US Debt – The Big Lie

by Bryan

11 comments

1 Kryten42 { 04.17.11 at 2:10 am }

LOL 😉 Those figures for Aus lie Bryan. 😉 Looking at that chart, I suspect they are only quoting *direct* taxes. We have many indirect taxes, excises, duties etc. that aren’t normally reported as *taxes* here. I guess it makes ignorant folks feel better. 😉 I am sure the actual figure here is nearer the 45-50% mark. Hmmm… I may just check that out… 🙂

2 Bryan { 04.17.11 at 11:46 am }

Oh, they track that sort of thing pretty closely, although local taxes might swing it some. For example, the state sales tax in Florida is 6%, but local governments can impose up to 1% more, so that adds to the taxes for the citizens of that county and isn’t generally known. The same goes for property taxes, as they would be averaged, so there could be a big difference based on where you live.

3 Badtux { 04.17.11 at 8:23 pm }

Kryten, these are taxes *as a percentage of GDP*. This isn’t necessarily the taxes that *you* pay, because at least here in the U.S., corporations (and the wealthy people who own them) have devised ingenious ways to not pay taxes, to the point where they were paying 30% of all income taxes in 1950, but only 7% of all income taxes today. Since we’re paying the same taxes today in the USA (as a percentage of GDP) as in 1950, what that means is that, err, who’s paying that other 23% that U.S. corporations were paying in 1950? Err, yes, us ordinary working Americans, duh :).

Every time I hear someone say nonsense like “the bottom 50% of Americans don’t pay income taxes”, I want to slap them, because those Americans pay sales taxes, they pay property taxes (either directly or indirectly), they pay payroll taxes, and on all of these (even property taxes here in California) they pay a larger percentage of their income than the top 50% pays in income taxes. Our lords and masters have devised a multitude of ingenious ways to shift taxes from them to us.

So if you feel you’re overtaxed, you may in fact be correct — even if the nation as a whole is undertaxed. The deal is that you’re taxed… and your lords and masters? Not so much.

– Badtux the Taxing Penguin

4 Kryten42 { 04.18.11 at 1:18 am }

Duh, BT! 😛 😉

According to our own *official* Treasury report on taxation here (from 2007 data), they claim slightly above 30% of GDP. I still think it’s higher as our Treasury are past masters at *creative accounting*. 🙂 Also according to this report, the USA is better off than we are as regards tax revenue vs GDP. Also, whenever Treasury reports tax (Gov revenue) figures, it’s almost always relative to OECD, very rarely Globally. 😉

http://www.taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_5-01.htm

This International Expenditure/Revenue comparison report shows that Revenue was near 40% of GDP in 2003, when our economy was much stronger and revenues higher than today (and taxes have not decreased since, in fact we have a couple new indirect taxes). You can also see from this report, that *Taxes* are claimed to be around 31%, which is about 8% less than the claimed Tax revenue at that time, which is curious given the title of the paper “International Comparison of Australia’s Taxes” and so should not include such things as International loan repayments etc.

International Comparison of Australia’s Taxes – Executive Summary

But… they all lie! 😛

5 Kryten42 { 04.18.11 at 1:34 am }

I have been reading the Treasury document “The Tax Framework”, and it has few examples such as:

Not all concessional elements of the tax system are classified as tax expenditures. This is because some concessions are considered structural elements of the tax system and are incorporated in the benchmark. For example, the personal income tax system includes a progressive marginal tax rate structure, which results in individuals on lower incomes paying a lower marginal rate of income tax than those on higher incomes. This arrangement is a structural design feature of the Australian tax system and is therefore not identified as a tax expenditure. Tax expenditures do not include the impact of the exercise of administrative discretion or the impact of taxpayer non-compliance with the tax law.

There are other fine examples of Gov semantics. 🙂

This was interesting also:

2.4 Treasury’s approach to estimating tax expenditures

REVENUE FORGONE AND COMPARISON WITH BUDGET ESTIMATES

The estimates of tax expenditures in this statement are prepared under the ‘revenue forgone’ approach which calculates the value of tax expenditures in terms of the benefit to the taxpayer of the tax provisions concerned, measured relative to a non-concessional tax benchmark, rather than in terms of the budgetary cost of those provisions.

Revenue forgone estimates differ from budget revenue estimates because they are estimated relative to different benchmarks. Estimates calculated by the revenue forgone approach identify the financial benefit of tax concessions to taxpayers receiving those concessions relative to taxpayers that do not. It does not include behavioral response impacts and so it does not necessarily follow that there would be an equivalent increase to Government revenue from the abolition of the tax expenditure.

In contrast, estimates of the cost of new policy proposals in the budget are based on the revenue that the Government expects to collect. The forward estimates and budget estimates are estimates of future tax collections and take account of factors such as taxpayer behaviour and compliance with the tax law.

The revenue forgone approach is the principal approach used to estimate tax expenditures in this statement and in the tax expenditure statements of most other countries.

It’s interesting because they constantly compare our Taxes against OECD, even though they use a different methodology to estimate tax expenditures to the rest of the OECD. 🙂

6 Badtux { 04.18.11 at 10:55 am }

What is interesting is that the OECD numbers above appear to include our Social Security taxes as taxes, rather than as pension fund contributions. Which of course they are :). That is also why Japan shows higher taxes than the USA, their direct taxes are lower, but their social security pension fund taxes are higher. If you wish to know why the U.S. is in financial trouble, the above numbers show that U.S. tax revenues were around 31% of GDP. U.S. government spending at all levels (local/state/federal), on the other hand, was at around 38% of GDP. Oops! Repealing the Bush/Obama tax cuts to the rich and taking tax rates back to Clinton rates would raise that revenue to around 36% of GDP, or a slight but quite manageable deficit (2% per year is a good number for a deficit because the Federal Reserve needs to expand the money supply by about 2% per year anyhow in order to keep money circulating rather than under mattresses, without a small amount of inflation money turns into mattress money and the economy slumps due to lack of that essential lubricant of commerce flowing through the tubes). We could live with that.

— Badtux the Numbers Penguin

7 Bryan { 04.18.11 at 12:24 pm }

Like every other balance sheet in the world there are two parts – assets and liabilities. If you reduce assets and leave liabilities unchanged you have a imbalance.

There are things that can and should be eliminated, like the Missile Defense System that will never work, but the real problem is that revenues were slashed before any serious work was done on expenditures.

There is over a trillion dollars per year given away is tax exemptions that certainly needs work. But do that first before playing with rates, so you know what the rates should be.

8 Badtux { 04.18.11 at 8:00 pm }

Bryan, defense spending was even more wasteful in 1950, we were spending close to 2% of GDP more per year then even with the pork built into the current “War on Terrah” budget. Had to build those B-36 bombers, y’know. Nevermind that it was clear by 1949 that piston bombers were obsolete and could be intercepted by Soviet jet fighters, Convair needed those bucks, y’know :twisted:.

That said, there is no longer a Soviet Union, and the War on Miscellaneous Dipsticks Living In Caves hardly requires missile defenses since the only missiles such persons will ever possess have sticks attached to their rear and require lighting a fuse with a match. So clearly there is some real fat there to cut. But the big problem right now is revenue, not spending — between the tax breaks and the tax rate slashes, revenue has sunk by 6% of GDP from the last year of the Clinton Administration.

– Badtux the Numbers Penguin

9 Bryan { 04.18.11 at 8:58 pm }

The really bad people would launch from submarines off the coast which is totally out of sphere of thinking for the MDS, or they would spend the $5k and send the warhead buried in cat litter in a container, which sets of the nuke detectors and therefore provides excellent cover.

There are all kinds of things that can and should be cut, but the real problem, as you say, is in revenue, and that needs to be dealt with first. Get the revenues back to the Clinton era levels, and start paying down the “debt”.

10 Badtux { 04.19.11 at 1:09 am }

Bryan, how many tons of drugs are smuggled into the United States *each day*? If the dipsticks living in cave somehow stumbled across a nuclear weapon, they’d just smuggle it using the same methods as the drug smugglers. The War on Terrah renders obsolete the old thinking that the only threat is ballistic missiles.

But the defense contractors need their profit. But that’s been a constant since 1950. I guess you can say we got more for our money in 1950 — after all, we *did* get close to 300 shiny aluminum big honkin’ bombers out of it, even if they were useless for anything except serving as targets in case of war.

– Badtux the Snarky Penguin

11 Bryan { 04.19.11 at 11:55 am }

You could smuggle it, but the container would probably be a lot cheaper, and you might make a profit on the cat litter before you set off the bomb. You couldn’t really trust the drug gangs not to use it on a rival.

At least all of the aluminum was easy to recycle, not like these modern materials.