Taxed to Death
If taxes are the price to pay for civilization… we begin to suspect civilization nears perfection in the United States of America.
The Congressional Budget Office (CBO) estimates Uncle Samuel hauled aboard a record $515 billion in taxes last month.
April tax receipts alone ran as much as $40 billion higher than CBO projections.
Individual income and payroll taxes rose $73 billion — or 20% — over last April.
Meantime, the federal government “only” expended $297 billion last month.
The happy result is what is known as a budget surplus — a record $218 billion surplus, in fact.
The previous record was $190 billion… established in April 2001.
Can we credit President Trump for the tax bonanza?
The Epoch Times:
The economy has been on a streak of exceeding expectations thanks partly to the “Trump effect” — a boost to confidence in the economy linked to Trump’s cuts to regulations, taxes and planned investment in infrastructure.
Let us lift a modest hymn of praise for the president!
But are we too bedazzled by April’s record surplus to glance the entire portrait?
April had its $297 billion record surplus, yes.
January had its own $49 billion surplus.
But February turned in a $215 billion budget deficit.
And March registered a $209 billion deficit.
Our rudimentary mathematics thus reveals a combined $78 billion budget deficit on the year.
If the books are to balance… an additional dose of civilization is required.
The tax haul must increase, that is — or spending must fall.
Will spending… fall?
Hell will fall below 32 Fahrenheit first… and its occupants will first fall to pneumonia.
Overall federal spending has risen 8% since last April.
“Defense” spending has increased 11%.
Social Security benefits rose 5%… Medicaid benefits, 10%.
Were you aware that interest payments on the national debt have increased 21% since April last?
And lest you forget…
In February, Congress reached a resolution to spend an additional $300 billion over the next two years.
If increased economic activity from tax cuts is to fund it all… the famous Laffer curve is in for heavy duty.
The CBO projects an additional $12.4 trillion of debt over the next decade.
What are the greatest burglars of America’s fiscal future?
Social Security, Medicare and Medicaid… with interest on the debt into the bargain.
These black holes alone could devour some 78% of the federal budget by 2026.
Let us look to the farther horizon…
According to an authority no less than the United States Treasury… projected taxes to fund Social Security and Medicare over the next 75 years fall $46.7 trillion short.
“Unfunded liabilities” is the term.
But even these $46.7 trillion of unfunded liabilities may only give a faint hint of America’s true indebtedness…
Economist and Boston University professor Larry Kotlikoff insists Social Security, Medicare and Medicaid aren’t fully accounted for in official crunching.
Accounting shell games mask the entire business, says Kotlikoff.
Give a true accounting and what is America’s true debt?
Over the next 75 years, this glum Gus projects America’s true debt at a cosmic $211 trillion.
Kotlikoff, shoulders slumped under the weight of his own words:
We have all these unofficial debts that are massive compared with the official debt. We’re focused just on the official debt, so we’re trying to balance the wrong books…
We’re not broke 50, 30 or 10 years from now. We’re broke today… It [the fiscal gap] equals the difference (in present value) between all projected future expenditures and all projected future taxes…
If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap. That’s our true indebtedness.
Here we approach a twilit neverland in which numbers become meaningless.
To close this intergalactic gap, says Kotlikoff, the following is required:
Either a 53% immediate and permanent hike in all federal taxes or an immediate and permanent 33% cut in all federal expenditures.
May we call upon you for a favor?
Please rouse us when the American people agree to a 53% tax hike… or an immediate and permanent 33% spending cut.
When Justice Oliver Wendell Holmes said taxes are the price we pay for civilization (1904)… the average American tax rate was 3.5%.
Even in light of the tax cuts, today’s average American worker’s contribution to civilization runs to perhaps 32%.
Many contribute more.
And rising deficits promise higher taxes in the years to come.
How much more civilization can America take?
We further wonder…
And how does a civilization survive… if it taxes itself to death?
Managing editor, The Daily Reckoning