Did you know? The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.
- 2011 Deficit: $1,299 billion
- 2011 Income tax revenue: $1,273 billion
Did you know? The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.
Tagged big government, Deficit, income tax, taxes, United States
Headline: “Tax bills in 2009 at lowest level since 1950”
The reality according to the very same article:
“Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.”
Notice that this is only talking about income taxes. As if income taxes are the only means of collecting taxes. In fact, look at what has been happening in Arizona. The legislature has been dropping income tax rates here, but at the same time they and the people through ballot initiatives have been raising the sales tax rate. Looking at only income taxes is looking at about a third of the total.
I decided to collect the data from http://www.usgovernmentspending.com/ and http://www.usgovernmentrevenue.com and create some simple charts.
Yes, taxes paid have declined recently and hit their lowest level as a percentage of GDP since 1959 (not 1950). However, as you can see, tax revenue is 2010 was back up to the same level as 1971 and 2011’s are expected to be the same as 1973’s. In fact, 2011’s tax revenue is expected to be just a point less than that of 2003’s. Big deal! Yet, look at that outstanding increase in taxes between 1910 and 2000.
But that only tells part of the story. As government’s share of GDP grows, the shrinking private sector has to pay for all that new government. So let’s look at taxes as a percentage of the private economy:
The decline in taxes is now much less pronounced. Taxes paid as a percentage of the private economy hovers around 50%. Looking at taxes against the private is much better because it is the private economy tax actually produces. Let’s look at it another way. If taxes were 60% of GDP but 100% of GDP, everybody in the private economy would stop working and government would get no revenue and would be forced to close down. So the private economy is the determining factor in tax revenues, not the total economy.
So the average person working in the private sector as an employer or employees pays, on average, a tax rate of 50%. This includes income taxes, sales taxes, property taxes, vehicle registration taxes, social security and Medicare taxes, corporate taxes, capital gains taxes, etc. FIFTY PERCENT!
And people have the nerve to complain that tax rates and tax revenues are falling.
Taxes need to fall much further. A decline to the 100-year average of 25% of GDP and 36% of private sector GDP would be a good start. In other words, to return to the average would mean a tax cut of $750 billion to $1300 billion. But with huge deficits, spending would have to decline by two to three trillion. But given the immense growth in government over the last 100 years, spending cuts like that would simply return us to the 100-year average.
Remember, USA today compared 2009 income tax revenue to the 50-year average. I am simply following their lead, but looking at all taxes and looking at a 100-year average.
Posted in Taxes
Tagged big government, GDP, government spending, Gross domestic product, income tax, Limited government, Tax rate, Tax revenue
Robert Price writes in The Wall Street Journal about The Price of Taxing the Rich:
Nearly half of California’s income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population’s during the recession. When they crashed, they took California’s finances down with them.
Maybe, instead of villainizing the rich, the people should pray for their success. And instead of taxing them to death, the government should enable and encourage them to prosper.
Posted in Taxes, Unintended consequences
Tagged Brad Williams, income tax, Robert Price, Tax, Tax cut, The Wall Street Journal
New York has decided that owners of property living in another state may still have to pay income taxes in New York. The Wall Street Journal reports:
Connecticut and New Jersey residents with a Hamptons summer cottage or a Manhattan pied-a-terre are about to get a nasty surprise: New York state wants more taxes from them.
A New York court ruled last month that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million.
Tax experts and real estate brokers say this ruling could boost the tax bill for thousands of business executives who own New York City apartments they use only occasionally. It could also hurt sales in the Hamptons and New York’s other vacation-home communities.
I want to focus on this line:
Under the ruling, if an owner doesn’t spend a single a day in a home it could still count toward a permanent residence.
If every state applied this ruling and federal court does not overturn it, a person could in theory own housing property in every single state and thus owe income tax in every single state and the District of Columbia. By my rough calculation using the top marginal federal income tax rate of 35% and the sum of all the top marginal state income tax rates, a person could theoretically be taxed at a rate of 288%. (Yes, I recognize it is absurd for somebody to have property in all 50 states and DC, but the whole notion of paying income taxes in every state you own property is equally absurd.)
I urge the federal courts to overturn this ruling. A permanent residence should be and must be the state in which the person lives the most. Income should only be taxed by states once, either by residency or by where it is earned. Not both and certainly not in a state where a person is neither a resident nor an income earner.
Isn’t this why we have the interstate commerce clause in the first place? To stop states from conducting commercial and financial warfare against other states or residents of other states?
Posted in Taxes
Tagged income tax, Long Island, Manhattan, New Jersey, New York, pied-a-terre, State income tax, Tax, United States, Washington D.C.
Back in the 1700s, income taxes were rare, yet more countries were adopting such revenue generating schemes. Adam Smith minced no words in attacking such “absurd and destructive” taxes. In a section of The Wealth of Nations titled “Taxes upon the Wages of Labour,” Adam Smith wonders why countries institute such income taxes:
Absurd and destructive as such taxes are, however, they take place in many countries.
Just a decade later, the Founding Fathers recognized that limits needed to be placed on government. One such limit would be to make it more difficult for government to raise our taxes. In Federalist #21, Alexander Hamilton argued that a consumption tax would effectively limit the size of government:
It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
We have seen how the income tax has accomplished the growth of government that duties were unable to do previously. I return to this chart of the size of government excluding defense dating back to 1910. Remember, the income tax amendment to the Constitution was ratified in 1913.
Seeing the growth of government since the income tax appeared a century ago, Smith and Hamilton were correct in their assessments. Based on the above quotes and their other writings, Adam Smith and Alexander Hamilton would support a switch to a consumption tax, more commonly called a sales tax today or the proposed Fair Tax.
Posted in Books, Economics, Government spending, History, Quotes, Taxes
Tagged adam smith, alexander hamilton, Consumption tax, Fair tax, federalist papers, Federalist Party, Government, income tax, Sales Tax, Tax, taxes, Wealth of Nations
In addition to repealing the 16th and 17th Amendments and getting rid of the Federal Reserve (all of which began in 1913), I propose this new Amendment:
The federal government shall have no powers beyond those specifically enumerated in the Constitution or absolutely required for the enforcement of those enumerated powers.
The general welfare and commerce clauses do not give the federal government any powers beyond those specifically expressed elsewhere in the Constitution.
All commitments and liabilities of the United States must be honored and paid out either immediately or in their due course. No new commitments or liabilities from unconstitutional programs may be added after the ratification of this amendment.
If anybody has suggestions to improve this amendment, feel free to comment below or email me from the contact page.
Posted in big government, Constitution, Federal Reserve, Federalism, Government spending, politics, Redistribution, Regulation, Socialism, Stimulus spending, Taxes
Tagged amendments, big government, constitution, Federal Reserve, Federal Reserve System, Government, Government debt, government spending, income tax, Law, Seventeenth Amendment to the United States Constitution, socialism, taxation, taxes, United States, United States Constitution
According to The Heritage Foundation’s 2010 Index of Dependence on Government, dependence on government rose 13.62 percent in 2009. That is the largest single year increase since 1976.
Heritage included a lot of detail in its reports and many cool graphs. I suggest you go to the full report. I would like to comment on one more chart of theirs.
Many conservatives lament the fact that so many Americans pay no taxes. As you can see below, the percentage of Americans who paid not income tax rose from 12.0 percent in 1969 to 43.6 percent in 2008. I actually wish that many more Americans were exempt from paying taxes. However, we cannot have a situation where nearly half of Americans pay no income tax while the size of government grows. The wealthy are seeing their burden doubly rise from the growing cost of funding government and their increased share in paying for it. While this will satisfy the “soak the rich” crowd, it only pushes the wealth to hide their income and wealth from the government or move overseas entirely.
Democratic candidate for US Senate Richard Blumenthal attacked Republican candidate and former WWE CEO Linda McMahon on Twitter:
STAFF: 2009: WWE Didn’t Pay U.S. Income Taxes On $4.1 Million In Earnings From It’s International Subsidiaries.
Why should US corporations pay US income taxes on foreign income? They already paid taxes on that income in the country in which it was earned. Foreign corporations don’t pay US income taxes on foreign income, so why should US corporations? Charging US income taxes on earnings in foreign countries makes US corporations less competitive.
The US already has the second highest corporate income taxes among industrialized countries. The United States should be lowering corporate tax rates, not making it more expensive to be a US corporation.
Richard Blumenthal is encouraging US corporations to close up shop, move overseas, and save million of dollars in taxes.
Posted in Economics, Taxes, Unintended consequences
Tagged Corporate tax, Delaware, economics, income, income tax, Linda McMahon, Politics, richard blumenthal, Tax, taxation, taxes, United States
Plato: “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”
Adam Smith in the section “Taxes upon the Wages of Labour” of The Wealth of Nations:Â “Absurd and destructive as such taxes are, however, they take place in many countries.”
Albert Einstein: “The hardest thing in the world to understand is the income tax.”
Will Rogers: “Income tax has made more liars out of the American people than golf.”
Please post more quotes in the comments.
Tagged adam smith, Albert Einstein, Economic, income, income tax, Politics, taxation, taxes, United States, Wealth of Nations
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