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.