Tax Freedom Day - 2006
From the “Death-and What-was-the-second-thing?” Department
Well, its been 10 days since the deadline to file Federal Income Taxes, I hope that the stress is far behind you. But now that we have cooler heads, its time for Two-Headed-Monster to enflame your anger again.
I first learned of the idea of Tax Fredom Day back in 1994, after the Republicans won back the Congress, and the Contract for America. It was back in the day when Republicans were the renegades and were the opposition party to the establishment. (Today, I feel that Republicans have become the Establishment, but that is a Different Post.) Anyways, the idea of “Tax Freedom Day” was something that appealed to me as a young working American, disgruntled with the way things were. It was an illustration on how much money, I personally was wasting with the Federal Government.
For those of you who came in late, Tax Freedom Day is an analogy to describe the ammount of money the average United Statesian pays in taxes each year, in relation to their Yearly Wage. If you paid all your taxes, up front, as you earned your yearly wage, Tax Freedom Day would be the first day of the year you would keep your money.
In its simplest definition, its the first day of the year in which you Stop working for the Government, and begin to earn money for yourself.
Today, my friends, is Tax Freedom Day.
The Tax Foundation Organization is a nonpartisan group that advocates a simpler tax system, and tracks the occurance of Tax Freedom Day, year over year.
There is some disagreement with when Tax Freedom Day is this year, as AdamSmith-dot-org suggests it is actually June 3rd. Either way, its later than I would like it.
Check out the Tax Foundation Website, they have a good breakdown of how you are working for the United States Government. (Its always good to be aware.)
And, Happy Tax Freedom Day!
Other Heads talking: 4 Pundits
April 26, 2006 at 2:13 PM
Doesn’t the date of tax freedom day depend on your tax bracket?
So we are so overtaxed you say… and yet we are the 3rd most prosperous nation on the planet. Certainly we have a rather disgusting amount of disposable income. Kids are running around with cell phones and $100 sneakers, People drive giant trucks yet complain about outrageous gas prices. Urban sprawl remains unchecked despite the skyrocketing prices of homes. Back in the glorious 50’s when houses cost 10 grand, gas was a nickel a gallon, and income tax rates were about 2/3 of the current rate… did we have a bunch of extra money? Nope.
So what are you whining about?
April 26, 2006 at 2:35 PM
Tax Freedom day is based on the average Tax Burden. Which is based on the average income.
So yes, our Rich are still paying off the Government.
Income Tax is a neccesary evil. Thanks to Woodrow Wilson and the 16th Amendment. Sales tax is expected. Usage Taxes are expected. However, Property Taxes are an abomination. (But that is another post/article for another day)
For a pseudo-capitalistic society, we’re taxed a lot.
And taxes, even when erected temporarily are never repealed. (The grossest example is the Tax to pay for the Spanish-American War.
We were a nation founded secondarily around protesting unfair taxation.
And, my real reason, taxes stunt economic growth. When you raise taxes, the economy simmers, when you lower taxes, the economy booms.
April 26, 2006 at 6:01 PM
Well to your last point I think there is again a balance. I can’t help but notice that Countries with the highest incomes (like us) also have some of the highest taxes. So how do you reconcile that with your concern?
April 26, 2006 at 6:25 PM
If the tax money is used in a productive way, (and by Productive I mean not in a socialist, take from the rich give to the poor, way) then I would not be as frustrated.
But I have the feeling that my hard earned money is getting thrown into a black hole. (My social security contributions sure are, I’m promised that I’ll get those back… but you can understand my skepticism.)
No, all I see is a bloated bureaucracy that can only implode on itself, just from the sheer gravity. A bureaucracy that wants to grow, and grow and grow, and find ways to pay for itself (and demand more tax revenue.)
I see a government which cannot live in a budget (which costs a fortune just to create, debate, and sign off on) and we end up breaking it in the end.
I see money spent on bridges to no where. I see memorials built to no one in particular. I see none of it really coming back to me the average citizen.
Full Disclosure: I used Pell Grants to help pay for college
But I cannot think of other federal entitlements I’ve used.
I know there are needy people out there, but over 30% of my yearly income is going to this bloated machine.
How much of these expenses do not have to be funded by the government?
How much of these expenses are wasted on needless bureaucracy?
How much of these expenses are wasted on things I fundamentaly disagree with? (Public Funds for the Advancement of the Arts comes to mind)
Yet, even though I vote for candidates who say they will reduce the size of government, I have no personal control of these expenses, and there is a continual government hand in my pocket.
April 26, 2006 at 7:06 PM
Ok, yes, I agree with you. Government is bloated and wasteful. But I really don’t see how in the grand scheme of things this is a priority. 30% or 40% (or whatever) of my paycheck is taken by the government and that is awful, or it’s a bargain. Whatever. But we’re RICH! In comparison to other countries. In comparison to our fathers and our father’s fathers. You say taxes slow down the economy. Why does it need to go faster? To fuel more growth?
I am with you in theory. I abhor waste. And the government is a colossal waste machine. But results are hard to argue with. We are taxed quite high. but the more they take, the more we make. Cause and effect or coincidence?
Seems like we’re worried about something that isn’t really a practical problem. At least not currently.
Of course arguments can be made about the rich being taxed unfairly, or the poor, or the middle class. But for now I’m talking about the nation as a whole.
The bigger problem to me is not that government wastes money (like I said, we have tons of that), but that it is terribly inefficient and often ineffectual. School systems, police, the justice system, immigration control… these all seem on the constant brink of collapse. But are we as a people willing to give up our $3 coffee, or our Escalade, cell phone, new shoes, etc to pay for these things? Apparently not.
The problems with capitalism and democracy is they rely on the people to decide solutions to long term problems. And people are stupid and short sighted and selfish.
You happy? I’m depressed again. Think I’ll go to Starbucks and drown my sorrows in a mochachino.
April 27, 2006 at 3:36 AM
A Growing Economy is an enabeling economy.
There is more economic ability and freedom to invest and take chances.
You want Hydrogen Powered Cars? We need a robust economy to support that venture.
You want Fuel Cells mass produces? We need a robust economy to allow invenstors to put their money into such a idea so a company can run with it.
You want faster computers?
You want Web 2.0?
The economy is not just wages, homeownership, unemployment and the GDP. Those are the metrics of the economy.
The great part about a growing economy, is that those programs you mentioned still will get MORE Public Money even if the Tax Rate goes down.
A big cut of a small number is often less than a small cut of a lot.
April 27, 2006 at 4:25 PM
I think we are talking past each other.
I agree that growing the economy is good (at least for the sake of argument), I agree that more money COULD be used for good things, I agree that a big cur of a lesser number is often smaller than a small cut of a greater number. I agree with everything you say.
BUT, my point is that I’m not sure that higher taxes means slower economy. At least not on the large scale. The evidence (countries with strong economies also tend to have higher taxes) seems to say you’re wrong. Now that is likely not causal. IF Brazil decided to jack up it’s tax rate, my guess is it wouldn’t suddenly be an economic powerhouse. It may just be that the higher taxes have come as a natural result of having a strong economy… in which case it is acting as a drag on an already established, and potentially astronomical economy.
But it may also just go hand in hand. When taxes are used to re-invest in community, it can have a strong long term effect on the economy. Spend a billion dollars give poor children educational opportunities that they wouldn’t otherwise get? That extra tax may drag down the economic growth in the short term in exchange for a stringer and more motivated workforce powering even stronger economic growth in the long term.
Anyhow these details are all just theoretical from me. Certainly the government is wasteful, certainly much of tax money is not spent MEANINGFULLY enriching our communities. But I look at us complaining about high taxes and see that we have more disposable income than almost any other country and more than any previous generation and I wonder where the problem really is. Why are we disposing of so much income instead of investing it? Why do we complain about the wasteful spending of our government, when we waste most of our own money as well?
May 2, 2006 at 12:53 PM
I have to agree with Brad’s point that ” higher taxes have come as a natural result of having a strong economy”. In a developing economy, most of the tax revenue is spent on essential items; infrastructure, defense, etc..
As that economy grows and prospers, additional programs are added. If there is a surplus, it seems that more programs are created yet again. Yet, when there is a downturn in the economy, those programs are rarely cut back. Rather, the government generally decides that it needs to raise taxes.
That (argueably) tends to have a more dampening effect on the economy to the point that tax cuts are proposed to ‘kick-start’ investment in businesses. After a period of higher taxes, the tax cut usually does have such an effect. Usually in the quarter following a tax cut, tax revenues expand past projections. This is primarily due to the compounding of each dollar that is ‘freed up’ from being earmarked to the government. Investments are made in business, leading to more jobs created both directly and indirectly (through suppliers).
But, ultimately, that process comes to an end and the legislators decide that business is making too much money, so they can raise taxes again. The additional revenue leads to more government programs, which require even more funding. Thus, the cycle starts anew.
The problem is that the equilibrium is never reached. The flapping of a butterfly’s wings is enough to disrupt our economy. There will always be this sort of fine-tuning. I acknowledge that it is part of the government’s responsibility to help the least fortunate among us. My objection is in the additional programs that are created in the harvest days that grow in administration costs, regardless of tax revenues.
Back to the initial point; for the last 2 years I have been taking classes at a local community college, primarily to brush up my math skills. That has been a real eye opener. It has been 20 years since I was in an acedemic setting and the (to me) sense of entitlement is astounding. Having worked the last 20+ years and not ‘expecting’ to be supported any other way, I am taken aback by people in their mid 20s (not even the conventional 18, 19 year olds) expecting that student loans, grants, etc.. cover their ‘living expenses’ in addition to tuition, books, fees and so on.
For many of them, their Tax Freedom day was back in January, while I still have a few weeks to go. I sit there quietly while I hear them complain about not being able to make trips to Europe or buy new cars. (I still have never bought a brand new vehicle!) When I went to Pitt (early 80s), I drove a ‘74 Chevy Vega. I had to rebuild the engine myself to keep it running. The thought of flying to France for vacation never entered my mind. I would splurge to attend a $5 jazz concert at the Student Union.
I realize just how much educational costs have risen, it’s not a pretty picture. But the typical student today has much more than I ever dreamed. I think this ties into Brad’s last paragraph above. The whole idea of what is ‘minimal existence’ has changed so much, that the richest of the world’s ‘poor’ would change places in a minute.
(Wow, I am long winded. I hope this was reasonably coherent. I get kind of wound up on a subject and start to ramble. )
May 2, 2006 at 2:56 PM
Great comment, Chuck; thanks for visiting!
I can’t get my head around your second paragraph. I don’t make the connection that a growing economy begats additional government programs. In my mind it is the opposite. A strong economy negates existing programs. (Scientific Spending, for example. Why should the government have to fund research when a corporation can do it.)
Another example was the days after the Tsunami in South East and Central Asia. Immediately other nations funneled cash from government coffers to the relief effort, and the United States did not. This made the UN and other nations cry foul; except they didn’t realize that the US Citizen and the US Business donated far more money from their own pockets rather than from money taxed by the Federal Government to use in Emergency Spending for such an occasion. This was an example, in my mind, where the non-taxed dollar replaced a Federal-Taxed dollar.
(And in the end, the US out donated every other nation on the planet, even in the wake of the Bush Tax cuts.)
May 2, 2006 at 5:31 PM
I think Chuck’s point (and welcome Chuck!) is that once a government program is created it is nearly impossible to destroy. Jobs are now on the line and public opinion, and people who have power over that program are going to fight tooth and nail not to give it up.
I’m not sure whether a growing economy begets public programs though or whether a hiccup in a growing economy gets programs to catch those that would fall out temporarily. Probably some of both depending on the program.
Companies do things for money. Period. So if they can get some goodwill or public investment out of donations for disasters or things like that, then they will. And since it’s tax deductible, it’s essentially publicly subsidized anyway. But I don’t think that works for long term things like the environment and education. It’s very hard for the public to draw causal relationships with long term subjects like this, so there is no payoff for companies spending money on them. I still believe we need government vision for these things.
Of course that requires that government actually have vision.