WHO BENEFITS AND WHO PAYS FOR GOVERNMENT?

Updated 1/19/2013

by James Craig Green

You've probably heard Republicans say a very small percentage of the highest income taxpayers pay the most taxes. And, you may have heard Democrats respond that may be true for the income tax, but what about payroll, sales and other taxes, more equally distributed? Like most public debates, this one provides convenient sound bites for both sides to parrot, while ignoring the bigger picture. But the other day, I came across a report from the Tax Foundation that compares all government spending with all taxes in the U.S.

In 2007, the Tax Foundation published a detailed study of government spending and taxes for the years 1991-2004, allocated to each of five income groups. It contains several tables and graphs, from which I developed the following presentation.

For each of five income groups, my graph below shows the ratio of government spending received to taxes paid, including federal, state and local spending; and taxes of every kind. As you can see from my summary of tax and spending categories taken from the report in the boxes to the right of the graph, the scope of the tax foundation study is much wider than anything you've seen before. I can only hope the tax foundation will do this for more years after 2004.

Below the graph is my table based on data from the report's Figure 1, which I used to calculate the ratio of spending received to taxes paid by each income group. Click on the graphic to enlarge it.

The lowest income group receives about 15 times the amount of taxes paid, and the highest group about one third. A ratio greater than one means that group receives more in government spending than it pays in taxes. A ratio less than one means the opposite.

Since the first three categories are all greater than one, 60% of the people (3 x 20%) get more from government than they pay in. This leaves the remaining 40% who pay more than they get back. This must be what Karl Marx meant by "winning the battle of democracy."

The 2010 congressional elections, after energetic campaigns by tea party and other so-called "limited government" conservatives, were as complete an electoral success as they were a complete failure to reduce government spending. As Congressman Ron Paul recently noted, Instead of the left agreeing to cut social spending and the right agreeing to cut military spending, the right agrees to more welfare and the left agrees to more warfare. Such is the nature of an out-of-control Empire past its zenith.

I assume you knew, but maybe not, that the primary purpose of government is to perpetuate itself. No government in the history of the world has been as successful at this as the current American Empire of Debt described in Bonner and Wiggin's 2006 book by that name.

MY CONCLUSIONS:

1. Although 2004 was more than six years ago, the levels of government spending received and taxes paid by each income group are fairly representative of today, at least compared to decades ago. If anything, it's gotten worse.

2. When 60% of the voting population receives more from the government than they pay, there is no reason for this majority to accept LESS government spending or taxes. The more government spends, the better off they appear to be. Besides visiting Afghanistan, empires have in common the self-destruction of their currencies, from promising wealth they don't have (i.e., unsustainable public debt).

3. There is no rational reason to think the democratic process can ever produce less government spending. Consumers outvote producers, which is cheaper than buying their products. They don't seem to realize, or care, that taking more from producers by force reduces wealth for everyone, by reducing production incentives and replacing win-win trades with win-lose plunder. Thomas Paine said, "What we obtain too cheap we esteem too lightly."

4. Economic reality (i.e., collapse) is the most likely way for government spending to decline. It is already happening with municipal bond defaults, which have caused many towns and cities to lay off police and other emergency services. The same thing is happening to many states who are cutting both lean and fat. Despite having Congress' permission to create unlimited dollars (but not wealth), the Fed and Congress seem to be on the same downhill path as the states and cities.

5. Observe the rule of holes: when you're in one, stop digging.

6. Read my "Unchain the Builders" series on this blog to understand the principles which made the U.S.A. the most prosperous country in the world, and "Subordinate Acts" to understand how the Supreme Court has poisoned American minds against the Constitution, which may be the best republic-restoring tool we have. It needs to be protected, not changed.