Debt & Taxes

by muon
 

(video courtesy of coffeepartyusa.com)

This week we were treated to drama and angst from  Washington.  Congress is, after decades of driving the country into debt, all of a sudden worried about it.  At least, they want to LOOK like they're worried about it.

In any household, the residents can usually break down their sources of income:  wages, bank interest, loans, garage sales, jury duty, etc.

The income of the Federal Government can be broken down this way:

33.7% comes from taxes paid by you and me.
7.2% comes from corporate taxes.
53.2% comes from borrowing.
The remaining 5.9% comes from excise, estate and gift taxes, custom duties and fees and miscellaneous income.

Right away we can see that borrowing more than half of our income each year is going to get us into trouble. Isn't all that borrowing bad?  Well, if you look at the historical data on the Treasury Department's website, you'll see that the United States has been in debt since the Constitution was ratified in 1791.  U.S. debt that year was $75,463,476.52 -- comparable to 2 billion in today's money.  A lot of moolah in 1791.  Except for a brief respite in 1834, when the country came close to paying all its bills, the national debt has been climbing, sometimes slowly, sometimes (especially in war years) very quickly.  As of 4/7/2011, our total outstanding debt was $14,264,245,526,311.58.  I can't even wrap my brain around one percent of that amount.

But U.S. citizens like us are doing our part.  Our income, excise, estate and gift taxes provide over one third of the nation's income.  I'm content to pay my fair share, but I don't think we need to pay more.

Let's look at corporations.  Last November, the New York Times reported that "American businesses earned profits at an annual rate of $1.659 trillion in the third quarter" and that this was "the highest figure recorded since the government began keeping track over 60 years ago."

Yet, corporate taxes only make up 7.2% of U.S. total income.  In fact, since about 1940 (when corporations last contributed more to the nation's income than individuals), corporate taxes have been going way down while individual taxes were going up (see graph below).

So instead of cutting the programs that ordinary citizens need--and for that matter, are chipping in one third the cost of--let's bring corporate taxes back into line with individual taxes.  Not only that, but let's get rid of the perks corporations get that they're not paying for.  Things like subsidies, write-offs, deregulation, big government contracts and further tax cuts.  And let's get rid of politicians who take corporate money for their campaigns, then give big business sweetheart deals, driving up our taxes and the national debt.

Congress caused the debt to get out of control.  Now they're punishing us for it.  Time we start complaining.

muon