Tax Freedom Day represents the day that US workers and investors are done putting 100% of their earnings into tax payments to various government agencies. This year it was April 17. The Tax Foundation (an obviously partisan organization) has been promoting this number for some time, but the concept is compelling. Also, I believe their calculations to be faulty, but for the sake of this discussion, let's assume they are correct. http://www.taxfoundation.org/taxfreedomday.html However, the federal government does not stop spending. They keep spending the earnings of US workers and investors til May 5. Unfortunately, no para-political organization has stepped forward to promote Federal Spending Freedom Day. This does not take into account interest payments due, as those are accelerating as the US federal government continues to allow the debt to grow. Currently, the US federal debt is $7,782,000,000,000. Interest payments are a legal liability, and either must be paid from government revenues (taxes) or by forfeiting US assets. The interest payment on that is about $350,000,000,000. We could also have a Federal Interest Payment Freedom Day. That day would be May 18. The purpose of this thread is to motivate discussions, and possibly actions, to encourage reductions in US federal debt.
I read somewhere that around 35% of those polled believe they don't pay enough in income taxes. I wonder how many of those actually pay income tax?
I think there are four options: 1. increase taxes to bridge the gap between revenues and expenditures 2. reduce federal programs and departments to bridge the gap 3. some combination of 1 and 2 4. stay the course and sell US federal assets to make debt payments Option 4 concerns me. When US policy is to sell of federal lands, public works projects and R/D projects, will this make the US stronger or weaker? The answer is obvious.
The Federal government will sell governement assets at a bargain price to those who received the greatest benefit of tax reduction.
Actually there is another option, which seems to be an increasing priority. That is to increase tax payer compliance. There currently is an estimated $300 Billion that goes uncollected every year. To date the IRS has been ineffective at finding/prosecuting them. It was believed that spending much of the IRS's enforecement budget on educating the taxpayer would create more tax revenue. To increase taxpayer compliance: 1) Need to make the tax code far more easy to understand. 2) Need to reform the IRS until they are actually able to perform its job.
Good points. I actually favor significant tax reform, in that too much of the tax code is "social engineering," and it has become quite a muddle. Simplification of the tax code, in and of itself, should be revenue-neutral. If the current complexity of the code is resulting in a net underpayment of $300,000,000,000, then a simplification should result in that same revenues (and the same revenue shortfall.) What I think is really happening is that tax payers are manipulating the code to their advantage. Otherwise, half the tax payers in error would be over-paying and half would be under-paying. Back in the day, we would have called these tax loop holes. Now, it is tax avoidance. Some difference. So a combination of tax increases and tax simplification could possibly result in improved revenues. Let's think about the expense side. Personally, I think the feds should do three things: protect the borders, uphold the constitution, and manage the central bank. Things like agricultural policy, education, commerce, HSS and HUD (to name a few) should be either state issues or non-issues. They are basically money-drains with little benefit. I can be convinced that social safety nets are a federal priority. Tax policy should also consistently reflect the priorities of the country. To some extent, tax policiy can either lean towards encouraging savings & investing, or it can lean towards consumption.
So for you, tax freedom day is sometime after breakfast on January 2, after you've "paid" your sales taxes. I'm jealous! At least you still are liable for the debt. Bwahahaha!
heh heh nah, I will file eventually, but I don't owe anything. I didnt make anywhere near 80k (U.S. dollars), so I am exempt from double taxation. And I have like 50 Aol shares to my name, no other investments yet. No capital gains on that wimpy portfolio. So it's all good.
I don't disagree that the Federal government is, perhaps, the absolute worst choice for social engineering. But, everyone's answer to this is going to be different, and really, I think that the only thing that has been proven indisputable is that piling taxes or programs on top of an inept system is a recipe for ever-increasing economic problems.
Or just change it so that it's not so freaking complicated that half the people can't understand, and the other half get so frustrated they get it wrong. It'd be a lot easier to collect, monitor, and control tax revenue if it was a flat tax or a national sales tax or something of that nature. There'd also be a hell of a lot less overhead, and it'd be exponentially more efficient (and less of a burden on taxpayers) than our current system. Anybody have any idea what the annual budget for the IRS is?
$10 billion What is really staggering is the compliance cost to business and individuals... I've seen estimates of $250 billion to as high $500 billion!
So lets just estimate $400 billion as a nice round figure, can you imagine how much could be done w/ an extra $400 Billion in reserves every year? Theres your solution to Medicare and Social Security right there alone.
With numbers like those, you should understand why there has been no real push for change. A very wealthy segment of society benefits from the confusion.
Actually there is broad (and growing) support for reform. It is the lobbists and special interest groups that benefit from the status quo.
You mean accountants? Interestingly, an IRS/Ernst and Young study shows that the top 20% of earners pay 67.5% of all taxes, down from 68.1% in 1999, but up from 52% in 1979. The bottom 20% play 0.65%, up marginally from 0.63% in 1999 but half of the 1.22% paid in 1979. (Source: Wall St. Journal (sorry, subscribers only). Leaving aside the politics of the rich getting richer (which is undoubtably true, as the rich ALWAYS get richer), it's pretty clear that convincing most Americans to pay a flat tax is not going to be easy. Getting rid of the mortgage interest deduction, a necessity toward any simpler tax system, will spark a massive middle-class revolt and send home prices reeling. Sachin
As always, Sachin, you speak truth. Make no mistake, I would be on the front lines of a full blown revolution if this nation moves to a flat tax and attempts to strip what little wealth I've managed to accumulate from my meager wage and my small home purchase. I sh!t you not. I could go on for days about how damaging such a system would be. And this is coming from a guy who used to support such an idea. That is until I started looking at the numbers. No doubt, if you want to hurt the middle and lower class, establish higher regressive taxes. In turn, you'll crush this economy inside of five years.
Then I invite you to take a closer look. The FairTax is highly progressive until you get into realm of the ultra wealthy. It's not much different than the current system in that respect.
Or how the money is spent? Audit Urges End of IRS's Employee Tuition Plan Administrative Costs Said to Be 'Far Too High' The Internal Revenue Service's employee tuition assistance program has spent more than 60 percent of its funds -- or $4.4 million in two years -- on administrative costs, employing the equivalent of 30 full-time workers while turning away hundreds of employees for lack of funds, an inspector general audit has found. ... The audit, which will be released today, suggests the IRS's Human Resources Investment Fund should be abandoned. Its findings come as Treasury Secretary John W. Snow pleads to Congress for more funding for the nation's tax collection agency. But in 2002 and 2003, only $2.8 million of the program's $7.2 million budget went to tuition assistance. The remainder was swallowed by administrative costs and the salaries of more than 80 employees detailed to the project, most of them part time. During that time, 1,680 employees were rejected for tuition assistance for lack of funds.
It would be interesting to see a chart on how the fifths would break down as far as % of total taxes paid under a flat tax system vs. what they are currently at. I'd imagine it would go down, but probably not as much as most would think.