Happy Tax Day!

Let me position myself on my soapbox.

Aaron and I live in Kansas. We both work in Missouri. Clarification: we both work in Kansas City, Missouri. We pay income tax to the U.S., Kansas, Missouri, and Kansas City, MO. Why Kansas City? Well, Kansas City has this brilliant earnings tax on 1% of income earned in the city limits...which applies to virtually all of our income. Nothing encourages businesses to locate within your city like an extra tax on employees! The liberal city council is left dumb-founded when companies choose to set up shop West of the state line in Overland Park, Olathe, or Kansas City, KS.

In addition to "tax season", there are plenty of other reasons why taxes are on my mind:

•  The Bush tax cuts expire this year. Not only does that mean increased income taxes, but also increased capital gains and dividend taxes. Due to the expiration of these tax cuts, I am bullish on the stock market in 2010. I firmly believe that corporations will do everything in their power to recognize revenue in 2010 rather than 2011, causing corporate earnings to be strong in 2010 and disappointing in 2011. That said, I am bearish on the 2011 market.
• Paul Volcker suggested implementing a VAT tax, and now Nancy Pelosi is chomping at the bit. What a fantastic opportunity for the democrats! A former Fed Chief that is respected by both the Left and the Right says a new tax is a good idea! Yippee!

In the past couple of years, I have become intrigued by the impact of fiscal policy on the economy, namely the affect of tax policy. Doesn't it sound intriguing to you, too? No? Unbelievable! I could bore you with the details of supply-side economics and the Laffer Curve, but I'll spare you this time.

Basically, we're at a particularly troubling time in American history given the level of debt that our government has taken on in conjunction with decreasing tax receipts. Check out the US Debt Clock if you need a refresher on just how bad things are. Don't visit the site if you're feeling nauseous, though. Not only will the 89.4% Debt to GDP ratio make you sick, but the numbers are moving so fast that you'll think you're on a carnival ride.

To be fair, I don't think the VAT is a horrible idea if done in conjunction of a repeal of income taxes. However, that is not the principle being tossed around. No, the VAT would be applied in addition to rising income tax rates, which would essentially make the U.S. look more like Europe. What is astounding is that proponents are okay with that! Don't get me wrong, I love (to visit) Europe, but there is a reason why I have not desire to live there, and for the life of me, I can't figure out why our nation is trying to emulate Europe, from tax codes to healthcare. Our economy has kicked the ass of every European economy in modern history.

Granted, we do need to find a way to begin closing the gap on the deficit - or at least slow its growth, and inevitably, that will mean raising taxes in some form. On the other hand, something tells me that giving politicians more of our money to play with won't help at all. In fact, it probably just means more entitlement programs and bigger government. "Thinking a VAT is going to cure the deficit is like giving an alcoholic the keys to a liquor store," said Daniel Mitchell of the Cato Institute. Until Washington gets spending under control, there is no hope for the deficit.

Happy Tax Day!