Tax Day – to Laugh or Cry. Total Personal Taxes

Happy Tax Day! If you have a big refund coming, celebrate. Relish it. Enjoy the pot-free high.

I apologize for the buzz-kill but: Do you know how much you paid in taxes last year?

Add state income taxes to your Form 1040 number, double the amount of Social Security and Medicare taxes shown on your W2.  Economists know that you actually pay your employer’s half. No, it is s not a plot.

Add sales tax, property tax, insurance premium taxes, telephone taxes, fuel and tire taxes, and dog licenses. You pay all business taxes as well, through lower wages, higher prices, and lower returns on your investments. It cannot be otherwise.

All told, government collects $38,000 per US  household last year. Match that up with a household making what it figures is $75,000 a year[1]; a typical income for a married, four member family. People who make more pay more in roughly lineal fashion. Those who make less, pay less.

On top of what it takes, government borrows, too.  Borrowing is just taxes you have to pay tomorrow. Unless you are lucky enough to die first.

The biggest chunk of public spending by far is senior subsidies. Each family under 65 pays $12,000 that goes straight to seniors – the have-lesses and have-mores both.  It is a weighty 24% of all government spending.

Social Security is wonderfully successful in cutting elder poverty. Yet it could provide better pensions for poor retirees much more efficiently for two reasons. First, the program pays people who don’t need it.  Second, if Social Security taxes were invested when collected, the have-lesses and the have-mores would both have much more.

Program advocates say the reason Social Security benefits are paid to the have-mores is to buy voter support. Call it a bribe or a marketing expense. Both are accurate.

Medicare suffers from the same marketing costs, too, as well as a health care sector four times more expensive than the best managed health industry in the rich world. We can thank the unintended consequences of a WWII era tax law for most of that damage.

Higher ed and K12 together takes another $5,800 per family[2] per year in more taxes. That’s 10% more than defense. Business models in both higher ed and K-12 have taken heat primarily on the grounds that costs have risen rapidly and quality has stagnated.

Defense is a taxpayer-funded piñata costing the typical family $5,200 per year. It is among the most technically competent of government agencies. Yet the DOD is so loosely run financially that it cannot pass an accounting audit that other agencies can.

Defense is a bit like anthropogenic global warming. In both cases, if the prophesied disaster is real, the money might do some good. But if the danger is a mirage, it is money down a rathole.

Defense and education bureaucracies have fascinating similarities, too.  Both have high degrees of political sophistication. Both have economic special interest groups as life partners. Both wear nearly nuke-proof bureaucratic armor.

Smaller public programs are as prolific as pre-teen girls at a One Dimension concert.  While all make some kind of contribution to the society that hosts them, taxpayers have seldom known if those benefits exceed their costs.

Surprisingly, over the past 85 years, government has grown its revenues more than four times faster than the business sector[3]. Not so surprisingly, it is easier to raise money using coercion, than it is when people have a choice.

Former Treasury Secretary Larry Summers’ phrase, “the bureaucratic imperative” describes the libidinous drive to a) protect budgets first, and b) to expand them whenever possible.

Bureaucratic pride can make organizations slow to recognize failures, quick to resist reforms. Look up Judge Lamberth and the Indian Trust Fund for a museum quality example of public sector boneheadedness.

Expecting public agencies to be neutral, third party advisors about themselves or their work yields the same results as depending on TV’s Dealin’ Doug for advice about your need for a new car.

Fidel Castro reportedly advised Hugo Chavez to cloak his Bolivarian Revolution as a democracy[4] presumably because people are easier to manage if they think they have a voice.

The US is a long way from Venezuela politically, but even in Eagle County, an old lady will go to jail if she refuses to pay for some retiree’s Caribbean cruise bought with Social Security money, ice at the skating rink, or an extraneous pedestrian bridge she thinks is dumb.

No doubt about it, there’s an itsy-bitsy version of Jonah Goldberg’s smiley-face fascism chewing on your paycheck.

Government spending is running a stunning $45,000 annually per family. Public debts total an explosive $650,000 to $800,000 per household, depending what is included. The Congressional Budget Office shows that trajectory heading to the moon.

Young people are easier to burgle than older people. Also note that there is not even a nominal “Taxpayer Protection Agency”, which, of course, would be badly compromised from the start.

Individually, public employees are wonderful, capable folks. Unfortunately, they are caged in organizations that seem intently focused on the organization’s well being first, less so employees, still less on the general citizenry in prominent cases[5].  Let us remember that they are only human.

We have a system that is extremely expensive and getting worse.  It backloads cost when it can, putting a particularly painful pinch on young people.

Without major efficiency reforms, most experts including Congress’ own budget office forecast national bankruptcy. Many families will go bankrupt before then.

The spending is poorly coordinated. Agency interests go beyond the common good.  Like dogs in a shelter, each agency barks for more.

It is up to us as taxpayers to manage the mess, and we do not have great tools.  On paper, we citizens are supposed to be in charge. In the field, it is hard to confirm that.

Look at your income. Look at your taxes.

This tax day take a vow for yourself, your family, and young people. “The path through me shall never be the path of least resistance”.

Now put that refund someplace where it will do you some good.

 

Click HERE for a version of this article published in the Vail Daily  on 14 April 2014.

 

[1] Based on MyGovSpending.com numbers from 2009, then adjusted for the increase in tax revs since then.

[2] from BEA Table 3.17 line 9

[3] BEA Tables 3.1, Line 15, Gov Current Expenditures, Table 1.1.5 Line 1 GDP, Table 1.9.5 Line 2, Business value added. Gov’s share of GDP went from 8% in 1929 to33%. Business’ share fell from 78% to 65%.

[4] The Economist, article upon Hugo Chavez’ death

[5] Post office, K12 teaches unions, civil service generally, PERA,

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