Taxes and Society
Posted by Jeff Id on December 14, 2013
There is a lot of dogma in politics regarding tax rates and general government performance. I personally have found that most people make statements about politics with literally zero data. On thanksgiving, I spent about 4 hours on the government data website – http://www.bea.gov/iTable/iTable.cfm looking at various numbers reported there. A reader, who shall be unnamed, even stopped by recently claiming that taxes were lower than 1950, conservatives only make decisions with emotion (a common claim applied to today’s Marxist authoritarian-style liberals) and even that we should have an 80% of GDP tax rate to maximize government revenue.
Why maximization of government revenue (and therefore influence) is assumed a positive goal, is something you should ask one of those authoritarians, because it runs counter to everything a government should be attempting to do. Still, I found some interesting facts about government tax taking and spending.
Are we paying more taxes than before? Taxes are taken from us in so many ways, it is very difficult to add it up. It seems from those of us experiencing it, that taxes are continually on the rise and rarely pull back even a little. Taxes are a financial load, where they are taken from does have an effect, but how much is being paid in total is important when we consider the cost to society. First I looked at the per capita tax paid into government across all sources.
So in 2012 dollars 1950 population paid on average $4000 per person into the US government. In 1998 that had increased to 14000 per person! We are definitely paying more tax than 1950. What it also means is that if you have a family of 4 and you are paying in less than 4 x $14,000 = $56,000 into the government, you are paying less than your share of those taxes and they are being taken on your behalf from someone else.
Most people don’t realize that even if they don’t write 14,000 in checks, they still end up paying that tax in the form of lower salary, higher prices, etc. and that means they have a loss of influence over cash. Loss of income (Taxation) in any form, is a strong limitation of behavior and is a general decrease of personal freedom. Said another way, when money is taken from your employer, that money was something you helped create, yet high corporate taxes mean you no longer have any control for directing the influence of that cash to your betterment. You are less powerful and free as an individual.
Many would say Jeff, that’s not fair. You need to recognize that people make more money since 1950. The GDP corrected numbers are a more fair comparison they say. This logical fallacy fails to recognize that we are still asking the government to provide 3 times more service per person than we needed only 60 years ago during our best years. This increased service represents further loss of control through added regulation and compliance with those regulations is a double hit for the economy on the same tax dollars. Paying our already massive government to create hurdles for the economy is very expensive, and we see results from it all over the country. Do you realize how many businesses have left California, and why? This also applies to the argument about whether we should ever try to maximize government “revenue” as a means to promote general welfare. Still the GDP graph doesn’t tell that great of a story either:
I’ve shown this graph before. Tax rates as a percent of GDP haven’t changed much since 1960. They peaked in 1999 under Bill Clinton but the percentage of GDP dropped off precipitously in the last two years he was in office. Combining the first and second graph with the concept that the additional spending per capita by government results in a double-hit on the economy as businesses and individuals invest more money and time toward compliance with EPA, Education, IRS, traffic laws, employment law, and many many other well-known increases in regulation. As a percent of GDP, it should be obvious even to the left that the total governmental financial load per capita follows the first “total dollars paid” graph, NOT the percent of GDP graph. This is a very important point that is lost in the discussion of tax rates – this subtlety is often missed with intent.
We are paying much higher dues for our government than we ever have in history. With each new group’s pet-peeve, excessive regulation has invaded every aspect of American life. The land of the free can’t make its own decisions even on the size of soda they buy. Obviously, compliance dollars are much harder to quantify than governmental budget dollars, so we will move on to some other interesting plots.
I’ve shown a version of this plot before also, the 4 years since Obama took office are incredibly stark considering that we are not at war. Where this money is going is going to be a bit of a surprise to some here. I found this next plot worthy of writing this blog post.
What this graph is showing is what percentage of government expenditures is being handed out as checks other than pensions or tax returns. If you get social security, social security disability, medicade, medicare, food stamps, unemployment checks, etc… this graph shows the total percentage of cash that is being handed to people in the form of checks.
Until 1970, 20 percent of government revenue was used to help those in need. By the 1970’s we had reached a full 30% That held flat all the way until Bush junior took office, he managed to jump socialist style payments to 40% of tax revenue. I haven’t studied which policies did what, but the website I linked has additional numerical detail that could allow us to figure it out. What is again clear is that when Obama took office, he jumped total payments to “needy” citizens by an overwhelming 15%. We are now paying 55 percent of total tax revenue as checks to these deemed by government to be in need -- Starting in the first year he took office!
Of the $14,000 taken from every American in some form or other, $7,700 is being handed out to the less successful. I can imagine no greater danger to economic health than this situation. Obama told us during the election that this was his intent. Remember the discussion with ‘Joe the Plumber’ where Obama said – “when you spread the wealth around, it’s good for everybody”. Now you can see the result of new policy in dollars in the graph above, what many aren’t noticing is what these payments to not work, are doing to society.
A large chunk of this money is a massive incentive to single moms to avoid college and have babies. You can make solid five figures with health care if you avoid education and work while producing babies in the US and it isn’t hard to do. We have had dozens of employees who have chosen this rout. They work for a bit and when the benefits disappear, they go home and get the benefits back. They don’t make much money and complain that they are underpaid, but the money which used to go for salary 30 years ago, is being taken out the back doors of the businesses to support these massive social bribe programs, and ever greater regulatory costs.
These people are being effectively enslaved, and when they go past child bearing age, they will have no skills, little personal property, and will end up with no ability to get out of the situation that this government created. Socialism, is universally ineffective at solving the problems it purports to address. These people, who are dis-proportionally minorities, are being effectively enslaved to low wage jobs and a long-term mediocre economy.
The same programs have reduced barriers to entry for social security disability, allowing functional people to find loopholes to permanent paychecks. Back pain, mental issues and other problems which people were forced to work through have now become passes to a soft easy life.
Worse, I don’t see many discussing these real and critical issues in a rational fashion. The media, which used to be the immune system for political corruption, largely believes in the endless flow of government cash and currently takes no time to call out pro-government politicians of any party. Republicans and Democrats both continue to march in the same direction as evidenced by the first graph in this post. Bit-by-bit and none too slowly we are reaping the increasing problems caused by these policies. It is blindingly obvious now that we should reverse course on much of the social spending and enact common sense pro-business, pro-industry reforms. Our quality of life in the US is being corroded by a bloated authoritarian central government, and is being rapidly replaced with something much, much bleaker.