Mukhtar M. Ali, Marco Island
Contrary to the common belief that the federal deficit arises from government overspending, government assistance to individuals and businesses are primary contributors to the deficit.
For example, homeowners are assisted by allowing deductions for mortgage interest, churches for charitable contributions, municipal bondholders for interest income, millions of stockholders for reduced tax rates on capital gains and dividend incomes (95 percent of dividend incomes originate from S-corporations and are not taxed at the corporate level) and a number of other deductions, exclusions and adjustments.
According to the Internal Revenue Service data, in 2009, government assisted individuals through these deductions, exclusions and adjustments, for a total of $430 billion.
The IRS data also shows that in 2003, $285 billion of government assistance was provided to businesses by allowing deductions for depreciation for physical assets such as buildings, machineries and others.
Without counting numerous other government assistance received by countless businesses, including oil, gas and agra businesses, through direct subsidies, government has assisted individuals and businesses by at least $715 billion ($430 billion plus $285 billion) a year. Cutting these assistance by half, the national debt could be reduced by at least $3.5 trillion in 10 years.
Deficit reduction by cutting spending is a myth. Every spending cut results in less money to consumers, even job losses, which together curtail customer flow to businesses. As businesses lose customers, they cut more jobs and job losses continue to grow.
Reduction in workers means less money to the Treasury resulting in an increase in the deficit.