Tax Freedom Day And Other Tax Issues

From the Heritage Foundation (emphasis mine):

According to the Tax Foundation, today is Tax Freedom Day: That means Americans have worked about three and a half months of the year, from January 1 to April 13, before they have earned enough money to pay this year's tax burden at the federal, state and local levels. Thanks in part to both President George Bush's tax cuts and President Barack Obama's temporary tax cuts, this year's April 13 Tax Freedom Day is the earliest it has been since 1967. But do not celebrate yet. The Tax Foundation also identifies how long Americans would have to work to payoff each year's budget deficit. That day does not arrive until May 29 … the latest day ever for the deficit inclusive measure.

But back to the taxes. The Congressional Budget Office released a study last week that should give pause to anyone who believes the gap between spending and revenues can be closed by taxing the rich alone. In 2006, the latest date data is available, the top 20% of earners paid 69.3% of all federal taxes. Never has the top 20% of earners paid such a high share of federal receipts. Meanwhile, the bottom 90% of households paid only 45%, and the lowest 20% of earners paid only .8% of all federal taxes. Editorializing on the CBO findings the Washington Post warns: "There just isn't enough revenue to be found above that figure unless we create a system so lopsided that voters would always want more government spending because it would come at such a low price."

Unfortunately we are already there. Over the past 14 months, Washington has gone on an unprecedented spending binge that has sparked a nationwide protest. This Wednesday, hundreds of thousands of Americans will take part in Tea Party protests in 500 cities and towns across the country. The USA Today reports:

Organizers say they were not pleased by former president George W. Bush's performance on spending, either, but what moved them from yelling at the TV to rallying in the streets was Obama's proposed $3.6 trillion budget, a package the Congressional Budget Office says would produce record-breaking deficits of $9.3 trillion over 10 years.

As we've detailed before for all the talk of "hope and change" our current president is every bit the borrow and spender that our previous president was … and more:

• President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.
• President Bush began a string of expensive finan­cial bailouts. President Obama is accelerating that course.
• President Bush created a Medicare drug entitle­ment that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new govern­ment health care fund.
• President Bush increased federal education spending 58 percent faster than inflation. Presi­dent Obama would double it.
• President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already in­creased this spending by 20 percent.
• President Bush presided over a $2.5 trillion increase in the public debt through 2008. Setting aside 2009 (for which Presidents Bush and Obama share responsibility for an additional $2.6 trillion in public debt), President Obama's budget would add $4.9 trillion in public debt from the beginning of 2010 through 2016.

The time has come to stop the madness.  Find a local tea party on Wednesday of this week, and show up.  Many of them are also having some sort of donation drive to help local charities, so it's that much better for you to participate.

And remember, the key here is the tax tipping point: when more than 50% of voters realize that they can simply vote themselves handouts from the government (via taxation on the wealthy/producers), America as a free and prosperous nation is finished.  As the taxation lopsidedness increases, that minority of people who still produce and earn wealth will either get out of the game or leave the country, which then puts an ever greater tax burden on those who remain.  Once this process begins, it is inevitable that it will end in economic collapse.

Ari Fleischer has an outstanding article in the Wall Street Journal (h/t Hot Air) that touches on this subject (emphasis mine):

[T]he actual data on revenue sources from the Congressional Budget Office and comes to a much different conclusion about Obama's policies — and the danger of excessive exemptions:

A very small number of taxpayers — the 10% of the country that makes more than $92,400 a year — pay 72.4% of the nation's income taxes. They're the tip of the triangle that's supporting virtually everyone and everything. Their burden keeps getting heavier.

As a result of the 2001 tax cuts enacted by a bipartisan Congress and signed by President George W. Bush, the share of taxes paid by the top 10% increased to 72.8% in 2005 from 67.8% in 2001, according to the latest data from the Congressional Budget Office (CBO).

Contrary to the myth that Mr. Bush cut taxes only for the wealthy, the 2001 tax cut reduced taxes for every income-tax payer in the country. He reduced the bottom tax rate to 10% from 15% and increased the refundable child tax credit to $1,000 from $500 per child, both cuts that President Barack Obama says we should keep. In so doing, millions of lower income taxpayers were removed from the tax rolls, shifting the remaining burden to those at the top, even after their taxes were cut.

According to the CBO, those who made less than $44,300 in 2001 — 60% of the country — paid a paltry 3.3% of all income taxes. By 2005, almost all of them were excused from paying any income tax. They paid less than 1% of the income tax burden. Their share shrank even when taking into account the payroll tax. In 2001, the bottom 60% paid 16.3% of all taxes; by 2005 their share was down to 14.3%. All the while, this large group of voters made 25.8% of the nation's income.

When you make almost 26% of the income and you pay only 0.6% of the income tax, that's a good deal, courtesy of those who do pay income taxes. For the bottom 40%, the redistribution deal is even better. In 2001, these 43 million Americans, who earn less than $30,500, made 13.5% of the nation's income but paid no income tax. Instead, they received checks from their taxpaying neighbors worth $16.3 billion. By 2005, those checks totaled $33.3 billion.

There's your number for what defines you as being 'rich': $92,400.  If you make that much or more, you're already getting hammered by taxes, and it's only going to get worse.  The two key details you need to keep in mind every time you think about taxes:

- The top 10% pay almost 73% of all income taxes!!!
- The bottom 60% pay just under 1% of all income taxes!!!

This is nothing less than a collective economic rape of the 'rich' perpetrated by the 'poor', mandated by the government.

Here's where Fleischer talks about the tipping point:

Mr. Obama is adding to this trend with his "Make Work Pay" tax cut that means almost 50% of the country will no longer pay any income taxes, up from a little over 40% today. A certain amount of income redistribution in a capitalistic society is healthy, but this goes too far. The economic and moral problem is that when 50% of the country gets benefits without paying for them and an increasingly smaller number of taxpayers foot the bill, the spinning triangle will no longer be able to support itself.

So what's his solution?

It's time to create an Economic Growth Code whose purpose is to fix and grow the economy, not redistribute massive amounts of wealth. A new tax code that creates growth and reforms our entitlement system is the only way to dig our way out of the hole we're in.

Under an Economic Growth Code, everyone in American would pay income taxes -- everyone. Such a system would be designed to foster broad-based growth for all, in contrast to the loophole-ridden system we have today. Not only is the current code flawed from top to bottom, it is used by politicians to divide the public along class lines and fails to promote prosperity.

I favor the abolition of all Social Security, Medicare and estate taxes. In their place, we should create a simple income tax system that has no deductions or credits at all. The result would be a progressive, multitiered income tax in which everyone pays. The bottom 50% won't be excused from paying the cost of government and top earners will no longer have the loopholes they're used to. The middle-class, whose wages have stagnated, will benefit from economic growth. Social Security and Medicare will be funded from income taxes, ending the myth that these programs are supported through government trust funds and payroll taxes. The tax base will broaden dramatically, allowing rates to fall and helping to foster what's most important -- economic growth.

I'd also create a mechanism so tax rates go up or down for everyone -- no more dividing the country by lowering taxes for some or raising them only for others. A revenue system whose purpose is to pay the government's bills should apply fairly to one and all. If Congress wants to raise or cut taxes, it should do so for everyone.

Another benefit is that such a system will create an environment in which spending programs receive the scrutiny they deserve. It's funny what happens when everyone pays the bills; Americans may want less spending so they can pay fewer bills.

It sounds to me that he's endorsing some sort of a flat tax.  Frankly, I know there are problems and potential problems with any tax system, but at this point, I think it would be pretty easy to persuade me to go with some kind of a flat tax, where everyone pays the same percentage of his or her income as everyone else.  Do you make $25,000 a year?  Fine, you pay 15% of it in taxes.  Do you make $2.5 million a year?  Fine, you pay 15% of that.  I have no idea is 15% would be correct, but you get the point.  Factor in big deductions for a couple critical things like health care and charitable donations (I've seen those proposals in the past, and they seem to make sense), and call it good.  No loopholes, no multi-thousand page tax code, no automatic deductions, none of that.  Make our tax forms less than three pages, and something that an average 8th grader could fill out.  On this subject, simple = good.

There's a lot of talk about the Somali pirates and their ability to kill a few Americans on the high seas right now, but the far bigger problem we face is the piracy in our own neighborhoods and especially in Washington.  Those are the pirates that will kill the country for good.

There's my two cents.