Friday, May 06, 2011

It's the spending, stupid!

The USA Today's lead story, Americans pay less taxes, demonstrates how percentages and statistics can distort a picture and lead to the wrong conclusions.

The article itself is pretty balanced in terms of presenting the picture, but how it will be used to justify more taxes is the problem. From the article:

The total tax burden — for all federal, state and local taxes — dropped to 23.6% of income in the first quarter, according to Bureau of Economic Analysis data.

By contrast, individuals spent roughly 27% of income on taxes in the 1970s, 1980s and the 1990s — a rate that would mean $500 billion of extra taxes annually today, one-third of the estimated $1.5 trillion federal deficit this year.

"See," the liberals and some politicians will say, "this means we need to raise taxes. The government would have another $500 billion if we just brought taxes up to what they were before."

But that's the problem with such analysis of tax rates - data taken out of context, or without examining WHY the percentages and data exist, mean you come to wrong conclusions.

The article does explain that the percent of income is a reflection of lower taxes, including a recent reduction in Social Security taxes, and a weak economy. But it doesn't explain how much is attributed to each reason.

Obviously, if people are earning less, they're paying less in taxes. And cutting the amount of Social Security tax people pay, while a good idea and one I like, means that Social Security (which is broke already) will certainly run out of funds even sooner than predicted. Social Security is a ponzi scheme that, if done by anyone but the government, would land a person in jail. But that's another post for another time.

Then there is this quote:

"We have a 1950s level of taxation and a 21st-century-sized government," says Robert Bixby, executive director of the Concord Coalition, a deficit-reduction advocacy group.

Hmmm ... If you start from the premise that our current size of government needs to be maintained, your only conclusion is that taxes must go up to continue it. While government has grown, there is no 'evidence' that a 21st-century-sized government is necessary or even Constitutional.

In fact, since the 1950's, we've expanded government exponentially - far beyond what the Constitution authorizes. For instance, there is no authority in the Constitution for Congress to regulate education, yet we have a U.S. Department of Education, a cabinet-level department.

The Department of Education wasn't established until 1979. In 1980, its annual appropriation was $14 billion. In 2009, it was $65 billion. That's a 364% increase in 30 years. Did your wages go up that much??? And if we're really interested in the discrepancy between revenue and spending, shouldn't we first start with cutting spending before confiscating more money from citizens? We could eliminate the Department of Education and get to 13% of the $500 billion figure cited.

The article also includes this quote:

The fall in taxes is almost entirely caused by a weak economy rather than lower rates, says Curtis Dubay of the conservative Heritage Foundation. "It's easy to draw the wrong conclusion," he says.

And Dubay is correct. The problem isn't the revenue, it's the spending, as the last paragraph of the article explains:

Government spent at an annual rate of $18,086 per person in the first quarter. That's up from $13,552 in 2001, adjusted for inflation. The difference between individual taxes and spending comes from corporate taxes, user fees and borrowing.

Corporate taxes are passed along to the individual as an inclusion in the price paid, so individuals 'pay' those taxes as well. According to the analysis, "Individuals paid taxes at an annual rate of $10,549 per person in the first quarter." So government is spending $7,537 more per person than it's getting and corporate taxes and fees don't make up that much of the difference, which is why our government is borrowing to the point that they want to raise the debit limit.

And rather than reducing the spending, they keep wanting to take more of our money.

I'll say it again: we have a spending problem - not a revenue problem, as the majority of Americans are realizing.

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