The American Spectator : Tax Freedom Day: Real or Imagined?

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A Further Perspective

Tax Freedom Day: Real or Imagined?

By Doug Bandow on 4.8.10 @ 6:08AM

As government debt spirals out of control, the sky is the limit when it comes to future taxes owed.

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And the future looks bleak. In its analysis of the president's budget, released in March, the Congressional Budget Office figured that the deficit for this year would be slightly less than the administration projected, but the collective red ink from 2011 and 2020 would be $1.2 trillion greater, for a total of $9.8 trillion. The agency warned that deficits for 2010 and 2011 "would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. By comparison, the deficit in 2009 totaled 9.9 percent of GDP."

Then there would be a short drop, but only short drop. Explained CBO: "the deficit under the President's proposals would fall to about 4 percent of GDP by 2014 but would rise steadily thereafter." The federal debt obviously would rise too. As a result, "Net interest would more than quadruple between 2010 and 2020 in nominal dollars (without an adjustment for inflation); it would swell from 1.4 percent of GDP in 2010 to 4.1 percent in 2020."

These estimates don't include any of the inevitable but unbudgeted future spending increases. The FDIC has been closing a record number of banks. The Pension Benefit Guaranty Corporation's fund is running in the red. Fannie Mae and Freddie Mac continue to lose money -- and the financial hemorrhage will reach flood stage if the commercial real estate market tanks, as is widely expected. Most federal health care "reform" outlays don't kick in until mid-decade.

Then there are Social Security and Medicare, which together have $107 trillion in unfunded liabilities. Contra expectations, Social Security began running a deficit this year. And there's no money in the fraudulent "trust fund" to pay for future benefits.

Looking just at the time frame just through 2020, CBO warns: "To keep annual deficits and total federal debt from reaching levels that would substantially harm the economy, lawmakers would have to increase revenues significantly as a percentage of GDP, decrease projected spending sharply, or enact some combination of the two."

Of course, we all know the likelihood of politicians suddenly becoming responsible fiscal stewards. America is starting to look like a bigger version of Greece, only a few years behind.

Even after you've finished paying your taxes this year, it's too soon to celebrate. You really aren't done. And you may never be done.

The president and Congress are attempting to run a welfare state on the cheap. Unfortunately, the bill eventually will come due. And when it does we may be lucky if Tax Freedom Day ever comes again.

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topics:
Taxes, Government Spending, Tax Freedom Day

About the Author

Doug Bandow is a Senior Fellow at the Cato Institute and the Senior Fellow in International Religious Persecution at the Institute on Religion and Public Policy. A former Special Assistant to President Ronald Reagan, he is author of Beyond Good Intentions: A Biblical View of Politics (Crossway).

Letter to the Editor View all comments (14) | Leave a comment

Richard Rider| 4.8.10 @ 11:04AM

Doug Bandow ably summarizes the fiscal mess we face. But as horrendous as it is, it understates the future tax obligations -- by a LOT.

Throw into the mix all the federal unfunded (military) and underfunded pension plans. Add all the future pension costs of the government taking over PRIVATE defined benefit pension obligations through the Pension Guarantee Corp (included in Bandow's article).

Then consider all the things that government insures, but ALWAYS undercharges premiums for. That insurance commitment includes FDIC, FSLIC, NCUSIF, mortgages, crop, weather and other areas where government blithely guarantees what it can't possibly fund.

I predict that ultimately we'll HAVE to pursue an intentional policy of major inflation, to "pay off" these massive fixed dollar obligations with debased currency. This way the government does not default on it's obligations -- at least it provides "plausible deniability."

Charles Polk| 4.8.10 @ 12:10PM

A good article to read while we are thinking about this subject can be found at this link: http://economix.blogs.nytimes......back-year/ . It gives a rough estimate as to how many years on average, it takes the average tax payer paying the average tax to pay back the government for all the services they have received excluding indirect benefits such as defense, roads and environmental protections. With the new health care entitlement, we won't be paying off what we receive in government benefits until we start drawing social security!!

Richard Rider| 4.9.10 @ 5:28PM

IF we start drawing SS!! Given the inability of government to pay such amounts, SS will surely some day become a DE FACTO "needed based" payment. If you are too successful, inherit money, or otherwise "don't need" SS (according to every changing government criteria), you won't get it. But at least you get to pay IN to SS!

Us old farts appreciate your selfless generosity.

Al Adab| 4.8.10 @ 12:37PM

After seeing the performance of the IRS chief yesterday "tax freedom" is a concept long gone. Since IRS is now the enforcement arm of Mandatory health care he promised that the agency would enforce fees, penalties and not even blink when they choose to retain refunds and garnish Social Security checks to obtain complaince.

Such comments, now policies, of the Federal Government represented by the IRS is nothing short of extortion and in fact Tyranny. Obye or pay. Non-compliance is our only remaining rational choice. The cost may be high, but the price of submission is even higher.

mstahl| 4.8.10 @ 2:24PM

Remember that the government never actually ran a surplus. It may have been close in 2000 but the so-called surpluses counted Social Security taxes as part of general revenue. Many accountants believe that the last year that the U.S. government actually balanced the books was during the Presidency of Andrew Jackson. My Congressman recently had the audacity to send me a franked flyer proclaiming his belief in PAYGO. This even though he has already voted numerous times for "emergency" expansions of the the deficit. What a crock.

Freedom1| 4.8.10 @ 2:42PM

This nation should definitely set itself to immediate and deep cuts in spending, and in that line should terminate the designation of "entitlements" to most social spending. As we try to work ourselves out of the financial mess we're in, we will no doubt need to continue for some time to make expenditures in behalf of citizens who have relied on government promises, such as social security and medicare, and are dependent on them, but those expenditures should increasingly be limited by budgetary considerations, rather than be extorted from taxpayers through the "entitlement" concept. However, in the event that necessary spending cuts prove politically impossible, everyone committed to freedom in this country should at least exert every effort to stop the government from increasing tax takings, in order to hold the government to an iron-clad limit on true income. Before long, the constriction on tax income will stop the deficits, because the government's credit will collapse as the debt threatens to grow beyond the ability to pay, and further borrowing will no longer be possible. When government is thus forced to live within its income, and the level of taxation has been held down, the next steps can be taken.

MattZ| 4.8.10 @ 3:24PM

Is America really overtaxed? Not really.

http://www.fivethirtyeight.com.....onist.html

Is America spending its money wisely? I think that's a better question, and irresponsible not to ask in this economic climate.

http://www.fivethirtyeight.com.....g-our.html

Bilwick| 4.9.10 @ 10:51AM

Thanks for the link, Matt. I heard the loony guy on the bus who is (surprise, surprise) an Obama Zombie mentioning "538.com" and I was curious. (Not making this up.) I figured it was a blog for State-shtuppers, and now I see I was right.

Oldefarte| 4.8.10 @ 3:54PM

I request all reader of this to simply [guestamate] add up ALL their annually paid taxes [income, property, gasoline, sales,etc]; and compare same to their yearly income. Then contemplate what said total taxes paid could have been used to purchase for yourself and your family. If that thought does not get one hopping, then you're not human!!!!!!!!!!!!!!!

merlin| 4.8.10 @ 9:15PM

Is there anything more irresponsible than congress running deficits year after year after year? This is not a retorical question and it should be asked of every politician at every opportunity.

Ever| 4.8.10 @ 9:25PM

However, in the event that necessary spending cuts prove politically impossible, everyone committed to freedom in this country should at least exert every effort to stop the government from increasing tax takings, in order to hold the government to an iron-clad limit on true income. reebok easytone shoes reebok easytone shoes

Yosemeti Sam| 4.9.10 @ 1:36AM

Folks, the solution is - so easy!

Buy a bunch of Monopoly sets and use the funny
money to cover all tax debts!

Or, send in the bark etc from trees - the source of
all funny, er paper, money.

suzy in miami| 4.14.10 @ 10:53AM

There is a very simple way to pay off the huge debt, which by the way, more than doubled during the bush administration so don't count on republicans to do anything but drive it up further, have corporations PAY TAXES. Forbes has an excellent article detailing the taxes paid by america's biggest, richest corporations. Most notable is EXXON with $35 Billion in profits and $0 in u.s. income taxes. This is outrageous and we should all speak up about this. We need Congress to close tax loopholes for corporations.