Henry David Thoreau

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Think times are tough now?  Wait till you see this article on tax rate increases of all types beginning in January of next year.

Investors Business Daily has done a good job of touching on some of the main tax increases scheduled for January 1, 2011. They include tax increases due to the expiration of some Bush tax cuts, as well as new ones passed through legislation in the last few years.

They affect individuals with respect to earned income, dividends, capital gains, and other tax return items.

They are on businesses with respect to depreciation schedules.

And no change has been made on the dreaded Alternative Minimum Tax, which continues to ensnare more and more people each and every year.

Virtually everyone is affected. Taxes are not just going up on the very, very rich.

The article is well worth the read.

Of course any economist will tell you that higher tax rates hurt the economy. They take away from the  money that could be circulated through the economy and create growth. They take away from the desire to work hard in order to create wealth. Wealth creation is one of the keys to a stronger economy. After all, have you ever seen a poor person higher someone?

So what is Washington trying to do?

I’m not sure but it does seem that they have no respect for the power of a free economy to allow facilitate better lives for the average person. Washington wishes to run everything through government. They have taken control over the health care and financial industry. They would have liked to do the same with the energy industry but have been stopped, at least for now. Their actions are all about the centralization of power, not about establishing the best public policies for the benefit of all.

So what to do given higher tax rates?

My own personal sense  is that we are close to having this entire federal system cave in, so I suspect major changes are close at hand which will change our reality in very profound ways, and thereby make these tax changes mush les important in the scheme of things.

Having said that, people will continue to adjust their lifestyles. They will spend less. They will try to create more of what they need through their own efforts, like home gardens. They will opt-out of the official economy, and this will feed on itself due to a continuing weakening economy.

Massive changes are coming our way, and these new taxes will both reflect those changes and act as a reason for those changes occurring. It doesn’t necessarily mean life will be worse, but it will be different.

Arm yourself with information. That will get you ready for all of the changes coming our way.