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Tax Reform
Savings,
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Demands are Only Growing Bigger for a Shrinking
Base of Taxpayers
Investor's Business Daily
July 2, 2009
By Ernest S. Christian and Gary A. Robbins
The old-fashioned term "taxpayers' money" has
recently resurfaced in Washington - but only to describe some
of the TARP funds used in the government takeover of auto
companies and financial institutions.
"Taxpayers' money" is almost never used in Washington
to describe any of the other dollars in the $3.5 trillion
federal budget. These dollars, divided into familiar categories
of entitlement and discretionary spending, are thought of
by most Washingtonians as the "government's money."
Washington is awash in money - dollars taken by the IRS from
the people who earned them and dollars borrowed all around
the world.
In Washington, success is measured by how many new federal
spending programs get enacted. Washington's champion spenders
- from the president on down - appear to suffer from a delusional
psychosis about money. They believe that federal spending
is a healing balm. It has magical powers. If applied often
enough in large enough quantities, it will cure everything.
Applied in the right places, federal money also enhances their
political powers and control. That is the main reason for
thousands of spending programs added to the federal budget
since 1965. President Obama is now expanding federal spending
by a whopping 30%.
Privileged Washingtonians forget that real people have had
to work, save and invest, often at great sacrifice, to produce
the money that government spends so extravagantly. In pursuit
of their careers, federal spenders pretend not to know that
the taxpayers of America would have been greatly benefited
had they not been forced to send their money to Washington.
Hardworking families could have paid a lot of bills and sent
a lot of kids to college with the $300,000 of "taxpayer
money" the government spends every week or so to fly
Speaker Nancy Pelosi home to San Francisco for a round of
political fundraisers and parties.
American taxpayers could do a lot of good for themselves and
others with the $400 billion in taxpayer money that Washington
spends each year on the 55% of government programs that admittedly
fail to accomplish their purposes.
When retained and put to work by the skilled, industrious
people who produce it, taxpayers' money tends to multiply
- usually by a factor of 3 to 1, according to a study by distinguished
economist Christina Romer (now President Obama's chief economic
adviser).
When government commandeers the taxpayers' money and spends
it, the money tends to shrink. Nearly all modern economic
analyses confirm that the "multiplier effect" of
government spending is less than 1. Predictably, the highly
touted "stimulus" package has not had its hoped-for
effect.
Years ago, Milton Friedman told his students that a dollar
of government spending produces less than a dollar of economic
growth. He was right. The government doesn't create wealth.
It just takes money from people who produce it and moves it
around.
More than 85% of the personal income tax is paid by a small,
overtaxed band of Americans who in number are less than 25%
of eligible voters. The total number of income-tax payers
is less than 55% of eligible voters. These people also bear
the economic burden of nearly all the income tax collected
from corporations.
Taxpayers pay government's bills - but they have little control
over how much of their money government spends or for what.
Obama plans to spend another $1.5 trillion of their tax money
in nationalizing health care, even though the taxpayers who
will pay 80% to 90% of that are overwhelmingly opposed to
socialized medicine. If the president succeeds in forcing
it upon them, they will get less health care (at a higher
price) and suffer a backbreaking tax increase to boot.
The plight of taxpayers and their money is likely to get even
worse after the next election.
Extrapolating from data compiled by the Congressional Joint
Committee on Taxation, and taking into account the president's
plan for "credits" that will remove more of his
supporters from the income-tax rolls, we estimate that a majority
of people who vote in the next election will be nontaxpayers,
fully able to tax an oppressed minority with impunity, without
themselves paying any income tax at all.
To them, government spending will seem free - and their demand
for more of it will be infinite.
Christian is executive director and Robbins the chief economist
at the Center For Strategic Tax Reform in Washington, D.C.
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