Friday, April 17, 2009
David Walker: Why Your Taxes May Double
Op-ed on CNN: Why Your Taxes May Double, by David M. Walker (President & CEO, Peter G. Peterson Foundation; Former Comptroller General of the United States and Head of the Government Accountability Office):
Even under the best of economic circumstances, tax season is a tense time for American households. The number of hours we collectively spend working on our returns is probably a lot more than government agencies claim.
The burden in financial terms is even greater: A recent independent survey found that the average American's total federal, state and local tax bill roughly equals his or her entire earnings from January 1 up until right before tax day.
Now imagine that tax bill doubling over time. ...
Regardless of what politicians tell you, any additional accumulations of debt are, absent dramatic reductions in the size and role of government, basically deferred tax increases. Remember the old saw? "You can pay me now or you can pay me later, with interest."
To help put things in perspective, the Peterson Foundation calculated the federal government accumulated $56.4 trillion in total liabilities and unfunded promises for Medicare and Social Security as of September 30, 2008. ... If $56.4 trillion in financial commitments is too big a number to digest, think of it as $483,000 per American household, or $184,000 for every man, woman and child in the country. ...
Meet Owen & Payne, partners in a fictional accounting firm that specializes in helping Americans fill out the "new" Form 483000, which spells out how our elected officials are putting our nation into more and more debt and how that bill eventually will have to be paid: By doubling your taxes. The campaign is all in fun, but the intent is very serious.
Unless we begin to get our fiscal house in order, there's simply no other way to handle our ever-mounting debt burdens except by doubling taxes over time. Otherwise, our growing commitments for Medicare and Social Security benefits will gradually squeeze out spending on other vital programs such as education, research and development, and infrastructure.
https://taxprof.typepad.com/taxprof_blog/2009/04/david-walker-why-.html
Comments
Hey Rich, exactly how much did Jesus charge to heal people? Did he have a fee schedule, or did he simply bill to Caesar? Don't recall reading that. I thought the whole idea was that it was free from God. A for-profit health system monetizes human life.
Judas had monetized Jesus' life for 30 silver coins. Was that about right... or not?
Posted by: jw | Apr 20, 2009 1:42:57 PM
Toutatis ... so you'd like to go back to the days of routine exploratory surgery (instead of CAT/MRI/PET scans)?
To the days where gall-bladder surgery meant a large incision and days in the hospital to recover (instead of three small incisions and an outpatient procedure)?
To the days of diabetics having far less control over their blood-sugar levels (instead of accurate home monitoring systems) and some facing the problem of allergic reactions to animal-derived insulin (instead of having the alternative of HUMULIN or other advanced insulin types)?
All of the "insteads" above, and much more, were facilitated by letting innovators make an honest profit. And have you ever considered that these innovations have prevented more expense (i.e. longer hospital stays, fewer days off work, etc.) for millions.
Have you ever considered that the direct costs of these innovations were increased in large part because of their exposure to the "lawsuit lottery" of our civil courts?
BTW, I don't see where Judeo-Christian "philosophy", as advanced in the Bible, supports your position that health-care is non-profit. Even those who assisted the Almighty in bringing spiritual healing (evangelists and pastors) were considered to be worthy of financial support ("The laborer is worthy of their hire"). And, despite the fantasies of the Left, the Bible supports the making of an honest profit as virtuous.
Now, let me ask you a question ... did you oppose the PATRIOT Act.
If you did, you should be opposing government-run health care even more so, for it has far greater potential for abuse of your civil liberties.
That is because, if implemented, it will inevitably push all other alternatives to it out of business ... leaving you no recourse when the government decides that a treatment you may NEED is not cost-effective and denies it.
At least, with HMO's and group health coverage, my employer can still change insurers (and they have done so, in my experience) to resolve such problems ... or I can change employers to accomplish the same result. Neither option, as cumbersome as they are, will be available to me if we go to a gov-run system.
There are some things government does well -- but they are generally one-size-fits-all things, like defense and infrastructure.
The more personal an area is, the less effective government is at solving problems within it ... in large part, because out of respect for civil liberties and "fairness", government is extremely limited in its ability to address the differences that exist from person to person when it comes to these problems.
And it really only has two tools to solve any problem ... a bag of money, and a pair of handcuffs. Those just don't have the precision needed to effectively resolve problems at a personal level.
I take great issue with your statement about the superiority of government bureaucrats ... particularly with respect to motivation, for the longer they are in the system and insulated from the consequences of their decisions, the more their motivation is to just do the minimum to get by ... just like any institution with a guaranteed revenue stream.
I don't think you understand human nature ... and how free enterprise and the profit motive work against its slothful tendencies, leading to a better living standard for all.
Posted by: Rich Casebolt | Apr 19, 2009 7:31:38 AM
The defense budget is about 25% of the total. Social programs are the bulk of the budget and they are unsustainable without cuts or tax increases.
Posted by: Big Dog | Apr 19, 2009 7:01:29 AM
The problem with Peterson and Walker is that they have not been ranting about why taxes were cut to such extremely low rates for the last 28 years (unsustainably low as we now know) and have instead been ranting about government indebtedness while PRIVATE indebtedness quintupled. That's been 1 of the chief problems that led to the financial crisis. This all occurred during a period of severe predation of government services. Predatory lending only followed the severe theft of government resources by the private sector, not only with respect to the military but almost all government agencies, to the detriment of the economy and the society. Today the typical government bureaucrat is far superior in training, motivation, and efficiency to the private bureaucrat. Jokes about DMV notwithstanding, who wouldn't rather deal with them than a phone or cable company, a vendor of any kind, insurance company of any kind or any other private "service"? Bloody ridiculous. Just look at education loans. The government provides far more and cheaper loans to college students, with far better repayment and collection rates, and the rapacious private sector with its bloated fees, never-ending corruption, and quite useless idiots still keeps fighting for a piece of that pie at twice the cost to taxpayers and students. I think it was all that idiot Reagan's fault. He belittled government and turned all the nonprofit health insurance companies like Blue Cross Blue Shield into profit companies and promoted HMOs as a way of profiteering on the backs of the American public and the taxpayers to enrich themselves and a pharmaceutical industry. There should be no profits in health care. it's immoral. Neither Judaic or Christian religious philosophy supports it. No profit-based company should be involved in providing health insurance.
Posted by: Toutatis | Apr 18, 2009 10:26:59 PM
Dammit, I really don't want to be defending out of control Obamunistic government spending, but some of this stuff is nonsense.
"Regardless of what politicians tell you, any additional accumulations of debt are, absent dramatic reductions in the size and role of government, basically deferred tax increases."
Simply a false statement. If the debt-to-GDP ratio were to merely remain the same, there would be no need of tax increases. That means the debt pile can increase at the same rate as the NOMINAL GDP (not even real GDP), which in normal times charges ahead 5 to 7% -- without any need of tax rate increases. Shockingly, at present that implies an increase in debt of $600+ billion a year, assuming the economy recovers and resumes normal growth.
Meanwhile, while the next entire century's worth of currently-unfunded liabilities is something to be concerned about -- as it shows how stupid current programs are -- it is not a current liability of American households, and it's meaningless to try to scare people by assigning a dollar value to per household to it. I don't know precisely how I'm going to pay for groceries in the year 2030, but I'm guessing that if I'm still alive, I won't starve to death that year.
Or for context, perhaps you should match that up to the next century's worth of income per household? Is $483,000 liability per household so scary matched against $10 million in projected income per household?
"Unfunded liabilities" merely means "these programs are so stupidly designed they WILL be changed sooner or later".
Posted by: Kevin | Apr 18, 2009 5:33:12 PM
"Riight, its the medicare and social security that's the problem, not the billions of dollars the Pentagon is given each fiscal year or the billions of dollars wasted on the non working "Stars Wars" system. Right."
Plamen Petkov,
It obviously hasn't occurred to you that a working "Star Wars" system will help ensure the continued survival of your wonderful Medicare and Social Security...not to mention tens of millions of American taxpayers who support those goddamn programs in the first place.
Betcha didn't think of that, did ya, Mensa Boy?
Posted by: MarkJ | Apr 18, 2009 4:16:51 PM
"Blah, blah unsubstantiated allegation. Blah, blah, rumour, blah. Gross blah misrepresentation. Blah, blah, fallacy. Blah, freaking blah, blah, disingenuous medacity blah"
The fact is that doubling taxes, tripling them, or even quadrupling them will not bring an end to the federal debt or deficit spending - all it will do is to cement the idea of confiscatory taxation into the heart of policy discussion in the nation. Increases in taxes will only have the impact of lowering federal revenue over the long term as investment is driven away. The idea that there is a linear relationship between tax rates and revenue is pure fallacy - each marginal increase in taxation will bring a proportionately smaller increase in tax revenues.
Posted by: Petk0v | Apr 18, 2009 4:16:25 PM
"Petkov" doesn't want to let facts get in the way of a good rant.
Posted by: Mister Snitch | Apr 18, 2009 3:38:56 PM
The firm of Dewey, Cheatham and Howe does my taxes.
I wonder whether anyone with access to stats and academic brains has thought to analyze at what $$$$ point the state, county and municpal taxing authorities run up against the all devouring federal tax authority's confiscations and run out of stones from which to extract blood.
Posted by: T. Shaw | Apr 18, 2009 3:23:04 PM
"George W. Bush is a war criminal." Gee, no one's ever said that before. And it's still a lie, an insult and a piece of nonsense. Grow up, O'Guillory. If you dare.
Posted by: Robert Speirs | Apr 18, 2009 3:13:27 PM
David Walker's expectations are fully consistent with how politicians have changed tax rates with respect to the level of the national debt per capita and GDP growth since the federal income tax was established in 1913.
The perverse thing is that even though the politicians will try to avoid it for as long as they can, they'll eventually be forced to hike tax rates it by the principal agents they're doing all the borrowing from, as a condition of continuing to be able to keep borrowing from them.
Then again, I suppose they could just start printing lots of money....
Posted by: Ironman | Apr 18, 2009 2:44:13 PM
To all the responses to Petkov I would add this: the federal government's responsibility for national defense is explicit in the Constitution. Social Security and Medicare, not so much.
Oops, now I'm on the DHS watch list because I mentioned the Constitution in the context of limiting government power. Heh.
Posted by: McGehee | Apr 18, 2009 2:43:28 PM
Looks like we are screwed, check that, our kids are screwed!
Posted by: robert | Apr 18, 2009 1:53:44 PM
The reference to a "non-working Star Wars system" is a crock. Remember the direct hit on a failing spy satellite by the USS Lake Erie in February, 2008? This system could save millions of lives when the Islamofascists launch a nuke at a US city.
Posted by: Mike Kelley | Apr 18, 2009 1:46:12 PM
Just a note of interest, perchance?
After you go to the Owen and Payne site using the article's link, every time you try to open or download the PDF file of Form 4380000 to either look at it or print it out (as I was trying to do, so I could hand it out at work), IE fades out as it shuts down, and then it restarts, opening your home page. Very frustrating.
Mayhap someone has hacked the Owen and Payne web site? If so, how lame is that?
Sheesh.
But on the other hand, if, by a very slim chance, its just a bug in my own IE program... well then .... never mind...
Posted by: Brian | Apr 18, 2009 1:46:04 PM
.....I say just let it all collapse.....I know that sounds bad, but look at Japan...they've been trying to stimulate themselves for over a decade and it aint working very well....and frankly, I think by the time we'll need to absorb all these taxes, they will have destroyed the dollar and forced us all into an international currency....and an international tax program.....which is what I think they have wanted all along...try this:
1. Nafta and all the other international agreements move our production base to Mexico, China & India.
2. Anticipating the loss of millions of jobs, the FED and our Government turn a blind eye to, and in most cases publicly support the use of our home equity as an ATM. Sure, some people used the equity for instant-gratfication, but many had to use it to offset income losses, or reduction in their income due to down-sized job changes
3. Now that we have off-shored our industrial base and used up our equity...we are trillions in debt and in need of "international assistance by the IMF"
4. Military enlistment is off the charts because of the lack of decent jobs and when we go to war with Iran, the government will have all the "volunteers" they need.
5. Face it....they have us by the gonads and have done so purposefully...while Mr. Obama seems a welcome, fresh change from the bumbling war criminal who preceded him, I think people are starting to realize he is just a sharper soul who's "color" and accomplishment have made us all feel hopeful, but who in reality will never retrn the US to an independent entity.
6. Welcome to the New World Order.
Regards,
O'Guillory
Posted by: OGuillory | Apr 18, 2009 1:25:45 PM
Uh, Petkov (6:06:33 am),
Yes, actually that is correct. Entitlement spending dwarfs military spending. We could entirely disband our military and reduce spending by less than 10%. Ending Social Security and Medicare would reduce it by about half.
Really can't do either one. We had an opportunity to reduce the hit by allowing the younger generations to handle some of their own retirement but blew it. Now we're stuck with the worlds largest compulsory Ponzi scheme.
I'm 62 and don't plan to retire until I have to. I don't expect to receive much Social Security because the system will be going down in flames by then. I sure wish my FICA payments had gone to the same places my IRA money went.
Posted by: Ed Nutter | Apr 18, 2009 1:16:48 PM
Riight, its the medicare and social security that's the problem, not the billions of dollars the Pentagon is given each fiscal year or the billions of dollars wasted on the non working "Stars Wars" system. Right.
Posted by: Plamen Petkov | Apr 18, 2009 6:06:33 AM
I'm going to call you out on this one as this is completely BS. "Star Wars" as you dub completely works. The AEGIS system is now the best working National Missile Defense system in the world. Combined with the X-Band radar system, it can track anything with near 100% accuracy to things as small as a baseball being hit out of the park. Combined with AEGIS destroyers using SM-3's, they can literally shoot down anything now starting from boost phase to midcourse phase to reentry phase. Now the weakest point of the phase is obviously in the boost phase.
Now I'm asking you to prove where the system is not "non working".
Posted by: Kaitian | Apr 18, 2009 1:03:45 PM
Petkov, go look up what Social Security/Medicare spending is as a portion of the budget now, and what they're projected to grow to in the near future, and then get back to us about whether you still think defense spending is the problem.
Innumeracy and knee-jerk sarcasm will be the death of the Republic.
Posted by: Thomas | Apr 18, 2009 12:49:35 PM
@Plamen
Right, in fact it is exactly that. Defense spending is a) among the legitimate functions of the federal government b) tiny by comparison to medicare and social security. And it can be cut if need be, it is not a promise made 50 years into the future.
Posted by: Morgan | Apr 18, 2009 12:35:16 PM
The current tax system is designed in a manner that supports a Ponzi Scheme;it is complex, opaque,and they put you in jail to force you to stay in the scheme. They plan to put Madoff in jail, not his victims. Under our current tax code, the perpetrators of the scam are re-elected by raising money using the tax code as the come-on. It is difficult to control spending when most people think they are getting other peoples money and none/less of the taxes. The current tax system must be replaced by the FairTax- it is simple, transparent, and everyone will know every time they pay taxes because it is displayed on their consumption receipt. Until everyone knows what government is costing them individually, there is no incentive for them to be concerned about government spending. Learn for yourself-go to FairTax.org to become informed!
Posted by: Leo Linbeck, Jr. | Apr 18, 2009 12:30:22 PM
Riight, its the medicare and social security that's the problem, not the billions of dollars the Pentagon is given each fiscal year or the billions of dollars wasted on the non working "Stars Wars" system. Right.
_____________________________________
Welfare spending and entitlements cost more then defense by quite a large margin. I don't have the numbers for the latest "budget", but the last one had something along the lines of a third of federal outlays going to entitlements and welfare.
Oh, yeah Star Wars doesn't work. The dozen or so successful tests are a figment of my imagination. We should be looking to well thought out, successful programs like the War on Poverty for answers.
Posted by: Britt | Apr 18, 2009 12:12:17 PM
A while back Representative Michele Bachmann linked to a WSJ article that showed paying for all of this debt could not be accomplished even if we taxes those making 75000 or more at a rate of 100%. The story is blogged here:
Here is a citation from the WSJ piece:
"A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That’s less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable “dime” of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion."
Posted by: Wintery Knight | Apr 18, 2009 11:48:02 AM
The bad news is that the various trust funds contain nothings but IOUs issued by the Treasury to various other federal agencies. The good news is that The Supreme Court has already ruled that congress can lower the benefits for these entitlements. Some day our children will wake up and start cutting back. There is no reason to assume that they will go along with these Ponzi schemes.
Posted by: Laurence | Apr 18, 2009 11:41:05 AM
Unfortunately, until the above article can be put into a ten-second sound bite to be bellowed during a political debate, it's a part of the discussion to be discarded as being mentally too difficult to grasp.
Posted by: Insufficiently Sensitive | Apr 18, 2009 11:40:23 AM
You mean we gotta pay this money back? It's not trillions from Heaven??
Posted by: Jeffersonian | Apr 18, 2009 11:19:38 AM
Well, if my income doubled then I wouldn't mind it. My preference would be that income double in real terms (constant dollars). My bet, however, is that we'll be happy to *merely* suffer 8-9% inflation from 2011-2021 or so. This at least has the virtue of reducing the real debt load into which Obama is casting us and permitting us to pay our doubled taxes with less valuable dollars.
Posted by: Wildmonk | Apr 18, 2009 11:07:51 AM
Speaking as a Canadian, I don't have to imagine it.
Tax Freedom Day, the day on which the average Canadian begins actually working for himself rather than the government (combining all taxes....federal and provincial income, the 2 sales taxes, etc, etc), was celebrated on June 14th in 2008.
This was a red-letter year because it dropped back from the 18th in 2007.
Posted by: taboo | Apr 18, 2009 11:04:21 AM
If I write the government a check for $184,000, will they just leave me out of their plans in the future?
Posted by: Bob D. | Apr 18, 2009 10:57:08 AM
Riight, its the medicare and social security that's the problem, not the billions of dollars the Pentagon is given each fiscal year or the billions of dollars wasted on the non working "Stars Wars" system. Right.
Posted by: Plamen Petkov | Apr 18, 2009 3:06:33 AM
I'd hardly put education in the government's vital program category. The government indoctrination centers(aka.:public schools) have brought us to where we are today: a nation of morons unable to see the tyranny coming before our eyes. We don't know the Constitution; we can't reason logically; we don't know how to identify the fallacies promulgated by the controlled media; we don't know who to vote for or why unless the media tells us. Public education has done exactly what it was meant to do to our children: turn them into sheep who grow up to be sheared.
Posted by: Abby | Apr 18, 2009 2:51:41 AM
jw - ANY health care system paid for or carried out by non-deities "monetizes life" as you put it. Somebody actually pays and there are in fact limits on what will be paid. This is true for both profit and non-profit payers. Are you suggesting otherwise?
Posted by: Willj | Apr 23, 2009 2:44:14 PM