"Americans this year will spend more
on taxes than on clothing, food, and shelter combined."
Tax Freedom Day: Real or Imagined?
by Doug Bandow
April 8, 2010
Doug Bandow is a senior fellow at the Cato Institute. A former special
assistant to President Reagan, he is the author of Beyond Good
Intentions: A Biblical View of Politics (Crossway).
Americans are about to finish paying taxes this year. Kind of. Tax
Freedom Day comes on April 9 in 2010, but it's an artificial freedom.
Massive borrowing this year -- the federal deficit is expected to run
about $1.6 trillion -- guarantees future tax hikes. And just wait until
the real cost of health care "reform" kicks in. The sky will be
the limit for taxes.
Not that the president is worried. During a recent question and answer
session, a worker at a battery technology firm observed that we were
"overtaxed as it is." President Barack Obama appeared to
disagree. I say appeared, because after denouncing
"misinformation" and "misapprehensions," he spent
more than 17 minutes talking about just about every fiscal subject except
whether we are overtaxed.
Tax Freedom Day, when we finally stop paying for government, comes a day
later this year than last, but about two weeks earlier than in 2007. We
still are devoting more than a third of our lives to working for Uncle
Sam, but in relative terms things seem to be a lot better than just a
couple years ago.
If only it were so.
The relief is temporary. The Tax Foundation, which measures TFD,
points out that "[t]he recession has reduced tax collections even
faster than it has reduced income" and that legislators "have
enacted large but temporary income tax cuts for 2009 and 2010, just as
President Bush did in 2008." Moreover, the estate tax and "the
so-called PEP and Pease provisions of the income tax" were repealed
in 2010 as part of previous legislation.
Even as it is, Americans this year will spend more on taxes than on
clothing, food, and shelter combined. Obviously, we sometimes make bad
purchases. Some of the clothes we wore fell out of style and some of the
meals we ate were tasteless. Some of the houses we lived in proved hard
to sell.
But consider the value of the government "services" that we
received: bailouts of banks, companies, homeowners, labor unions, and
most everyone else with political connections; a coming federal takeover
of the health care system, which will reduce both the choice and quality
of care; a gaggle of foreign "welfare queens" on the American
military dole, dedicated to doing as little as possible for their own
defense; expanding government bureaucracies at home determined to micro
manage our lives at work, at play, and at home; out-of-control
entitlement programs set to wreck federal finances; and thousands of pork
barrel projects designed to reelect the very politicians who voted for
all of the aforementioned programs and policies.
In fact, one has to wonder if Washington can get anything right. Last
year Congress passed with great fanfare a "stimulus" bill.
Assume the best case analysis, that dumping more cash in social programs,
tossing money at infrastructure projects, and subsidizing states and
special interests alike can generate job growth. The benefits still would
be only temporary, and overshadowed by the long-term cost of the added
borrowing.
In fact, the CBO predicted that the added spending would increase the GDP
a little through 2012. Then there would be no net impact for a couple of
years. And then the misnamed stimulus would reduce economic activity
starting around 2015. The best case would be a continuing economic boost
through 2014. But in any case the "stimulus" bill would end up
cutting the GDP permanently. Which means workers will be receiving lower
pay even as they are being forced to pay back Uncle Sam's loans. Heckuva
job, Barack!
The president might not get it, but by any measure of benefits received
Americans are overtaxed.
The average TFD is bad enough. Many states are worse. Connecticut
continues to dominate the number one position, coming in at April 27. New
Jersey is number two, with its people paying for government until April
25. New York suffers at number three, with its TFD on April 23.
Happily, a few Americans get off relatively more lightly. At the other
end of the spectrum are Alaska and Louisiana, whose residents were able
to start partying on March 26. Mississippi was next at March 28.
Unfortunately for all Americans, TFD today is merely the proverbial calm
before the storm. In a world of endless red ink and the coming debt
tsunami, spending rather than taxing is the true measure of government's
burden.
Explains the Tax Foundation: "Since 2008, however, deficits have
been massive by any measure, and as a result Tax Freedom Day may give the
impression that the burden of government is smaller than it really is. If
the federal government were planning to collect enough in taxes during
2010 to finance all of its spending, it would have to collect about $1.3
trillion more, and Tax Freedom Day would arrive on May 17 instead of
April 9 -- adding an additional 38 days of work to the nation's work for
government."
This number is striking. The previous TFD record was May 1 in 2000. And
that year borrowing would not have pushed the date forward even one hour.
In 2000 Washington ran a $236 billion surplus, the largest ever. May 1
really did reflect the burden of government.
And the future looks bleak. In its analysis of the president's budget,
released in March, the Congressional Budget Office figured that the
deficit for this year would be slightly less than the administration
projected, but the collective red ink from 2011 and 2020 would be $1.2
trillion greater, for a total of $9.8 trillion. The agency warned that
deficits for 2010 and 2011 "would amount to 10.3 percent and 8.9
percent of gross domestic product (GDP), respectively. By comparison, the
deficit in 2009 totaled 9.9 percent of GDP."
Then there would be a short drop, but only short drop. Explained CBO:
"the deficit under the President's proposals would fall to about 4
percent of GDP by 2014 but would rise steadily thereafter." The
federal debt obviously would rise too. As a result, "Net interest
would more than quadruple between 2010 and 2020 in nominal dollars
(without an adjustment for inflation); it would swell from 1.4 percent of
GDP in 2010 to 4.1 percent in 2020."
These estimates don't include any of the inevitable but unbudgeted future
spending increases. The FDIC has been closing a record number of banks.
The Pension Benefit Guaranty Corporation's fund is running in the red.
Fannie Mae and Freddie Mac continue to lose money -- and the financial
hemorrhage will reach flood stage if the commercial real estate market
tanks, as is widely expected. Most federal health care "reform"
outlays don't kick in until mid-decade.
Then there are Social Security and Medicare, which together have $107
trillion in unfunded liabilities. Contra expectations, Social Security
began running a deficit this year. And there's no money in the fraudulent
"trust fund" to pay for future benefits.
Looking just at the time frame just through 2020, CBO warns: "To
keep annual deficits and total federal debt from reaching levels that
would substantially harm the economy, lawmakers would have to increase
revenues significantly as a percentage of GDP, decrease projected
spending sharply, or enact some combination of the two."
Of course, we all know the likelihood of politicians suddenly becoming
responsible fiscal stewards. America is starting to look like a bigger
version of Greece, only a few years behind.
Even after you've finished paying your taxes this year, it's too soon to
celebrate. You really aren't done. And you may never be done.
The president and Congress are attempting to run a welfare state on the
cheap. Unfortunately, the bill eventually will come due. And when it does
we may be lucky if Tax Freedom Day ever comes again.
http://www.cato.org/pub_display.php?pub_id=11670
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