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Fri., April 15, 2011

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 taxreceipt. That is, if you know how much you pay in federal taxes, which is another point of illumination the tax receipt would provide.

The Spokesman-Review Editorial Board

Members of The Spokesman-Review editorial board help to determine The Spokesman-Review's position on issues of interest to the Inland Northwest. Board members are:

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