No Taxes for One Year...

Let’s say, in a crazy attempt to jump start the economy, the government, in all their infinite wisdom, waived federal taxes for one fiscal year.

For bad and good, what would be some of the consequences?

Well the national debt would skyrocket.

Well, for one thing, there would probably be a huge outcry the next year, when everyone’s income drops enormously from the year before (the no-tax year). Nothing like giving people something and then taking it away to make them miss it all the more.

We’d be subjected to even more obnoxious versions of the “come spend your tax rebate money with us!” commercials.

H&R Block would shut down or come close to it. Accountants would take an enormous hit in employment. Peddlers of tax preparation software would go belly-up.

If the federal government didn’t borrow to cover the money it pays to the states, states and smaller government units would raise their income and other taxes to replace the lost federal revenue.

And of course they wouldn’t want to reduce those taxes once the federal taxes come back. :smiley:

The IRS would probably furlough what 30,000-40,000 employees nationwide until the tax load comes back.

Maybe that’s a good thing H&R block would go belly up. I’m still thinking income would need to be accounted for, and state tax wouldn’t go away. Earners would still need to figure out what they owe SS and other income based tax. So there would still be some revenue and job security.

How much do states depend on government funds to stay afloat for a year?

As for the national debt… does another trillion or so really make that much more difference? :wink:

Actually, it’s more like $2.6 trillion , so halting federal tax collections for a year would add something over 25% to the national debt .

I love how the revenue soars during Clinton’s years in office, then as soon as Bush arrived, it tanked. Love in the sense that I love it when my bills arrive in the mail.

With the national debt increasing the value of the dollar would drop. That would make the price of crude oil climb.

Big time.

Are you planning on giving the armed forces, the FBI, the CIA, the Border Patrol, and the Federal Bureau of Prisons a year of unpaid leave? On the plus side, unlike most countries, the United States probably wouldn’t see its government overthrown just because it told all the people with guns that they’re not getting paid. But I’d guess most of them would find other jobs and it would be real hard to get them to take their old jobs back a year later. Which would be bad because I’m guessing there would be a lot problems that you’d want them to start fixing.

On the plus side, stopping social security and medicare for a year would probably drastically reduce our nation’s senior population. So when we restarted them a year later, the expenses would have been reduced.

No I think he wants the Fed to just borrow the entire budget for a year.

I don’t think it would make much of a difference to tax payers. I paid twice as much for social security and medicaid than I did federal taxes, and those two wouldn’t be going away.

I’m self-employed, so I’m paying a ton toward FICA as well as the rest of my income tax. If I break into the next tax bracket this year, I could be throwing in as much as 42% of my income.

That’s a lot of scratch.

It’s interesting to see these responses, because it helps reveal a lot of the intricacies of how our government works at the financial level, how that gets dissipated, and how we eventually end up spending it as a nation. It been obvious for decades we’ve been spending much more than we have (indeed, we have to borrow trillions). So, I’m not really proposing anything more than this thought experiment for the interesting conclusions it may point to.

Let’s refine the OP a little. If federal didn’t collect for a year, that doesn’t mean the money wouldn’t exist or help the nation. Is there something smart we, as a nation, could do with that money to boost our economy or even help reduce our national debt? Or would we just end up creating more problems as we try and mitigate others?

It’s a myth that the government “always” wastes money and private citizens “always” spend it in a wiser fashion. Which is a better investment in the longterm growth of the economy; sending a kid to public school for a year or buying a widescreen TV? Assuming the program was a good idea in the first place, the government is often the entity most capable of getting it organized efficiently. (How do you think World War II would have worked if everyone had to obtain their own weapons and equipment and figure out where to go on their own?)