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The Problem With TaxesAs noted in The Role of Government, our over-sized government is funded by our over-sized tax bill. We are overtaxed. For every dollar we earn, we pay about 43 cents of it in taxes, but this statistic is somewhat misleading, as it understates the true extent of taxation. When we earn a dollar, 57 cents of it is paid to us, and 43 cents of it goes to the government.
The overhead of a huge government is astounding, and it creates a vicious feeding frenzy. When we raise taxes for a supposedly good cause, a surprising amount of the tax proceeds go to the overhead. The government collects our taxes, subtracts their expenses, and dispenses what's left. It first pays the staggering payroll costs as seen above, benefits, infrastructure such as buildings, rent, and utilities, interest, supplies, etc., then it hopes to have something left after this automatic net loss. Some estimates claim that as much as 83% goes to overhead, leaving only 17% for the purpose for which the lawmakers lobbied.
Some people complain about a do-nothing Congress, but keeping with Thomas Jefferson's theme of a small, frugal government, maybe such a Congress is not a bad thing at all. A do-nothing Congress is better than one that is constantly imposing new and bigger taxes upon us.
The government literally searches for new ways to tax us. Lawmakers tax everything they can in order to fund pork barrel and totally unrelated projects in their district that will gain them votes in the next election. Now politicians are anxiously thinking of ways to tax the Internet, and we should not let them do it.
Don't be deceived by politicians who display charts showing how taxes are higher in certain other countries. The citizens in those countries receive many more services for their taxes, and those services are more equitably distributed, such as health care (although socialized medicine is not a good idea). However, and more importantly, just because taxes might be higher elsewhere, doesn't mean that ours aren't too high. They're all too high, and those countries with higher taxes are doing an even worse job than we are in confining the role of government to its biblical place and size.
Also, beware of politicians who talk about "paying for tax cuts," because they are putting the cart before the horse. This is a misnomer, and an idea that they can get away with because we have become so numbed by high taxes. The idea is that if taxes are cut, then reasonable cuts may need to be made in inflated entitlement programs. This is backwards. The way the system should work is that the government should decide upon a budget, then collect the taxes required to fund that budget. However, many politicians seem to think that they have this endless supply of tax money to fund anything that crosses their minds. Hence comes the idea of tax cuts "causing" a cut in entitlements. It's as though they are focused on collecting high taxes instead of the merits of the programs. Tax cuts aren't "paid for", but entitlements must be.
We are taxed for virtually everything. We pay our money, time, and trouble for nearly everything we do. We have multiple layers of governments (federal, state, county, city, school, etc.) collecting taxes, fees, licenses, and permits for individuals and business at every turn:
- If we earn money, we pay (very high) income taxes, social security taxes, and Medicare taxes. In fact, we pay income taxes on the social security and medical taxes that we pay (a tax on a tax).
- If we buy something, we pay sales tax to the state and city.
- If what we bought is an automobile, we also pay the state and county for a title, and the state for a license and safety inspection (even if the car is new).
- If we drive that car, we pay the state for a driver's license.
- If we drive on certain roads, we pay a toll tax.
- If we drive to public property at a state park, we pay a usage fee to the state.
- If we buy gasoline for that car, we pay up to 100% tax to the state for it.
- If what we bought is a house, we pay (very high) property taxes to the state, county, city, school, mud district, and hospital district.
- If what we bought is an animal, we pay the city for a permit, only after we pay a vet for the shots that the city requires.
- If what we bought was material to build a storage building, we pay the city for a permit.
- If we sell something, we pay for a tax permit and collect taxes for each sale.
- If we run a business, we have to inflate the amount we charge our customers, due to OSHA and other government regulations.
- If we make a phone call, we pay federal, state, county, and city taxes.
The worst inequity in this is that we frequently pay tax on the tax we pay. We should never be taxed twice on the same income. All government fees and taxes should be deductible on our federal income tax. We shouldn't pay income tax on money we pay for Social Security tax or any state or local tax or fees.
Now, it may be OK to have a graduated income tax, but if some pay, then all should pay. We all see commercials on TV about lawyers who negotiate with the IRS on behalf of people who didn't pay their taxes, and those people get away with paying a small percentage of what they owe. Also, those who don't make enough money to pay income taxes should not receive subsidy checks.
Owen Weber 2009