How Much Taxation Would Fund Current Spending?

[Jeebus]

To best understand this spending aspect of the current budget negotiations in Washington, we must answer one crucial question: how much taxation on the top income-earners would be required to fully fund the present level of government spending?

For example, what would a 100% income tax on all those who earn over $10 million amount to? I'm not taking about a wimpy marginal rate, where one might tax only those dollars of income over $10 million (leaving the taxpayer $10 million). No, I'm saying you find all those who made more than $10 million and take every last penny -- an absolute tax of 100%.

Our federal government alone is spending more than $10 billion a day. Thus, a 100% confiscation of all income of those making more than $10 million would amount to less than 24 days of federal spending.

If we drop that "tax" point down to $1 million, the picture changes radically. The IRS says 236,883 Americans filed returns with more than $1 million in income. They reported a total income of $726.91B. While that is a lot of money, it's less than just Medicare and Medicaid, which cost $1 trillion together.Confiscating 100% of all income from those who made over $1M funds the federal government for 72 days.

The bottom line is that we cannot fund our current levels of spending by only increasing taxes on "the rich," all revenue increases must be coupled with significant REAL spending cuts (not just reductions in the rate of spending, which of course, are increases not reductions).

[soulflower]

We have too much spending and too little revenue. Its not one or the other. Both issues are serious problems...

[Jeebus]

We have too much spending and too little revenue. Its not one or the other. Both issues are serious problems...

Not true.

We have MORE than enough revenue.

The tax increases sought by the President are symbolic and do nothing to help increase revenue to the point that would be needed to fund his spending demands.

Spending must be cut, period.

We cannot tax our way to prosperity.

[soulflower]

Not true.

We have MORE than enough revenue.

Not true. Revenue right now is the lowest since the post-WWII era. It's the lowest it has been in several generations.

If that's not a revenue problem, I don't know what is.

I'm progressive but atleast I admit that we also have a spending problem...

[soulflower]

FactCheck.org agrees with me:

Some key facts we think are worth considering:

Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year, which ends Sept. 30. The figure was 25 percent in fiscal year 2009, highest since 1945.

On the other hand, federal revenues are expected to drop to 14.8 percent of GDP this year, lower even than the 14.9 percent attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4 percent.

These historically high rates of spending and low rates of taxation have combined to produce a chain of deficits that are also the highest since WWII.



http://www.factcheck.org/2011/07/fiscal-factcheck/

[Jeebus]

FactCheck.org agrees with me:

No year of taxation since WW2 has been able to capture more than 21% of GDP.

Current spending levels around 23% of GDP.

Spending is the problem, even if we had "historically highest of all time" tax rates.

[soulflower]

No year of taxation since WW2 has been able to capture more than 21% of GDP.

True but normal levels of Revenue are around 18-19% of GDP, not below 15% of GDP where it has been the past few years and where it was 60 years ago.

Ideally, we should grow revenue via economic growth but the next few years of economic growth are projected to be stagnant or modest. So, we're going to have to raise revenue the hard way.

Spending increasing the next few years is inevitable due to the wave of Baby Boomers retiring and getting Medicare and SS...

[ivanbalt]

No year of taxation since WW2 has been able to capture more than 21% of GDP.

Current spending levels around 23% of GDP.

Spending is the problem, even if we had "historically highest of all time" tax rates.

Spending and lack of revenue ARE BOTH THE PROBLEM.

[banner1124]

It's both a spending AND a revenue problem. Anyone who says it's only one or the other just doesn't know what the hell they are talking about. Sorry, that's just the way it is

[Jeebus]

So, we're going to have to raise revenue the hard way.

Even if "the hard way" called for 100% (all of it! every dime you make!) tax rates on EVERYONE (17 million tax returns) who made over $100,000 last year......

..it would raise $3.765 trillion dollars.

That's revenue / income to the US treasury. 100% of every dollar from every person over $100k income.

The current spending proposed by Obama is.......

...$3.767 trillion dollars.

So obviously we are not going to raise rates to 100% for everyone over $100K, and obviously the tax increases asked for by the President are meaningless media-hyped events that do nothing to solve the problem, which is, without a doubt, out-of-control spending--not revenue shortages.

[Jeebus]

It's both a spending AND a revenue problem. Anyone who says it's only one or the other just doesn't know what the hell they are talking about. Sorry, that's just the way it is

Anyone who thinks raises taxes on "the rich" is going to solve the crisis doesn't know what the hell they are talking about.

Sorry, just say it slowly "I am sofa King stupid."

[SemiAuto]

Not true. Revenue right now is the lowest since the post-WWII era. It's the lowest it has been in several generations.

If that's not a revenue problem, I don't know what is.

I'm progressive but atleast I admit that we also have a spending problem...

Revenue is at a near record level. It is being outpace by spending.

[SemiAuto]

It's both a spending AND a revenue problem. Anyone who says it's only one or the other just doesn't know what the hell they are talking about. Sorry, that's just the way it is

If you put 2005's spending against 2012's revenue then what would you have?

[sigmalady]

Spending and lack of revenue ARE BOTH THE PROBLEM.

Stop trying to make sense.

[banner1124]

Anyone who thinks raises taxes on "the rich" is going to solve the crisis doesn't know what the hell they are talking about.

Sorry, just say it slowly "I am sofa King stupid."

That's great. Now, please point out to me where you've EVER heard me say that raising taxes on "the rich" is going to solve the crisis. Here, I'll help you... I"VE NEVER SAID THAT!

The truth is that eventually tax rates need to go back to the Clinton levels for everyone as they never should have been lowered in the first place. However, as it stands right now the so-called "rich" are the only ones who can realistically absorb being moved back to the Clinton rates right now. The rest of us will likely go back to those rates at some point, but only when the economy is growing as it should be again.

[banner1124]

Revenue is at a near record level. It is being outpace by spending.

Maybe in raw dollars, but tax revenue as a percentage of GDP is at near record lows

[SemiAuto]

Stop trying to make sense.

The government is only lacking in revenue in the context of spending therefore spending is the problem. Revenue is near record levels but is being outpaced by spending.

A guy makes $100,000 and spends $110,000. He ran a $10,000 deficit. The next year he makes $120,000 and spends $160,000. Does he have revenue problem or a spending problem?

[soulflower]

Revenue is at a near record level. It is being outpace by spending.

In actual dollars, both Revenue and Spending are at record levels.

However, as a percentage of GDP, the correct way to measure Revenue, its at a 60 year low...

[banner1124]

The government is only lacking in revenue in the context of spending therefore spending is the problem. Revenue is near record levels but is being outpaced by spending.

A guy makes $100,000 and spends $110,000. He ran a $10,000 deficit. The next year he makes $120,000 and spends $160,000. Does he have revenue problem or a spending problem?

Depends on the context. If that guy had historically made $200,000 and now is only making $100,000 or $110,000 then one could realistically argue that he has both a revenue problem and a spending problem

[SemiAuto]

Maybe in raw dollars, but tax revenue as a percentage of GDP is at near record lows

Of course spending as a percentage of GDP is at near record highs. So if you combine raw dollars against spending it is pretty clear you have a spending problem.

If the government adopted spending levels from 2005 they'd have a nearly balanced budget. There is no doubt, the massive majority of the problem is spending.