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Economic Reports is a series of picture
reports of threats to the economic future of families and their children, compared to
prior generations - - from incomes to debt to education quality to health care to
international trade balances to energy and national security. You are now at the brief
chapter on Taxation, since unacceptable trends in taxation is one of those serious threats
facing our young generation. Welcome. We hope your visit will find useful information to
help you and your loved ones. Knowledge is Power.
TAX DAY IS EVERY DAY
FOR 5 MONTHS EACH YEAR
That's 267% more months 'working for government' than it
used to be, as shown in the chart.
The government taxes when you earn it, taxes you when you save it, taxes you when
you invest it, taxes you when you spend it, and, when you die, they tax what's left over.
What did they leave out?
5.3 months working for taxes is 43% of a year. In 1776 Thomas Paine argued that if
a king demanded 50% in taxes, we wouldn't pay it. We are nearly there.
Who said the 'era of big government is over?'
- other charts below show the road traveled, but first a few questions -
Since we hear about tax cuts, are
Taxes going down?
Answer > April 2006 recorded the 2nd highest federal government tax collection in
And - In April 2012 the U.S. has the
highest corporate tax rate in the developed world,
a federal/state integrated rate of 39.2 percentc- compared to 25% OECD average.
And - spending by federal, state &
set another all-time high in 2010 - at $5.9 Trillion - 50% of national income.
- Protective tariffs were the principal source of revenue for our federal government from
its beginning in 1789 until the passage of the 16th Amendment, which created the federal
income tax, in 1913. Were our founding fathers wrong regarding tariff taxes instead of
- Is it fair that today's families, many requiring 2-wage earners compared to one per
family in past generations, must work on average 5 months (142 days) per year just to
cover federal, state & local government spending - - compared to but 1.4 months
several generations ago? Did our nation's founding fathers intend
that citizens work more and more and more to support government?
- Is it fair that federal income and social security taxes on individual incomes in 2000
fueled 82% of all federal revenue, compared to just a 51% share in 1950? That shift
certainly has not helped more mothers of young children stay at home, if they wish.
- Is it fair that part of the social security taxes paid by workers today is more than
needed for current retirees, yet the surplus difference promised to be set aside for
future retirees is siphoned-off and consumed for non-pension stuff as fast as it arrives
leaving nothing but non-marketable IOUs behind?
- Is it fair that a median income dual-earner family paid the highest,
inflation-adjusted taxes to federal & state/local governments in history?
- Is it fair that working families pay higher federal income taxes than did seniors
with the same income, in addition to already paying the highest social security tax rates
in history to support senior pensions?
- Is it fair that the typical American pays more in taxes than they do on food, shelter
and clothing combined! And that doesn't even include the "hidden taxes" on
products caused by government regulations - compared to senior generations. Is that
- Is it fair to workers that government still sucks in revenue faster than growth of
the general economy, with 1995-2000 the highest tax in-take in relation to the size of the
economy in peace-time history - - partly due to the largest tax increases in U.S.
history in 1991 and 1993?
- Is it fair that federal taxes increased 2.5 times faster than personal income 1995-
- Should each citizen carry 3 times more state & local government employees on
their back than before, with their higher job security and benefits?
- Why should government extract revenues faster than the economy generates them? Shouldn't
it take in lower tax ratios each year to prove federal, state and local governments are
improving their own productivity and efficiency?
- How about 2006? The federal government took in
13% more revenue than the prior year. That jump in revenue was the 2nd highest in 25
years. Who said the era of big government is over?
- In addition to paying more taxes, Americans spend 5.4 billion hours per year
complying with the federal tax code - - roughly the equivalent of 3 million people
working full-time. If it were employed in productive activity, the labor now devoted to
tax compliance would be worth $232 billion annually. The federal cost of hiring 93,000 IRS
employees is $6 billion. If all these people weren't fooling around with the tax code,
they could produce the entire annual output of the aircraft, trucking, auto, and
food-processing industries combined. Source: W. Williams, Professor
Economics, George Mason U, Imprimis August 2000.
- Government mandating that employers withhold taxes from workers is wrong, as it removes
power from citizens in controlling government spending.
- To put U.S. federal/state corporate tax rates in 2012 of 39.2% in
perspective, the average in the developed world (OECD) is only 25
percent. Our six major trading partners - - Canada (27.6%), Mexico (30%), the United
Kingdom, Japan, Germany (30%), and France (34%) - - have a lower rate. As a result,
capital and jobs will continue to flow overseas, rather than staying here to create jobs,
increase wages, fund pensions, invest in new business, or grow nest eggs.
- And still, federal, state & local government spending
continues to consume a larger and larger share of the total economic pie of $5.9 Trillion
in 2010 to nearly half national income, further reducing the private sector's share.
Who said 'the era of big government is over?'
Eight (8) color pictures below tell a lot. Since 'a picture is worth a thousand
MONTHS WE WORK FOR GOVERNMENT
(Note - to save time, read the full page before clicking referenced links)
- April 15 is one of those annual 'Fun Days', federal tax payment dead-line. As
expected this time of year we hear the following on the morning news: "the average
American now works 5.28 months per year to pay for federal and state/local
government spending (federal & state income taxes, social security & Medicare
taxes, excise tax, sales tax, home property taxes, gasoline taxes, utility franchise
taxes, etc., etc.)."
- 5.3 months equates to about 43% (160 days) of the year worked by the average citizen
to pay for government spending at all levels. This ratio, of months worked to pay
taxes, is similar the ratio of the nation's total economic pie today consumed by combined
federal + state/local government spending - being 43% of the total economic pie (measured
by national income).
- One could ask what part of the 5 months of work required to pay all taxes is attributed
to federal spending vs. state & local government spending? The answer would be about
3.2 months of work for federal and 2 months to support state & local government.
- Let's ask the question: If the average employed person must work 5 months, or 43%
of the year to pay for federal & state/local spending - how many months per year did
prior generations have to work to cover government? Was it less, or was it more? To answer
this, we know that Bureau of Economic Analysis data shows in the Grandfather
Government Spending Report and the Private Sector
History Report that today's government spending is about 43% of the nation's
economic pie (as measured by national income data); this compares to a 22% share so
consumed in 1947 and a 12% share so consumed before 1930. Restated, it could be
said the average American in the 1920s had to work 1.4 months per year to pay all
taxes (1.4 months being 12% of 12 months in a year), compared to working 5.1 months to
cover today's government spending. Stated another way, today's Americans must put in
267% more working time to cover federal, state and local government spending.
Since we just gave you the data, we repeat the above chart,
showing the average worker needed to work 1.4 months in 1928 to pay for federal plus
state/local government spending, compared to working 5.1 months today. This means today we
must work an extra four months each year to cover government spending, compared to before.
That's 267% more working time to cover federal, state & local government spending.
(Note: this chart is a representation of the ratios of months worked each
year, in relation to total government spending % national income trends - since in the end
all revenue to governments comes from citizens in the form of taxes on income or property,
excise & sales taxes and higher prices paid for goods & services to cover
corporate and import taxes).
- The above statistics help show how increased government spending ratios have weakened
many Americans, more so than ever before in our nation's history - - as families face
record low savings, record high debt, and fewer children with full-time-at-home moms to
assist their development.
- When spending ratios were lower, it took but one-wage-earner per average family - - not
just to make ends meet, but to increase family living standards, education quality, and
family savings - - and, therefore, more mothers had the choice of staying at home to help
raise their children in a responsible manner instead of leaving them to day-care by
others. Now, more families need 2 wage-earners per family, with a reduction of family
options for mother to stay at home as a full-time mother to little Johnny - - and, they
both must work 5.1 months per year for government. Additionally, as shown in the Family Income Report, real median family incomes are not better
today than 2 1/2 decades ago, personal savings, as a percentage of disposable
income, is lower than ever before, and personal consumer debt % disposable income is the
highest ratio in history. Further, the public education system is called the 'worst
quality in 35 years' and 'mediocre at best', despite record inflation-adjusted increases
in per-student spending, as documented in the Education Report.
And, today's federal debt ratios are twice what they were 2 decades ago, where 51% ($2.92
trillion) of all federal debt created in the nation's history was created in the 1990s - -
as shown in the Federal Government Debt Report , yet we are
not at war, except to some extent with ourselves. It could be better. It should be better.
It's our responsibility to make it better.
- Some of these taxes are to finance federal government spending, graphically shown in the
Federal Government Spending Report , which contains a
chart showing social spending growing 14 times faster than the economy. FICA taxes
are covered in the Social Security Report, showing 1,700%
higher than prior generations, as today's workers must support more seniors per worker
than ever before. Additionally, the State & Local
Government Report documents spending and employee counts growing many times faster
than the nation's economy and population - - which means more and more taxes to cover
these levels of government, too - - placing massive increased burdens on today's working
people, compared to prior generations - as today's workers must carry more state &
local government employees on each of their backs, in addition to more seniors, than ever
- So, after all of these years of so-called 'progress', we find ourselves working more
than twice as much each year just to pay taxes. (additionally, we also have to pay an
extra $3,300 per man, woman and child of 'hidden taxes' in the price of goods for
the cost of added regulations mandated to the private sector by large government, as shown
in the Regulation Cost Report.)
- Few can deny the above data (mostly from the Federal Bureau of Economic Analysis),
although some will blame class X vs. Y, or political group A vs. B. But, blame resolves
nothing, nor helps it to become better. If we truly care for families and the economic
future of their children, government spending ratios must be cut, including the debt on
their backs. Are there some who believe we should continue to require 5 months per year
working to pay for government, or maybe even increase this to say 8 months per year?
- How much more dramatic would the picture appear to more people if each received zero
take-home money for their work for the first 5 months of the year, and then finally
started receiving gross pay for the balance. That would make it clear and perhaps more
would stand up and demand corrective action. But, there may be some who think the current
status is just fine.
- This author wants action taken to reduce these spending ratios so when his grandchildren
enter the workforce they must not toil more than 1.4 months per year for government
spending - - instead of today's 5 months, nearly 3 times longer.
- According to the Washington, D. C. Tax Foundation's senior economist Arthur Hall, 1996
represented the highest inflation-adjusted taxes ($22,000) ever paid in history for a
median income dual-earner family - and, new records were set in 1997, 1998 and again
- According to Steve Forbes, as reported in the LBK Observer 7/20/99, "Since 1993
federal tax receipts have grown 52% faster than personal incomes and in 1998 80% faster.
Government greed is wrong."
TAXES INCREASE -
This chart shows a relative comparison of personal taxes (percent personal income) to
personal savings (percent disposable income).
The red curve on the chart is for personal taxes,
where the ratio of taxes to personal income increased from 1959 and soared in the latter
1990s the ratio soared to near 15% by 2000, followed by a 2002 tax cut. Taxes
increased 36% faster than personal income in this period until the 2002 cut.
The black line represents the portion of disposable income that was saved - the savings
ratio. Note the saving ratio rose steadily up to the early 1970s, which was the same
period of strong inflation-adjusted median family income growth, when most families were
supported by but one wage earner. Savings rates plummeted during the 1990s - - and by
2006 reached the lowest savings rate in history at negative 1.7% - - and that includes the
Great Depression period.
In 2000, income and social security taxes on individual incomes fueled an 82% share of
all federal revenue collected, compared to a 51% share in 1950 - - that's an increased
share of 60%. And, part of that increase was supposed to fund the social security trust
fund surplus for their future retirees, yet it was all siphoned-off and consumed on other
stuff as fast as it arrived - - leaving the trust fund with zero marketable assets. (this
is covered in the Trust Fund Report chapter, accessed
from the home page). Meanwhile, the share of federal revenue covered by corporate income
taxes and other sources declined from a 49% share in 1950 to an 18% share in 2000.
And - house hold debt ratios soared to historic
HOW OUR MONEY IS SPENT
we know from above that we work 5 months for government
- here's another view, compared to food, clothing, etc. -
This chart shows the 'consumer basket of goods and services'
used by the government to define the consumer cost of living index (CPI) - - with one
addition - - it adds government spending impacts shown by the red slice, and adjusts
the ratio of each of the original CPI components accordingly.
First, we notice from the chart that the red slice of the pie, 42% of the total pie,
is represented by that required to support all federal, state, and local government
Government is a real cost to each of us, just as food and housing are real costs to
each of us, and guess who pays for the cost of government? You guessed it, we all do - -
by direct and indirect (hidden) taxes, franchise fees, etc..
This 42% figure is from The Government Growth Report - - for
2002. The 2007 number is up to 43%.
This 42% for government, you will notice, is more than the sum of the food,
housing and clothing components in the chart which total 37%. Many
will say one needs food & housing more than government - - especially more than large
We know government's taxes and regulations impact family cost of living and inflation,
just as any other item faced by individuals and families.
- We know our federal income taxes have not gone down, nor sales taxes, nor
property taxes, nor social security taxes, nor Medicare taxes, nor excise taxes, nor
utility & telephone taxes, nor - - (you name the ones I left off). Have you ever heard
of a tax going down, and staying down? If they go up, which they do, or if they slip in
more taxes (or reduce deductions) at federal, state, or local government levels, which
they do - - that is added cost to is added costs to families just as food and clothing,
which also is subject to inflation that should be in the cost of living index so
individuals and families can better understand total inflation Yet - - taxes are not
included in the CPI computation, yet the cost of government is the largest spending
component in the economy. Question: Why Not?- - as reported in the Inflation Report.
- we also know government tax revenue at all levels has been increasing at a faster rate
than both GDP and personal incomes. And, from where does that revenue originate?
Answer: It all comes from individuals and families, because they pay all costs of
government, in one way or another, both direct and indirect.
- and, we know federal government spending has increased faster than general CPI
inflation and even faster than growth of the entire economy. See the Federal Government Spending Report.
- and, we know state and local government continues to increase their employee
headcount faster than growth of the general population - - as shown in the State & Local Government Spending Report. What percentage
of households have experienced a reduction each year in their property taxes? Answer:
that's not on anyone's radar screen. How many have seen their property taxes rise?
Everyone! That's inflation, and must be included in the CPI.
- and, we know government employees don't just sit around doing nothing, they write more
regulations each year, which increases compliance costs impacting families, as shown
in the Regulation Compliance Cost Report. This component is
not shown in the 42% slice of the above pie chart.
GUESS WHAT? - the above chart proves the best way to reduce a family's cost of
living is to reduce TOTAL taxes, which means reduce the share of the economy controlled by
government at all levels.
WHY, why, why - - are so few demanding spending & tax cuts at
all levels of government?
Is it because nobody believes it will happen, as shown by record low voter turnout?
IMPACT OF TAX
COMPARED TO PAST
|Above we have been looking at combined federal and state/local spending, and the
number of months of work required on average to pay for same.
Before we leave this Tax
Report, let's repeat 2 charts shown in the Family Income Report.
The first chart shows the change over the years in federal tax rates and social
security (FICA) tax rates are covered in the 2nd chart.
| Federal Tax Rates up 1,250% for Families of 4
chart compares the federal income tax rate for 1994 with that of 1948 for a family of 4 at
median income level. (data: Family Research Council, reported October 1996
by presidential candidate Steve Forbes, Impris)
The tax rate has jumped from 2% to 25% - - an
increase in tax rates of 1,250%.
Primarily to fund social 'entitlement' programs of consumption, which increased 14
times faster than did the economy in this period. (see Federal
Which reduced savings & productivity growth rates by 70% in the past 40 years. This
is one of the many negative impacts on family living
standards, compared to prior generations.
This chart's 1948 data point for income tax was levied on individuals rather than
couples. Now the married are penalized with higher rates - - amounting to $28 Billion.
"Between 1995 and 1998, GDP rose by $1213 billion or 16.7%. Federal revenue rose
by $390 billion, or 26.9%. Stated differently, extra federal taxes took 32% of the total
growth in GDP between 1995 and 1998. This is an extraordinary revenue surge, which has
led federal tax collections to their highest share of GDP in history. In the last
three years personal income taxes have surged 43 percent, two and one half times as fast
as personal income." Dr. Lawrence B. Lindsey, Arthur F. Burns Chair in
Economics, The American Enterprise Institute before the Senate Budget Committee 1/20/99.
How about 2006? The federal government took in
13% more revenue than the prior year. That jump in revenue was the 2nd highest in 25
years. Who said the era of big government is over? J. Sahadi, CNN on July 11, 2006
And - portion of population required to file federal tax
returns increased 16 times in my generation
"In 1939, 26 years after the Sixteenth Amendment was adopted, only 5% of the
population, counting both taxpayers and their dependents, was required to file (federal
tax) returns. Today, more than 80% of the population is under the income tax." (Source: The History of the 16th Amendment by W. Cleon Skousen at
From 5% of the population to 80% required to file tax returns is an increase of 16
times during my generation.
The following chart shows additional tax rate impacts
Escalating Impacts Financing the Senior
Generation 5 times larger than before
This chart shows the increase in social security & Medicare tax rates on employee
incomes - - today vs. 1950. - see the Grandfather Social Security
Such tax rates grew from a 2.96% rate on employee incomes to a 15.3% tax rate - 5 TIMES LARGER than today's seniors were paying during their
working days in the 1950s. (note: these tax rates are calculated on employee incomes -
half paid by employee and half by the employer. If today's tax rates were the same as in
1950 not only would employees take home another 6% but employers could give employees an
additional 6% raise on top of that - - meaning families would have an extra 12% to save
for their future).
This picture understates the drain on families compared to the
past, since the maximum salary taxed has escalated from $3,000 of earnings in
1950 to $84,000 in earnings today - causing tax dollars paid to rise more than 2,100%,
- - a trillion dollars of which was in surplus to that needed to cover senior pensions,
and all that surplus was siphoned off for non pension spending by the general government -
- meaning this extra FICA tax was nothing more than a hidden extra income tax over and
above marginal income tax rates.
Despite paying a dramatically higher share of their income than did seniors, today's
young, when they retire, will not receive anywhere near the benefits & purchasing
power of today's seniors.
There is zero doubt families have lower living standards and savings as a result of
this imbalance. (for a chart on savings trends, now at an all-time low, see the section in
the Family Income Report on savings).
And, just before family incomes ceased to grow, there were two major impacts on
families: in 1968 Medicare was born and in 1972 Social Security pensions became
inflation-protected - - both programs imposed significant added loads on family NET
incomes which, unlike seniors, were not inflation protected or given near-free health
Not only must working people pay a larger percentage of their incomes than prior
generations to support today's seniors, but they pay higher federal income taxes than
today's seniors earning the same amount. Dr. Lester Thurow, MIT Economist, reports that a
couple with one child earning $30,000 pays $2,449 in federal income taxes, while an
elderly couple needing to support only two with an equal income of $30,000 pays only $791
in taxes. Should a working family pay more taxes than seniors earning the same income?
As we saw in the Family Income Report that
inflation-adjusted median family incomes have not increased in 2 ½ decades. Some
will say, how can this be? MIT economist Lester Thurow, 1996, ("the future of
capitalism, pg. 41): "If per capita incomes are up yet wages are down, someone has
to be getting all that extra income. That someone is the elderly. The share of the
elderly has doubled in the last 2 decades. It is they who are the big economic
winners." The dramatic increase in family tax rates, compared to those paid by
today's retirees, has resulted in a whopping income transfer from working families to
seniors - - and, a negative impact on the capacity of families capacity to save, and
invest in higher quality education to better prepare their children to meet the soaring
competitive pressures of the global market-place. See the Grandfather
Social Security Report and the Grandfather Education
TOP PERSONAL TAX RATES
The left chart shows a recent history of top personal tax rates.
In 1981, at the beginning of the Reagan Era (see Reagan Era
Report), the top personal tax rate was cut from 70% to 50%. Another cut occurred in
1986, as the top rate was reduced to 28%. That means 1986 tax rates were a whopping 60%
less than 1979's.
But, in 1991 and again in 1993, tax rates were increased. A combined increase of 41%
- - each the largest in history. Note from the chart that the tax increases 1991 &1993
combined to cancel about half the 1986 tax cut.
Some hated tax cuts, claiming only the rich benefit - which is but a smoke screen for
reality - - "Most studies find the share of tax income generated by the
highest-income Americans rose after both the 1981 and 1986 tax cuts." (The
Economist, pg. 75, 1/24/98).
'Martin Feldstein of the National Bureau of Economic Research showed that the taxable
income of those at the top fell after the 1993 tax hike, while those whose tax rates did
not go up rose.'(above Economist article). This shows tax increases may more negatively
impact the non-rich, than the rich, while tax cuts cause the wealthy to pay a higher share
of total tax revenue - - indicating political rhetoric to the contrary may be political
'smoke' for other agendas rather than consideration of the average American.
Who Pays - per the tax code ??
The U.S. tax code is a so-called progressive system, calling for those who
have the highest income to provide most of the taxes the government collects, not only
because they have the highest income, but also because they pay a much higher percentage
of that income.
As a result, the top 1% of taxpayers by income pay roughly 36% of all
income taxes paid. The top 5% of taxpayers pay 57% of all taxes paid. The top 10% pay 68%
of all taxes paid.
So the small group of the wealthiest 5% of taxpayers will pay more than
half of the taxpayers cost of the rescue efforts.
Stepping down from the top 5% echelon, taxpayers who rank in the top half
of taxpayers by income, pay virtually all individual income taxes collected. Taxpayers in
this group pay 97% of all income taxes.
That leaves half of taxpayers paying just 3% of the total, to say nothing
of the many workers who pay no income taxes at all.
Even that is only part of the equation. Individual income taxes account
for only about 40% of the governments tax revenue. Payroll taxes paid by
corporations, corporate income taxes, and estate and gift taxes, account for most of the
rest, and that also tends to come mostly from the very wealthy. So half of taxpayers pay
what, maybe 1% of the countrys total tax revenues?
A PENALTY TO BE MARRIED
According to the Congressional Budget Office, in 1996 43% of couples were penalized
by tax laws for being married, compared to had they been un-married. This means they paid
an extra $28 billion in taxes that year due to the marriage-penalty - - money that
that could have been used to improve family finances by reducing debt and increasing
savings, plus providing more funds to enhance choices for improving their children's
education quality. (data source: The Economist, 18 Oct. 1997, pg. 29). According
to the Treasury Dept. November 1999
the ratio has jumped to 48% of all joint filers paying a marriage penalty,
representing 25 million couples paying an average marriage penalty tax of $1,131 per
The marriage penalty results mainly from steeply progressive tax rates. In effect, the
lower-paid spouse is taxed at the higher- paid spouse's marginal tax rate. Other
provisions of the Tax Code that also give rise to a marriage penalty are the standard
deduction and the Earned Income Tax Credit (EITC). It is estimated that more than 60
different provisions of the Tax Code cause tax liability to vary with marital status.The Family Income Report proves that
the earnings of full-time working males has declined, forcing more mothers into the
workforce - - which is a negative for family values - - and now we see that government
capitalizes on that event via an extra $28 billion in revenue siphoned from these
Is the government trying to penalize family formation and marriage? Is that fair?
(NOTE - although repeal, over time, is in a new tax bill, said legislation is facing many
THE TAX TAKE FROM THE ECONOMY BY STATE
& LOCAL GOVERNMENTS
The chart at the left shows the percentage of the economy consumed by state & local
This is the sum of property taxes, state personal & corporate income taxes, sales
taxes and other tax-charges (revenues from federal grants are excluded).
If state & local taxes had not increased faster than the size of the economy in the
past 50 years then the right bar on this chart would be the same height as the left bar.
But the chart clearly shows that as such taxes used to be 5.9% of the economy (left
bar), they are now 16.1% of the economy (right bar).
This means the 'tax take' of state and local governments increased 275% faster than
growth of the entire economy.
This reduced the effective share remaining to the private sector, and reduced the share
of family income power, compared to prior generations.
Just as we all know each citizen today carries on his back more senior citizens than
before, each also carries on their back more state and local government employees than
A major reason for this state & local tax increase, from 5.9% of national income
to a 16.2% ratio, is because today citizens carry on their back 3 times more state
& local government employees than before, because their head-counts increased many
times faster than general population growth. If today's government employee ratio was as
in the past, there would be 11.3 million fewer government employees than there are.
According to Economy.com in March 2003 - since 1995 property taxes nationwide
have jumped 48%, thats 30% higher than inflation.
(for proof and more charts see the Grandfather State &
Local Government Spending Report)
Gasoline Taxes - - as of 2003, the federal
government tax on gasoline was 18.4 cents/gallon - - state tax averaged an additional 22
cents/gallon. Total = 40 cents per gallon. When gasoline cost $1.20 per gallon this tax
equates to a tax rate of 33%. For a $1.60 per gallon price this tax equates to 25%
taxation. In the state of Florida, for example, a gallon of gas is taxed as follows >
federal tax 18.4 cents, state tax 14.3 cents and county tax 7 cents - - total 39.7 cents.
LONGER TO FILL OUR YOUR TAX RETURN - -
lost productivity for everybody
Speaking of the Regulatory Compliance Cost Report, here is a perfect
example of how government mandates REDUCES PRODUCTIVITY for nearly every citizen > the huge costs of complying with the tax code. Compliance costs in terms of
time have skyrocketed from an average of 17 hours and 7 minutes fifteen years ago to 28
hours and 30 minutes today. Lost productivity is in the billions of hours. The cost in
dollars in 2005 was about $200 billion.
HIDDEN TAXES - an EXAMPLE OF A NEW (hidden)TAX
INDEPENDENTLY BY ANOTHER AGENCY
Government continues to expand its power of extracting resources from the public,
James Glassman of the American Enterprise Institute and the WASHINGTON POST has a knack
for spotting government power grabs, and exposing them for what they are. In his column
(December 2, 1997) he discusses a subtle telephone tax imposed on consumers through
bureaucratic edict by the FCC. The rationale for the new fee is that revenue is needed to
hook up the nation's classrooms to the Internet, at a time, notes Glassman, when students
"can barely read the volumes of Mark Twain and Shakespeare already in the school
library." Glassman's article can be read at: http://www.washingtonpost.com/wp-srv/WPlate/1997-12/02/014l-120297-idx.html
This is another example of big government, outside local school boards, throwing
more money at the education system, which now produces the lowest quality in relation to
per student spending in decades with piles of evidence that education quality is inversely
proportional to spending - - as proven in the Grandfather
Education Report. Many teachers, after reading this education report, have written
that computers shoved into schools significantly dilute teacher capacities to get the
education process back to the basics of reading, writing and math - - closer to what it
was in prior generations. Additionally, they point out that teachers are not educated on
computers, and most equipment is obsolete as fast as it arrives. Schools should be
concentrating on the basics, not being forced by those above who dilute their own thinking
by believing that computers can make up for the huge school quality deficit. And, this new
tax is another example of the transfer of local school
board power to higher levels of government under the guise of 'helping education'
while increasing power above. Computer decisions should be left to the local school
boards, the closest to teachers and parents. Our president recently said he needed
volunteers to teach kids to read, a clear indictment of the current system in need of
massive overhaul - - and de-centralization.
LET'S GET ONE THING STRAIGHT,
THERE HAS NOT BEEN A BUDGET SURPLUS IN RECENT YEARS!
Because we know total debt increased each year to a
despite the highest percentage tax revenue intake in peace-time history
POLITICIANS ARE NOT LEVELING WITH US!
IF WE EVER SEE A TRUE BUDGET SURPLUS
IT SHOULD BE RETURNED VIA TAX RATE CUTS FOR ALL CITIZENS
because history shows we cannot trust government to refrain from
siphoning off even trust fund surpluses and spending on other stuff, while proposing new
- Some say the budget is finally balanced with even a 'surplus', although they are not
counting the large imbalances in the off-budget categories like the trust funds. In any
case, the politics of what to do with a possible so-called 'on-budget surplus' will be
batted about. Already 'political-speak' discussions are polarizing along the lines of
spend it on more social things like education, child care, prescription drugs, etc. vs.
using it only for paying down debt and tax cuts vs. use all surplus to 'fix' social
- History has shown surpluses have always been spent, by 'hook or crook.' A big example is
that all incoming surpluses to the trust funds over the years have been spent 'off budget'
on non pension things, and not accounted for in the deficit calculation - - and such
caused the issuance of IOUs further driving up federal debt and threatening the social
security system down-stream. This is proven by the fact federal debt rises much faster
than is claimed by deficit numbers - according to U.S. Treasury figures. See the Federal Debt Report for the current status vs. debt history.
- The Budget Deficit-surplus Report covers that
topic in detail, As an example: 'Some political leaders brag to the general
public "we ran a $70 billion budget surplus in 1998." Also, they say they want
to 'save social security'. Listening to such rhetoric some might think the federal
government has cut general spending so as to produce surpluses, and thereby save social
security. But, that's 'smoke & mirror' - since they did not tell you they
siphoned-off $190 billion from the trust funds to achieve that 'accounting gimmick',
and spent it all on non-pension stuff - plus they ran up the debt another $120 billion.
Last year the general government siphoned-off $136 billion from the social security trust
fund plus $87 billion out of the federal employees pension trust and another $40 billion
from the federal hospital trust - a total of $263 billion - - every penny spent on
non-pension things. Had we not consumed that $263 billion on non-pension spending the 1998
deficit would have been $263 billion higher than stated - - all of which means the general
government budget ran a deficit of $193 billion compared to had we not raided those
trusts, not a $70 billion surplus we claimed to you.'
- Federal tax collections as a share of the economy were the highest in history
last year. Sure the economy has expanded lately, but why should government's tax revenue
expand at a faster rate than does the economy - - which means government is benefiting
more from an expanded economy than the private sector. Further, we know this so-called
'surplus' is created by a combination of reduced defense spending ratios (which cannot go
much lower) plus record revenues as a share of the economy created by the tax hikes of
1991 and 1993 - - not from a reduction in social spending ratios - - PLUS, they are
counting trust fund surpluses as if they belonged to the general government. See the Trust Fund Report, which shows Fiscal Year
2000 at another all-time record debt and a record siphoned from trust funds.
- It would be my preference concerning use of any budget surplus - never to support
general spending, but to reduce debt by first retiring debt to the social security (and
other) trust funds. This would mean stop any further siphon/borrowing of incoming trust
fund surpluses plus paying off all federal debt now resting in the trust funds - by using
'on-budget' surpluses to buy-back and tear-up the non-marketable IOUs which were deployed
to paper over the past surpluses siphoned off from the trusts and spent. The cash flowing
back to the trusts, in exchange for destroyed IOUs, should be invested only in securities
held by the public on the open market as counted by the Federal Reserve (T-Bonds,
T-Notes). This action would both work down 'off budget' deficits plus reduce federal debt
- - and cause those surplus funds to be arms-length from the federal government and future
spending temptations - - and, when the trust fund's outflows exceed inflows said open
market securities could be sold to meet cash needs of the trust without requiring more
issuance of federal debt as would be the case with old IOUs.
Perhaps even that is not fool-proof to prevent surpluses being spent, since history
shows government is incapable of holding on to any 'surplus' without somehow, sooner or
later figuring out how to spend it - - and, therefore, the only way to prevent its
spending is to remove all 'surplus' from government hands by returning
every surplus penny to citizens via tax cuts.
- From this report can be seen the significant adverse trends in taxation of American
working people, compared to recent prior generations. This is due to the fact that
government spending has increased at much faster rates of growth than has the total
economy. In other words, government spending now controls and consumes approximately 4 times more of the nation's economic pie, than before. The
tax drain to finance this excess spending negatively impacts living standards, family incomes, savings and debt burdens, compared to the
past. In addition to stagnant family incomes with fewer families having the option of not
being forced into the workforce with her children receiving day care by non-mothers, we
have seen the explosion of social spending resulting in a decline in education quality and social
security/Medicare equality for future generations. America does not just need an
over-haul of its taxation system. It needs major reductions in the share of our economy
now dependent upon government spending, at federal and
- As stated by Nobel Laureate Economist Milton Friedman
(in his book, 'Bright Promises, Dismal Performance'): "I favor tax cuts. Our
basic long-term need is to stop the explosive growth in government spending. I am
persuaded by the experience of decades that the only effective way to do so is limit
government revenue, by cutting taxes - - at any time for any excuse in any way. The
reason is that government will spend whatever the tax system raises plus more - - but not
an indefinite amount more - - as the out-cry for deficit spending will limit this. The
most effective way to force each of us to economize is to reduce our income. The restraint
is less rigid on government, but it is there and seems to be the only one we have."
- Following Dr. Friedman's clear logic, tax rates need to be
cut much further to 'reduce revenue' - - including elimination of the marriage penalty,
which should be a politically feasible objective to easily accomplish - and, such would
not only improve family-marriage fairness & finances and more school
choice toward improvement of education quality, but
also reduce revenues to the government which will place pressure to squeeze down government spending ratios - - one of the prime needs
identified by the Grandfather Economic Report series. The Reagan Era
Report shows that family incomes rose following tax cuts.
- In closing this Tax Report page: There is a massive, unfair tax inequality
imposed on working families today, compared to the past. This author wants action taken to
reduce these spending and family tax ratios, so when his grandchildren enter the workforce
they must not toil more than 1.4 months per year for government spending - - instead of
today's 5 months, which is nearly 4 times longer. In addition, the author wants to
see the current $20,000 of federal debt on the shoulders of each man, woman and child
amortized to zero.
BOTTOM LINE SUMMARY of ACTION
to IMPROVE FAMILY INCOMES and CONTROL
- It's not taxes, it's the spending Stupid!. Therefore, reduce government spending
ratios at both the federal and state & local level from today's near 40% of
national income toward the 22% ratios of spending to national income achieved before and
right after World War II. (see charts) Those claiming ratios
came down a bit in recent years are not counting all the spending - - but for sure they
are not comparing same to the above target period. The only politically effective means of
accomplishing this is to reduce all tax rates - - starting with elimination of the
marriage penalty tax, death (estate) taxes, and taxes on pensions. Recognizing
historically low rates of savings, consideration should be given to reduce tax rates even
further on all savings - - both ordinary and capital gains. Targeting tax reduction to
specific groups for social engineering purposes must be discouraged - - taxes should be
proportionally reduced for those who now pay. In addition, government must stop siphoning
off surpluses from any of the trust funds - - the social security trust and all the other
trust funds - - trust should be trust - - keep your fingers out.
- Since history has shown that all revenue will be consumed by more spending, tax cuts
are the only remedy to prevent said spending. However, we know that the very basis of
political power is the capacity to spend, and politicians will resist with 'full court
presses' any tax reduction - - throwing up smoke screens like children will not get
schooling, or seniors will be thrown in the street and/or deficits will return. But tax
cuts are the only way to cause spending reductions. Therefore, more citizens must feel the
real 'pain' of the taxes they pay, and this can only happen when they have to write their
own tax checks, instead of having it withheld from their pay checks, out of sight. This
calls for eliminating withholding taxes and pay employees gross instead of net pay. This
will also stimulate the economy because employers can cease the cost of being the
government's tax collector. Now, politicians will resist with all means possible
eliminating of the withholding tax, because they know that once workers take home that pay
(instead of having it withheld) they will be up in arms at tax payment day when they have
to write the check - - and will therefore start placing real 'tax cut' pressure on their
elected officials, and those officials are scared of that. They want it withheld in quiet
- - they just want the money with no pressure. Eliminate withholding taxes would be truly
an all-American event, giving the power of spending back to those who earn it in the first
- And - - if there ever is a real surplus we know Congress will find all ways possible
to spend it on something. We know they are not going to just allow cash to sit around in a
cookie jar without digging in with their fingers. Therefore, should there be any 'budget
surplus' all should be returned to the private sector via across the board reductions in
tax rates, without strings and without showing preference to any segment of society
(such as favoring credits for families using daycare for their kids over parents who
sacrifice so mother can be full-time with her kids so as not to farm them out to daycare
by others, etc.).
- To be fair and treat every citizen equally, all tax reductions should be an equal
reduction in tax rates across the board.
- We should never allow the following statement to stand: "if we reduce taxes then
budget deficits might return." Our answer should always be that if they reduce taxes
and reduce spending there will be no deficits - - it's up to them to cut spending. We
will always remember what Nobel laureate Milton Friedman
said, "I would rather have one trillion dollars of spending with a half trillion
dollars of deficit to finance that, than to have two trillion of spending with zero
deficit." Now that's wisdom, right on!!
- Restructure the education delivery system that gives parents more choice to select any
school (private or public) - - to seek significantly higher levels of education quality
(especially in math and hard sciences), than is now provided by the current system. Only
with significantly higher education quality can today's young people effectively improve
their own family incomes, while facing accelerating competition for said income from the
global market place.
From here, we offer a few suggestions:
Read a Powerful History of U.S. Taxation - it's
easy to follow and will open your eyes
or, Return to the HOME PAGE of the
Grandfather Economic Report,
to review other economic trends facing families and youth, compared to prior generations.
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