Thoughts on Taxes
April 15th is coming up. For many of us, the problem with taxes is not how much we pay, rather it is what we get for our tax dollar. Taxes are the dues we pay to belong to a civilized society. Are we getting what we need? Are we getting our money’s worth? Are we building a prosperous, healthy, sustainable, and truly civilized society?
There is too much sound bite and too little information on this topic in the media. Perhaps the facts below and some perspective will help ease the pain this tax day.
How much do we pay?
In 2011 Americans paid, as a percentage of income, between 17% and 29% in total taxes. This includes ALL federal, state, and local taxes (income, sales, gas, property, payroll, etc.)
This same data shows the bottom 99% with average income of $58,500 paid 27.5% in total taxes while the top 1% with average income of $1,371,000 paid 29%. Do you think there might be a problem with fairness if the very wealthy pay only 1 ½ % more in total taxes?
In 2010 the average federal income tax paid was 11.81 percent of income. Individuals in the top 1 % averaged 23.39 % while all filers in the bottom 50 percent paid an average tax rate of 2.37 %. Is this too much to pay for a civilized society?
Where do our tax dollars go?
In 2014 the federal government will spend about $3.8 trillion. About 66% will go for mandatory spending like Social Security, Medicare, and interest on the debt. So a large part of total federal spending does go to people. But Social Security and most of Medicare are trust funds and are paid with payroll taxes. Social Security contributes nothing to the federal deficit. These programs are not really part of the “budget”. Is your 401k part of your employer’s budget or is it your money?
About 34%, or $1.15 trillion, is for discretionary spending or what is commonly argued about in Congress as the “budget”. This is where the problems lie. This is where the investments in people, public infrastructure, and government operations (courts, law enforcement, defense, etc.) must come from.
The Center for Defense Information (no liberal group) lists total national security spending at $968 billion for 2014. This tallies the Departments of Defense, Energy (nuclear weapons) Homeland Security, Veterans Affairs, some of the FBI, State Department, and the costs of the wars. This equals 85% of discretionary spending.
Why do we have budget problems?
In addition to excessive “security” spending, the cost of tax breaks to individuals and businesses is $1.18 trillion in 2014. Federal subsidies, grants, loan guarantees, and other handouts to business were $100 billion in 2012. As a result 60% of businesses pay NO income tax. Tax cheating, primarily failure to report income and padding of expenses, costs $400 to $500 billion a year in lost revenue. We also fail to set sensible priorities in our budgets.
Prosperous communities depend on INVESTMENTS in PEOPLE. A healthy, educated, working population and a strong public sector are the foundations of a secure and prosperous America. Our future depends on good PUBLIC schools, living wage jobs, affordable college, affordable housing, secure retirements, healthcare for all, clean energy, safe food & water, and a necessary safety net for all in need.
We cannot afford to ignore our real needs while bailing out Wall Street and subsidizing multinational corporations. We can no longer afford to spend over 85% of our discretionary budget on “security”.
An alternative balanced budget has been proposed that sets “people first” priorities. Called the Better Off Budget, you can support this effort by becoming a “Citizen Co-Sponsor” at http://betteroffbudget.squarespace.com.
Responsible budget solutions collect needed revenue, set better priorities for our tax dollars, and invest in people.