How about a 64 percent increase to all federal taxes?
By Fergus Hodgson
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How about a 64 percent increase to all
For years now, I've been
publicizing that the official national debt bears little
resemblance to the federal government's fiscal balance. In fact, while the reported number is approaching $16
trillion, the reality is around $211 trillion, depending on one's calculation.
Last week I spoke with Laurence
Kotlikoff, an economist and columnist with Bloomberg News, on precisely this
matter. He is one of the leading scholars on the indebtedness of the federal
government, and his book, The Coming Generational Storm (2004),
first introduced me to the concept of unfunded liabilities.
that federal officials label their transactions creatively, in a way that conceals
most of their debts. For example, Social Security and Medicare contributions
are recorded as straight revenue flows. The reality, however, is that this
money generates liabilities for repayment when the taxpayers retire. In other
words, the taxpayer has loaned money to federal officials, planning to receive
that money back; then, since federal officials spend the money and ignore the
need for repayment, they generate "unfunded liabilities."
This Ponzi scheme (as Texas
governor Rick Perry rightly
characterized it), of paying current recipients with money from new
contributors, is coming
to an end. As is always the case, at some point you run out of new people
to pay in, and an aging baby boomer population has brought us to that
To give people a sense for the
magnitude of this fiscal gap, closing it would require an immediate and
permanent 64 percent increase to
all federal taxes. And for every year that passes without reform, the
percentage continues to grow. In fiscal year 2011 alone, for example, the
federal government acquired $6 trillion in new unfunded liabilities, with no
sign of slowing.
The 64 percent increase in
taxes is both economically and politically inconceivable. The United States
already has the highest
corporate income tax and the most progressive
income tax in the OECD, so spending cuts are a fiscal necessity. Those who
propose sustained or even higher federal spending--Lord save us--ought to face
up to this reality.
A tip of my hat to the Independent Women's
This group, IWF, combats the stereotypical "presumption
that women want and benefit from big government"--a noble role. Recently,
they've published a lot on the contraception mandate, but the theme of their
latest Policy Focus, "Tax
Simplification," can't be repeated enough.
Not only does tax compliance
take our money, it takes our time too. And the more complex a tax code becomes,
the more time it wastes. In the case of the United States, taxpayers devote 7.6
billion hours annually to compliance. For each non-business, individual filer,
that comes to twelve hours and $160 for tax filing and preparation.
Not only would a simpler tax
code waste less time and enable a more competitive business environment, it
would discourage political corruption. Disparate tax application, allowing for
preferential treatment, is likely the key reason why such an unpopular tax code
remains in place. In fact, more than four out of five American adults believe
the tax code is both too complex and in need of major changes or a complete
- On Wednesday, March 7, I presented testimony before
the House Select Committee on Agricultural Regulations at a hearing on raw
milk legalization. Listen to that here.
- There will be a Constitutional Candidate Forum,
hosted by Founders' Truth and Constitutionalist Gathering Place, taking
place on March 31 from 8.30 a.m. to 12:30 p.m. at the Lighthouse Convention
Center, Raleigh. Go here for
Click here for the Fiscal
Tuesday, Mar. 13th, 2012 at 7:30 PM
2012 John William Pope Lecture
with our special guest Meghan L. O'Sullivan
"Making Sense of the New Middle East: The Dynamics and Their Implications for US Interests"
Saturday, Mar. 17th, 2012 at 9 a.m. - 3 p.m.
A Citizens' Constitutional Workshop in Morehead City, NC
with our special guests Dr. Troy Kickler & Dr. Michael Sanera
Workshop #2 in Morehead City: "What would the Federalists and Anti-federalists say about the current political and economic crises?"
Monday, Mar. 19th, 2012 at 12:00 pm Noon
A meeting of the Shaftesbury Society
with our special guest Professor Anthony J. Papalas
"The Fall of Greece, Keynesian Economics, and the European Union."
Monday, Mar. 26th, 2012 at 12:00 pm Noon
A meeting of the Shaftesbury Society
with our special guest Thomas Thibeault