having coffee with Elvis. F&F fully was investigated and it was a failed mission, as many are. Only the wildest of conspiracies go there and only the deepest divers into the hottest part of the swamp believe it was anything but. When there is NO evidence, believing what heavy drug users like Rush and Beck tell you isn’t really wise.

  • duckusucker

    There was no drama under Obama, just high farce as Republicans investigated everything but his choice of deodorant, spent gazillions on hearings, and came up with nothing but a massive spending bill to fund it. BTW, Dennis Hastert, leader of the Republican congressional delegation a few years ago, is up for parole I believe on his child sexual assault convictions. He makes that sleaze ball who also was lead Republican, Newt Gingrich, look like a choir boy, “The House voted overwhelmingly yesterday to reprimand House Speaker Newt Gingrich (R-Ga.) and order him to pay an unprecedented $300,000 penalty, the first time in the House’s 208-year history it has disciplined a speaker for ethical wrongdoing.: wp.com

  • Quartermaster

    The Obama maladminstration was wall to wall drama. When things started to get quiet, he, or one of his clownish minions, would manufacture more. I agree that Hastert was a sleaze ball. Gingrich was anything but. The ethical charges against him were manufactured and ridiculous. My observation during my entire adult life is that the left does what it wants, no matter how illegal, and then screams bloody murder at everyone else’s sins.

    WaPo, like every leftist rag, isn’t worth the paper it’s printed on. About like libtard opinions.

  • Michael Sheehan

    The Laffer Curve is a joke that no quality economist follows

  • Dudley Twimp

    When corporations doing big business in the USA can amass hundreds of billions of untaxed dollars in offshore tax havens, something has gone horribly wrong.

  • jringo55

    I’m retired from my first career. I was only 48. I decided to take on on another job but I soon discovered that I was working for peanuts and paying extra taxes because my income was increased. My employer and the govt were the ones gaining from the fruits of my labor. So I quit and live a very modest lifestyle. I’m not going to feed GREED and govt waste. I pay my taxes but I pay far less.

  • SuperTech86

    LMAO…the laffer curve

  • SuperTech86

    Actually it was the Maliki government that walked away from the talks and not Obama, the U.S has been arming and training radical Isalamist’s since the Eisenhower admin in the early 1950’s which is when the U.S relationship with the Muslim Brotherhood was established and Operation Fast and Furious which preceded Operation Wide Receiver was part of Project Gunrunner which started under the Bush admin it’s literally right on the ATF’s website. The practice of gun walking started under Bush and was continued under Obama.

  • Not taxing the richest Americans at exactly the same rate as ordinary middle class Americans is going to bankrupt us all.

  • INGLORIOUSBASTARD

    They’ve admitted Obamacare is a tax. Okay you love it so much, you keep it. But let those of us who can, Write It Off as an expense… with none of todays bs of only if 10% higher than your income.

  • INGLORIOUSBASTARD

    A person can be very rich , yet if he invests, which creates jobs, then he only pays tax on the money he’s sitting on doing nothing. That’s how rich get away without paying taxes. But remember…they are creating jobs for ordinary people. Oh, sure lets have the government take their profits and use them how THEY feel they should be used… can you spell socialism ? I own a small business, and I too can re-invest in my business to avoid paying tax. So if you change the law it affects everyone. I believe the only fair way to do it is have a flat tax that is proven fair. But now you open a new can of worms and that is reining in government spending so that a “fair” tax is enough to run government. Yes, programs would have to be cut… that will work itself out in time. I’m sure you wouldn’t mind donating to the homeless for a while… right ?

  • INGLORIOUSBASTARD

    OMG where do you get your fake news…. WOW !

  • INGLORIOUSBASTARD

    BAAAAA HA HA HA HA HA .. peaceful… tell that to the thousands who died fighting Obamas cousins in the mid-east.

  • Bob Person

    If you want more money to come in, you lower tax rate. This is a formula that has been proven throughout history; but, most people misunderstand this as a counterintuitive misnomer. Again, lower tax rates = more money, period.

  • brycenesbittt

    $100 to you is a lot less money than $100 to a coal miner. Flat tax is an oversimplification. Try instead a tilted tax: just as simple to calculate but recognizing that having money gives you the means to make money, and you can shoulder more of the tax burden.

  • jrj90620

    The cost of $10 trillion in debt made Obama look better but left the debt to be paid for later.Anyone could borrow a lot of money and look good in the present,if ignoring the future debt to be paid.

  • saltydogalan

    Can you document this claim? Sounds like the same old “trickle down” theory that has never worked in the past but is fundamental to Republican economic belief. We’ll see how well it works this time when our entire economy is beggered.

  • Bob Person

    Thank you; yes, it is important to stick with facts because I do not favor SPIN. A quick Google search will deliver many historical periods of this fact that cutting taxes yields more revenue to government, but here is one just-the-facts article that came up when I searched “historical tax cuts”, http://www.heritage.org/node/18247/print-display . However, I do not necessarily consider the Trump Tax Plan to be of the same merit as those referenced in the link. Thanks.

  • Mike

    always seems to short term resulting in a tax increase and recession.. true growth can only be sustained when consumers have enough disposable income to stimulate the economy with spending..companies expand, hire to keep up with demands…just handing corporations $$ wont stimulate any long term healthy growth. no reason for corps. to spend, expand without potential increase in revenues, sales etc. theyll just reward CEO, stockholders…

  • Bob Person

    Very good point. Our Tax Payor system seems to favor the whole “Corporate” persona, and most “persons” do not realize their inherent corporate nature within the code, but I digress.

  • Jeffrey Mark

    Every single day people put their money in the banks to earn .00001% back annually.. ANNUALLY! And you people think .90% daily is unsustainable? Bitcoin is going to be $27,500 per by Feb. 1st 2018.. Bit-connect is making hand over fist in revenue from the exchange and the rise of their own token alone.. Cryptocurrency is the future so I suggest any bussiness minded person, newbie or beginner in crypto currency should contact Mr Jesse Liam via ( jesseeliam44 @ gmail . com ) for his Auto-Trader software because it has made me thousands of dollar in just 3 weeks. Its free

  • Jim Brown

    We will never ‘pay-off’ the debt. We pay interest on the debt. Granted we have too much debt and were actually paying it down under Clinton. Then came the Bush tax cuts and we went right back to running deficits which add to the debt. We need to close some loop hgoles, no government interference in business. Eliminate all corporate welfare. Let the free market economy determine prices, winners and losers. No more oil depletion allowance, no more accelerated depreciation, investment tax credits, etc. No more price supports.