Thursday, October 8, 2009

How About We Stop Spending?

By Mr. Quarter

Yesterday, the Congressional Budget Office delivered it’s anxiously awaited assessment of the cost of the Health Care Reform bill hammered out after lengthy deliberations in the Senate Finance Committee. The estimated tab? A paltry $829 BILLION over 10 years. But hold on, here is the really good news! It will reduce the national deficit by $81 billion over 10 years, with “potential to save more in the future.” Really. Now there’s a deal that I’d rush to every time - spend $10 to save $1! So if I am doing the math correctly, if every decade we spend $829 Billion (or more adjusted for increases in population and inflation) and every decade we reduce the national deficit by $81 Billion (or less adjusted for inflation) after 100 years we will have spent $8.3 Trillion but will have reduced the deficit just enough to pay for the first 10 years. Of course, that is expressed in undiscounted cash flow terms, but it still doesn’t sound like the kind of bargain that I would jump on down at WalMart™. As I calculate it, the net outflow of tax dollars (assuming that the cost and the deficit reduction numbers stay the same) is $748 Billion every 10 years. That is $74.8 Billion more spending each year. That’s additional spending.

I guess to Senators and Congressmen, when contemplating an actual $1.4 Trillion annual deficit for federal spending for the fiscal year ending September 30, 2009, an additional $74.8 Billion in spending seems a little thing. But it would be done at the expense of the taxpayers. Who are the taxpayers? Well, in 2009 under the current and future tax code, it is a minority who are getting their pockets picked by the government to pay these bills, and the proceeds are distributed to the majority who consume those tax dollars.

According to the Urban-Brookings Tax Policy Center, 46 percent of all tax filers will pay no income tax in 2009. Their further analysis indicates that nearly 47 percent of single tax filers, 40 percent of joint filers, over 70 percent of household heads, and about 55 percent of the elderly will pay no income tax. Because of the Earned Income Tax Credit and other programs, approximately 40% of taxpayers will actually receive a cash subsidy that totals approximately 10% of the total income tax collected.

So who is paying the freight in America? The top 20% of income earning taxpayers pay 91% of income tax. The top 1% pays 36% of income tax. The bottom 50%of income earning taxpayers pays less than 3% of income tax. Doesn’t sound too fair to me. So, let’s do a calculation. If there are 120 million taxpayers and 20% of the income earning taxpayers pay 91% of income tax, then the $74.8 billion additional annual cost works out to an average of about $2800/year of future debt service or additional future income tax for that group of taxpayers.

The problem is not taxes but spending. Taking of money from a small minority of tax payers and distributing it to the majority. This is the work of politicians, spending the government’s revenues in ways that get them re-elected. No politician today is willing to stop spending if it means that some block of voters getting their subsidy will get pissed off. That costs votes.

The endless increases in spending are sinking this country deeper and deeper into debt, and it has to stop. The well is running dry. In my state alone, there has been a proposed increase in state taxes to cover budget deficits. The Bush tax cuts are going to expire so the marginal rates will go up in 2010. The Alternative Minimum Tax is looming for many. Many employers, including my own, eliminated annual compensation adjustments and 401K matches in 2009, with no change forecast for 2010. Nationally, unemployment is near 10% officially, with the real unemployment number closer to 17%. And, yes, the cost of health care insurance has gone up for FY2010 – 10.9% at my employer. Enough! Our take home paychecks are getting smaller and smaller and smaller. But no one in Congress gives a damn, because they just want to keep spending and spending, taking more and more of your paycheck.

I have an idea for a second stimulus program, place a moratorium on income tax for three months. Let the taxpayers take their entire paycheck home and let them decide how to spend the money. Maybe it would do some good to let the people who earn it decide how to spend it.

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