Where do the taxes you pay go? Some answers are really shocking. The government collects about two trillion in tax dollars every year. Americans want to believe that all that money goes into the services that the Us provides. Sadly this isn't the case. Around a third of the money is wasted as the government is very inefficient. Another third (according to one source), isn't collected. That leaves ONE THIRD!. That's still several hundred billion dollars.
One theory states that most of the federal tax money doesn't go to pay for essential, and nonessential services, but that is it wasted! It's used to pay interest on our national debt. At the time of writing , the national debt was slightly over $11,000,000,000,000!
Tax Surcharge on the Wealthy- Speaking of tax surcharges on the wealthy, increasing the tax rate on taxpayers with incomes of over $200,000 or couples earning over $250,000 has also been discussed as a way to help pay for health care reform. This is the hot proposal in the House. Current proposals would levy an additional 3-4%, with the possibility of an additional 0.6% tax on those making more than $500,000. It is projected that if passed these tax increases would generate an estimated $832 billion in Federal revenue over the next decade. Increased "Sin Taxes"- Increased taxes on sugar heavy soft drinks, tobacco products, and alcoholic beverages (also known as sin taxes) could provide up to $200 billion in additional tax revenue over the next 10 years. According to reports taxes on alcohol were last raised in 1991, and adjusted for inflation they are actually 37% lower today. However, with little support and opposition for dozens of industries, any such increases are very likely to ever see the light of day.
There were several other potential recommendations in the article that the commission might propose but each has a serious flaw. One option is to eliminate all Congressional earmarks, an action that would save upwards of $20 billion a year. However, since earmarks really serve as a clandestine way for politicians to fund their election campaigns, unless this recommendation is coupled with significant election campaign reform, our politicians are unlikely to give up this source of revenue for their perpetual re-election. Another recommendation is to eliminate the the deduction for the interest charged within mortgage payments. However, given the horrible financial shape of the housing market today, removing this benefit of owning a home would surely heap further ruin on an industry that is dragging down the economy. Thus, unless you can get the housing industry healthy enough to absorb another shock, this is also a nonstarter, at least in the short run. A third additional recommendation is to increase the gasoline tax by $.15 a gallon to fund transportation programs. Two things wrong with this proposal. First, how is this a deficit reduction recommendation? This expands government spending and has nothing to do with deficit reduction. Second, this proposal needs to be part of a bigger strategy as it relates to having a much wider national energy policy that takes into account energy independence, global warming, infrastructure. This is a tactic in search of an overarching strategy which does not exist.
A final recommendation is to freeze Federal pay levels for three years and reduce the Federal workforce by 10%. Recent studies have shown most Federal governments employees are much better paid with richer packages than their private sector counterparts so this recommendation fits into today's reality. Given that the Federal payroll has expanded significantly under the Obama administration and we are theoretically going to trim back the size of government, a 10% Obama mortgage interest deduction in the workforce also seems fair and doable, with the right leadership, a big if. Given what we know about the President's deficit reduction commission, from both the AP story and the Business week article, it is not unfair to say it will be a failure. First, politicians are already moaning about how these cuts will affect their constituents, putting any proposal in the hole out of the gate. Second, it does not appear that there is a comprehensive strategy behind how the commission went about their business. These proposals all look disconnected and disjointed. There is a short term, immediate proposal to freeze Federal worker pay but the commission won't touch Social Security for another forty years. In forty years, most of the baby boomers will be dead, how is that effective? They want an increased gas tax which fits no overall energy strategy or structure, very disconnected. And finally, none of these potential recommendations show any kind of creative thinking. In fact many of them are already in "Love My Country, Loathe My Government:" However, all is not lost. Many smart Americans are working on this issue in one form or another. They are not burdened by political office so they can come up with the right ideas, not the politically acceptable ideas. The U.S. Public Interest Research Group and the National Taxpayers Union recently issued a joint extensive report, highlighting their fine analysis on how to cut Federal spending. Their analysis shows that if their recommendations were implemented, they would result in over $600 billion in cost savings by 2015. Their general suggestions include better government operations in addition to outright cancellation of some non-vital government programs. Their underlying data came from a wide range of authoritative sources and their recommendations are detailed, specific, and actionable.
One theory states that most of the federal tax money doesn't go to pay for essential, and nonessential services, but that is it wasted! It's used to pay interest on our national debt. At the time of writing , the national debt was slightly over $11,000,000,000,000!
Tax Surcharge on the Wealthy- Speaking of tax surcharges on the wealthy, increasing the tax rate on taxpayers with incomes of over $200,000 or couples earning over $250,000 has also been discussed as a way to help pay for health care reform. This is the hot proposal in the House. Current proposals would levy an additional 3-4%, with the possibility of an additional 0.6% tax on those making more than $500,000. It is projected that if passed these tax increases would generate an estimated $832 billion in Federal revenue over the next decade. Increased "Sin Taxes"- Increased taxes on sugar heavy soft drinks, tobacco products, and alcoholic beverages (also known as sin taxes) could provide up to $200 billion in additional tax revenue over the next 10 years. According to reports taxes on alcohol were last raised in 1991, and adjusted for inflation they are actually 37% lower today. However, with little support and opposition for dozens of industries, any such increases are very likely to ever see the light of day.
There were several other potential recommendations in the article that the commission might propose but each has a serious flaw. One option is to eliminate all Congressional earmarks, an action that would save upwards of $20 billion a year. However, since earmarks really serve as a clandestine way for politicians to fund their election campaigns, unless this recommendation is coupled with significant election campaign reform, our politicians are unlikely to give up this source of revenue for their perpetual re-election. Another recommendation is to eliminate the the deduction for the interest charged within mortgage payments. However, given the horrible financial shape of the housing market today, removing this benefit of owning a home would surely heap further ruin on an industry that is dragging down the economy. Thus, unless you can get the housing industry healthy enough to absorb another shock, this is also a nonstarter, at least in the short run. A third additional recommendation is to increase the gasoline tax by $.15 a gallon to fund transportation programs. Two things wrong with this proposal. First, how is this a deficit reduction recommendation? This expands government spending and has nothing to do with deficit reduction. Second, this proposal needs to be part of a bigger strategy as it relates to having a much wider national energy policy that takes into account energy independence, global warming, infrastructure. This is a tactic in search of an overarching strategy which does not exist.
A final recommendation is to freeze Federal pay levels for three years and reduce the Federal workforce by 10%. Recent studies have shown most Federal governments employees are much better paid with richer packages than their private sector counterparts so this recommendation fits into today's reality. Given that the Federal payroll has expanded significantly under the Obama administration and we are theoretically going to trim back the size of government, a 10% Obama mortgage interest deduction in the workforce also seems fair and doable, with the right leadership, a big if. Given what we know about the President's deficit reduction commission, from both the AP story and the Business week article, it is not unfair to say it will be a failure. First, politicians are already moaning about how these cuts will affect their constituents, putting any proposal in the hole out of the gate. Second, it does not appear that there is a comprehensive strategy behind how the commission went about their business. These proposals all look disconnected and disjointed. There is a short term, immediate proposal to freeze Federal worker pay but the commission won't touch Social Security for another forty years. In forty years, most of the baby boomers will be dead, how is that effective? They want an increased gas tax which fits no overall energy strategy or structure, very disconnected. And finally, none of these potential recommendations show any kind of creative thinking. In fact many of them are already in "Love My Country, Loathe My Government:" However, all is not lost. Many smart Americans are working on this issue in one form or another. They are not burdened by political office so they can come up with the right ideas, not the politically acceptable ideas. The U.S. Public Interest Research Group and the National Taxpayers Union recently issued a joint extensive report, highlighting their fine analysis on how to cut Federal spending. Their analysis shows that if their recommendations were implemented, they would result in over $600 billion in cost savings by 2015. Their general suggestions include better government operations in addition to outright cancellation of some non-vital government programs. Their underlying data came from a wide range of authoritative sources and their recommendations are detailed, specific, and actionable.
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