Spokane7
65°
April 15, 2011 in Opinion
Editorial: Tax receipt might dispel common budget myths
With the nation’s deficit and debt in the headlines and various solutions being debated, it would be helpful to know where tax dollars are spent before deciding where the cuts should come from. With this in mind, a number of politicians, including U.S. Rep. Jim McDermott, D-Wash., are proposing an annual taxpayer receipt.
Once educated on where most of the spending occurs, the public and politicians can embark on meaningful debates about spending cuts that would actually reduce the deficit. Before scoffing at whether this is needed, consider a recent CNN/Opinion Research Poll on the federal budget.
Sixty percent of respondents said foreign aid should be cut or eliminated, and that’s partly because they believe such spending represents 10 percent of the annual budget. Twenty percent believe it consumes 30 percent. In fact, it is closer to 1 percent. Funding for public television was another popular target, with the average respondent surmising that this is 5 percent of the budget. It is one-tenth of 1 percent. Another target was federal pensions and benefits, but that is 3.5 percent of the budget, not 10 percent, as is popularly believed.
That doesn’t mean cuts aren’t warranted in those areas, but they won’t make much of a dent in the deficit. Some politicians might prefer the public remain in the dark, because it allows them to rail against low-hanging fruit while pretending to be serious about deficit reduction. Fortunately others, such as McDermott, U.S. Sen. Scott Brown, R-Mass., and U.S. Sen. Bill Nelson, D-Fla., are pushing for the government to provide taxpayers with the details.
Brown and Nelson have co-sponsored legislation that would compel the Internal Revenue Service to provide taxpayers an itemized one-page receipt each year. A link to a website would also be provided for taxpayers who want more details.
The magazine Democracy Journal printed what a list would look like for a typical household paying $6,883 in federal taxes in 2010. At the top, defense got $1,375; Social Security, $1,335, and Medicare, $845. Further down the list, education got $211; transportation, $168; agriculture, $57; foreign aid, $43, and arts and culture, $4.92.
Of note is that interest payments on the debt were the fifth-highest item at $433, or nearly double what Veterans Affairs received. That’s a significant indicator that debt has gotten out of control. Another graphic representation is a pie chart the IRS produced in 2009 that showed that 60 percent of that year’s budget was funded. The rest was financed by debt.
It’s important to note that Social Security has a dedicated funding source, so it is not a primary driver of the current deficit, except to the extent that money borrowed from it is being repaid. Medicare has a partial source, but it doesn’t come close to covering costs. Otherwise, programs are funded by general revenue.
To find out where your tax dollars went, you can try the online calculator at www.thirdway.org/ taxreceipt. That is, if you know how much you pay in federal taxes, which is another point of illumination the tax receipt would provide.
Trudy Rubin: Egyptians say no to Islamists 
Orphan on April 15 at 7:03 a.m.
Great idea, most dont know or care to find out. I wonder how the people would feel if they know we are using our credit card to pay for 40% of everything. The borrowing needs to stop.
jimvw2 on April 15 at 7:23 a.m.
Good idea. One correction. Social Security is not borrowing money. It is investing its surpluses in U. S. Treasury Notes the same way any other investor seeking the safest harbor for excess cash might. That sort of debt is qualitively different than trade deficits or unfunded military spending. Revenues from Treasury bonds purchased with Social Security surpluses recirculate in our economy once converted to benefit payouts. When a cruise missile explodes, that money is just gone. This difference ought to be called out in taxpayer receipts.
I’d also like an annual accounting of who is actually paying what real share of the tax burden, not what the law says they “should” be paying. That could be a real eye opener as well.
Then there’s adding on the real incidence (point of collection) for numerous state and local taxes. An accurate accounting of total tax burden might impart a whole different public perception of who actually pays the cost of providing public services anmd infrastructure.
Ninch on April 15 at 7:47 a.m.
True about Social Security surplus investment, except now we do not have a surplus…and the U.S. Treasury bonds (which finance federal debt), which were purchased with the surplus are now being turned in for cash. This also means the feds must find a replacement investor for those T-bonds. And that is the beginning of the problem. Hillary Clinton focused on this issue during campaign 2008 when asked about social security funding… and candidate Obama denigrated that argument and then responded that social security will do alright (without details) under his administration.
Jeffrey_Grey on April 15 at 7:55 a.m.
There seems to be some dispute on this point.
http://factcheck.org/2011/02/democrats-deny-social-securitys-red-ink/
DickAdams on April 15 at 9:22 a.m.
Pay day loans took a page out of the governments way of doing business by screwing the little people with interest rates so high its difficult to pay the principal off. What ever happened to the lid to stop the loan sharks that charge exorbitant interest rates so high it makes casinos look attractive to pay off their loans? Same moronic logic.
gmorton on April 15 at 10:46 a.m.
jimvw2 wrote,
“I’d also like an annual accounting of who is actually paying what real share of the tax burden, not what the law says they ‘should’ be paying. That could be a real eye opener as well.”
That info is here:
http://www.ntu.org/tax-basics/who-pays-income-taxes.html
The wealthiest 10% of taxpayers paid 70% of the personal income taxes the government collected (2008).
gmorton on April 15 at 11:04 a.m.
Jeffrey_Grey wrote,
“There seems to be some dispute on this point.”
That link is misleading. SS’s *tax* revenues fell below outlays last year, but SS also has revenues from interest on its previous loans to the Treasury. That’s how trust funds work – they invest their surpluses to augment the beneficiaries’ contributions.
The government will not have to borrow money to cover SS payments. It will have to borrow it to repay what it has already borrowed from SS, and pay the interest on that debt.
“But unless the government raises taxes or cuts other spending substantially, the government will need to borrow more from the public to finance its obligations to the trust funds.”
Yes indeed. The government has raided the trust funds for years. Now it’s time to pay the piper.
Hiker on April 15 at 11:12 a.m.
The “Your 2010 Federal Taxpayer Receipt” feature on the White House’s website implements this now. See http://www.whitehouse.gov/issues/taxes/tax-receipt
eagleproducer on April 15 at 11:27 a.m.
The wealthiest 10% paid 70% of income taxes because they took home 70% of income.
Duh.
That is the root of the problem. We have small ruling class that can hold the rest of us hostage. That is freedom?
Mayocynic1 on April 15 at 11:45 a.m.
They worked for it mr eagle. They should get the bigger rewards.
gmorton on April 15 at 11:59 a.m.
eagleproducer wrote,
“That is the root of the problem. We have small ruling class that can hold the rest of us hostage.”
Really? Please explain how Bill Gates or Jeff Bezos or Sergey Brin are “holding you hostage.”
Is the FBI aware of this kidnapping?
“That is freedom?”
Yes. Freedom includes the freedom to pursue the livelihood of your choice, produce the products of your choice, and exchange the products of your talents and labor with any willing person on any mutually agreeable terms.
It does not include free lunches paid for with money taken from others by force.
ellray on April 15 at 1:05 p.m.
The last few comments here make it clear that we need to reach some agreement on the ethics of progressive taxation. For me it’s a no-brainer: people should pay according to their means. But I have no objective argument to support my position. It goes back to how I was raised, I guess; if we want to survive as a country, then we have to agree to support our government as a community, and it seems clear that revenues fall short if we don’t tax progressively. (Don’t tell me we can spending-cut our way to solvency—I don’t buy it.)
Clearly it’s in the best interest of all Americans that our government not slip into default, so we have to solve this problem together.
garyc on April 15 at 1:54 p.m.
It doesn’t say that. It says money is borrowed from it.
CougarGold on April 15 at 3:26 p.m.
On the tax progression/income issue, there is some above discussion about the freedom to choose a profession, work hard, produce the products you choose, and have the accompanying success. All true. The piece that is always left out though is the accompanying risk and ongoing liability associated with those efforts.
I no longer own my own company but when I did, I would occasionally remind someone who may have been naive’ to it that if something happens to the company; sued, lost money, went bankrupt, the absolute worst thing that would happen to them is they would lose their job and could possibly have to go find another, possibly at lower pay. For me, any of those calamaties meant losing real money up to and including personal bankruptcy and carry-forward financial liability. When someone asks an owner what’s at risk, there are two words that describe it: personal guarantee.
A personal guarantee is required by banks, vendors, and at times, customers. What it means, in essence is that, even in the case of company bankruptcy, you are not protected. You have guaranteed to the entity that you will pay them back at some point before you die and that even if you die, your estate is still liable for the assumed debt. It’s a high risk but is necessary in most cases if you’re in business. With many businesses, it’s not a huge deal but with others, such as my old company, it is a huge deal. Even though it’s been a few years now since I sold out, I am still not clear of potential liability if something goes wrong with one of the projects we did. You don’t just go out and find another job and walk away.
None of this even touches on the other associated risks of business; employee practices, previously unknown environmental risks, and so on. Risk is high, so too should be the rewards. Everyone seems to love to beat up on business and the owners as not paying their fair share but there really is very little understanding as to what is at risk and the disastrous potential of business failure.
johnclarke on April 15 at 3:38 p.m.
I’m not sure what the argument is on social security. It was in surplus, Uncle Sugar borrowed it and gave SS bonds. Since unemployment caused less people to be paying SS, they had to cash in those bonds. Also, unemployment caused people to start COLLECTING ss much ealier than they normally would have.
Yes, for the first time in a very long time, SS took in less money than it paid out. Saying that SS adds to the deficit is certainly true in a sense, only because our borrower (Uncle Sam) can’t pay it’s bills. There is nothing wrong with Social Security.
gmorton on April 15 at 5:37 p.m.
ellray wrote,
“For me it’s a no-brainer: people should pay according to their means.”
Really? A no-brainer? Should people pay for their groceries according to their “ability to pay”? Pay for their housing per that principle? Their cars, teevees, shoes, or movie tickets?
Why would you suppose paying for government services would be different?
People should pay for government according to the value of the services they receive from government, just as they pay for anything else.
ellray on April 15 at 10:33 p.m.
No, gmorton, let’s let the lazy sots starve. It’s only fair. And while we’re at it, let’s let our government go bankrupt. Anything to avoid sacrificing any part of our well-earned comfort, right? Where did this greed and selfishness come from?
gmorton on April 15 at 11:30 p.m.
ellray wrote,
“Where did this greed and selfishness come from?”
To whose greed and selfishness do you refer? To Alfie, who has produced something of value and desires to keep it, or to Bruno, who has produced nothing and so hires a hit man, such as the government, to seize some of the wealth Alfie has produced and hand it over to him?