How tight is the United States budget, really?

This is a continuation of a conversation begun in another thread, where this subject is off-topic.

Every voter knows that we're running a deficit and have been since early in the Bush, Jr. administration. It is also widely believed that the only viable solution is massive spending cuts, supposedly because raising revenue by increasing the top marginal tax rate and/or eliminating exemptions for multi-millionaires, billionaires and corporations would have catastrophic side effects, but that is demonstrably untrue. Below is the first off-topic post on economics and tax policy, from the "heading towards being a secular society?" thread.

I suggest a distribution of wealth somewhere between the status quo, and the ideal Christian society, in which all excess (in fact, all privately held wealth of Christians, if you take Jesus at his word!) would be given to the poor.

When have I said zero out safety nets? How much is enough? Show me the math that is sustainable. (Show me the MATH Guy)

Let's begin with a ballpark estimate.

Economy - overview
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $48,100.

Notice, that's nearly $200,000 per family of four on average. Of course, most families have much less income than that (and fractionally more children), while a very few have astronomically more.

330,000,000 capita * $48,100/capita = $15,873,000,000,000 ($15.873 Trillion)

So, here is the "math that is sustainable" you requested, with a side ethics of ethics at no additional charge. Half the current United States GDP could be earmarked for safety net programs (Less would be needed for modest but sufficient food, housing, utilities, medical care, transportation and education, I'm sure, but I'm using hyperbole to emphasize that caring adequately for everybody in need is easily sustainable.) and nearly $8 Trillion would still be available for defense and to stimulate competition by rewarding whoever is more productive.

The defense budget is something like $2 Trillion, last I checked. It could be half that or twice that, and it wouldn't really matter. The point stands that the remaining several Trillion dollars are more than enough to motivate such competition as the capitalist model requires, and whoever cannot be motivated to put forth their best effort for their equitable share of that jackpot is too insane to make anything that anybody needs or wants.

Nobody must suffer deprivation in order for all of us to enjoy the benefits of civilized competition. The math is sustainable.

aw ite...

As I've stated before, to talk about it in such broad terms and in such an academic way is, well, it's a good starting point I suppose because when ever I start getting into the specifics, stating numbers, pointing to the latest IRS data, and showing how we can turn the current financial mess around, many folks in here, well, they ignore it, insult me, and tell me I don't know what I'm talking about.

Where am I in this financial mess? I give the government the equivalent of two brand new cars every year these days. Based on the bottom line of my 1040, I am not rich by any definition in Washington DC. And based on the things I see our federal government spending the dollars I give them every year, I think I pay twice as much as I should. I've worked as a tax professional at H&R Block so I'm well aware of most adjustments, deductions, and credits. I'm a strong advocate of SIMPLIFYING the tax code. I'm a strong advocate of BROADENING the tax base. And I'm a strong advocate of cutting federal spending. Real cuts--not base line budgeting cuts! I've done the math before. And each year I do the math, it's getting worse. And if we don't fix it soon, we will soon go the way of many other countries in the last few decades and suffer through the plight of hyperinflation.

So, are you aware of the current distribution of taxpayers and how much each pays? Are you aware of how much of the GDP goes to state and local taxes? Are you aware of the number of people who either don't pay any income tax what so ever or actually get a negative income tax check? (I won't ask you if you know how business raises capital to start a business which creates products, employs workers and generates more tax revenue at this time.)

I'm going to assume you know that you can raise taxes to what ever you want.... ONE TIME. And I assume you know anything you do to taxes will have an effect on the taxable amount next year.

So, can you get a bit more specific than there's a $15.8T pile of money we can take from next year without anybody suffering deprivation?

...
I give the government the equivalent of two brand new cars every year these days. ...

You're not really a computer science teacher are you?

Guy, get over it trickle down is a failure, the only logical solution is a blend of reduced expenditures and raising revenues. Way too much wealth is being accumulated by too few people. As an aside there are way too many people who have given up and contribute little or nothing. A question I ask is why have they quit and what opportunities do they have to improve?
McDonald's and Wall Mart are pretty poor options for mass upward mobility.
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...
I give the government the equivalent of two brand new cars every year these days. ...

You're not really a computer science teacher are you?

And you don't pay any taxes what so ever in the U.S., do you?

Guy, get over it trickle down is a failure, the only logical solution is a blend of reduced expenditures and raising revenues.

That's a lot to consider. Thanks. I'm going to skip over your personal taxes because I'm not interested in raising taxes on teachers. I think they could be lowered, at the same time providing better for the poor, by raising taxes on the truly wealthy to a level commensurate with their debts to society. I have tried to address much of the rest of what you said.

But first, I attempt to succinctly summarize by main premise, which is simply that a safety net which prevents any American from suffering abject destitution is achievable without undermining competitiveness.

I'd appreciate if you'd state succinctly, either why you think the expense is too great, or the effect on competitiveness would be too much (assuming I have inferred correctly that you disagree with me on the above). ;-)

My proposal would put a floor on "need" so competition would be only for luxuries, or better versions of the necessities, so housing with standard carpeting (or maybe linoleum, simple tile or Bella wood floors and the like) would be provided, Persian rugs would require competing successfully for economic reward; education up to and including state college, dormitory or modest apartment housing should be provided, but Harvard, upscale housing and fancier transportation than bus or bicycle would require competing successfully for economic reward, etc. And, as now, we'd all have to choose among such luxuries according to the degree of our success. The only difference is no mother would have to choose between food for her kids, or medicine for her kids, nor any other necessities.

By my rough estimate, a middle class standard of living guaranteed across the boards would really cost more like 25% of GDP, based on per capita income = $48,100 according to CIA, and family size approximately equals 4 (slightly more than 4, iirc). So even if the real cost of the general welfare is twice my guess, there would still be at least half of GDP remaining for us to compete over, and that would be more than enough to motivate me.

You're welcome to choose different figures that you consider more realistic, more reasonable, whatever. Just please specify at least the ballpark figures you're using in your analysis.

And based on the things I see our federal government spending the dollars I give them every year, I think I pay twice as much as I should.

I've worked as a tax professional at H&R Block so I'm well aware of most adjustments, deductions, and credits. I'm a strong advocate of SIMPLIFYING the tax code. I'm a strong advocate of BROADENING the tax base. And I'm a strong advocate of cutting federal spending. Real cuts--not base line budgeting cuts!

I've done the math before. And each year I do the math, it's getting worse. And if we don't fix it soon, we will soon go the way of many other countries in the last few decades and suffer through the plight of hyperinflation.

So, are you aware of the current distribution of taxpayers and how much each pays? ... Are you aware of the number of people who either don't pay any income tax what so ever or actually get a negative income tax check?

I'm going to assume you know that you can raise taxes to what ever you want.... ONE TIME. And I assume you know anything you do to taxes will have an effect on the taxable amount next year.

Are you aware of how much of the GDP goes to state and local taxes?

So, can you get a bit more specific than there's a $15.8T pile of money we can take from next year without anybody suffering deprivation?

Rs, one thing you are not considering is Guy's military pension. With his 27 years of service and the pay grade he last held I would suspect his pension is over 4K per month.
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Guy, get over it trickle down is a failure, the only logical solution is a blend of reduced expenditures and raising revenues.

Yes, the new "trickle down government" has never worked in history.

bobby, she didn't ask me a question. She called me a liar. Not knowing my tax situation isn't justification for calling me a liar. And not paying taxes in the U.S. gives me more reason to believe she's not familiar with the putative tax code in the U.S.

I wonder, what is the source of that $50K pension? Presumably that would be a government expenditure you and others (myself included) here would not argue to cut.

The fact that he contributed to that pension every weekly/monthly payday for 27 years.

I'd appreciate if you'd state succinctly, either why you think the expense is too great, or the effect on competitiveness would be too much (assuming I have inferred correctly that you disagree with me on the above). ;-)

http://www.irs.gov/pub/irs-soi/08in11si.xls

Consolidated from Column A (income group), Column C (% of returns) and Column R (Total tax)

Income group - % of returns - % of total tax
$0 - $25K-------41.3%-----------1.2%
$25K - $50K-----24.1%-----------6.4%
$50K - $100K----21.7%----------17.9%
$100K - $500K---12.1%----------41.3%
> %500K----------0.6%----------33.3%

You defend it all? Well, how the heck are we going to continue to pay for it all? The quick answer I always hear is to raise taxes on the rich, control private corporations more, and increase wealth transfer to the poor. This endless cycle of government taking more, keeping more, and handing out more is the downward spiral of our nation. We can't continue to raise taxes and expect to get more in revenue. If you tax more, you'll get less business. With less business, you'll get less tax revenue.

In D.C. speak, my VA benefits have been cut two years in a row already, and I'm looking at a bigger cut next year. You don't hear me whining. And you won't hear me whine. When word gets out about the bigger cut next year, you'll see all the veteran lobbyists start to walk back and forth with signs. But I won't be part of it. I'm willing to take these cuts. But I'll be darned if I'll be happy with my benefits being the *only* thing cut in order to be able to continue paying for things like:

-National Endowment for the Arts. $167.5 million/year
-National Endowment for the Humanities. $167.5 million/year
-Woodrow Wilson Center Subsidy. $20 million/year
-John C. Stennis Center Subsidy. $430,000year
-Beach Replenishment. $95 million/year
-Exchange Programs for Alaska, Native Hawaiians, and Historical Trading Partners in Massachusetts. $9 million/year
-Economic Assistance to Egypt. $250 million/year
-General Assistance to District of Columbia. $210 million/year
-Presidential Campaign Fund. $775 million/year
-Taxpayer funded union activities by federal employees. $1.2 billion over ten years.
-Mohair Subsidies. $1 million/year

Again, let me run down what can go into a tax return for you.

-Standard deduction $5,700 - $15,800
-Personal exemption $3,650 (for everyone in your household)
-Educator credit if you're a teacher $250 (CURRENT NOTE: GONE LAST YEAR)
-IRA deductions $5,000 or $6,000
-Student Loan interest deduction $2,500
-Tuition and Fees $2,000 or $4,000

So if you add this all up, it's plausible to make between $19,100 and $41,400 and pay zip/zero/nada federal income tax

And this isn't including the non-refundable credits

-Additional child tax credit - allowed only if you still haven't zeroed out your tax liability yet, and many times, I saw this do it.

After your tax liability goes to ZIP/ZERO/NADA, the following can make the IRS pay you money.

-Dependent care expenses - up to 35% of your actual expenses
-Elderly or disabled $3,500 - $7,500
-Education credits (3 ways to claim this) $2,400 - $10,000
-Retirement savings contributions up to $1,000
-Child tax credit up to $1,000 per child
-Making work pay credit $400 or $800
-Earned income credit maxes out with income between $12,500 and $16,400 for a credit between $3,043 and $5,657 depending how many children you claim

And then there are the refundable credits, such as the cash for clunkers thing last year and the first-time home buyer's credit (which most people don't understand you have to pay back!)

SO.... if you look at another of my previous posts showing the distribution of tax payers grouped by income, % returns, and % total tax, you'll see 65.4% of the total tax returns were for incomes of less than $50K.

So, yes, I think it's very believable that 47% of the people who filed tax returns in 2008 paid NO income tax at all. I don't know where that article got the numbers for 2009, since the IRS numbers only go up to 2008 at this time.

And, yes, based on the available information I've gathered and displayed here, it's very believable that 23% not only didn't pay any income tax at all, but also got a check for 100s or 1000s of dollars from the IRS.

I, too, have 5 digits withheld. And with careful planning, I usually write an additional 3 digit check to the IRS by April 15, which is less than 10% of my overall tax bill, otherwise, I get penalized even further. I do this to hang on to my money a little bit longer, because I plan for it.

Everybody on payroll has the option to plan for tax season. It's done with a W-4 to your employer. If you overpay throughout the year, that's money the treasury is collecting interest on, and not you. Your refund is a 0% interest loan to the federal government being paid back to you. It's being refunded because it's been yours all along.

Care to list the "tax credits/shelters/dodges available only to the wealthy"?

Or do you want me to do the work and actually show you the available deductions and refundable and non-refundable credits, along with their phase in and phase out amounts?

It can get very confusing for some and would take a lot of effort for me to explain it to you.

Simplifying the tax code would go a long way towards increasing revenue to the treasury. I'm all for a graduated flax tax system. No more deductions (schedule A). No more credits. No more standard deduction. No more personal exemptions. No more married filing separate or joint. No more head of household. No more qualifying widow(er). Everybody files without claiming to be married or single. They claim the number of people they are supporting. If one of the people you support is an income earner, you add that to the income for that family unit. Everybody pays *something*. Even if it's only $12/year for the lowest of wage earners.

Here's an example of what I'd like to see. Of course, I'd have a tax rate table based on the number of people living in your family. For simplicity, I'll look at only at a single person living on his own.

Annual income Tax rate
0 < 5,415 $1/month
5,415 < 10,830 1%
10,830 < 21,660 1.5%
21,660 < 41,320 3%
41,320 < 82,640 5%
82,640 < 165,280 10%
165,280 < 250K 15%
250K < 500K 25%
500K < 1M 35%
> 1M 40%

I think something like this would make a lot of people happy. It would annoy those currently at the bottom who not only don't pay anything, but still get a check, called a "refund." But I think something like this would be much fairer.

My proposal would put a floor on "need" so competition would be only for luxuries, or better versions of the necessities, so housing with standard carpeting (or maybe linoleum, simple tile or Bella wood floors and the like) would be provided, Persian rugs would require competing successfully for economic reward;

COMMUNISM DOES WORK! I've said this before and I'll say it again.

HOWEVER, there is a caveat. It works in small groups. As soon as the group becomes large enough so that someone can become anonymous, communism fails. In small groups, the groups can see who *truly* needs a helping hand and a helping hand is gladly given. When people no longer see where their helping hand is going, inevitably, someone takes advantage of the free ride and those who were once gladly lending a helping hand no longer want to lend a helping hand TO ANYONE.

Feeding the poor, giving to charitable organizations, being generous to those who are less fortunate, forgiving those who trespass against you, ... are all Christian moral values. Yes. But it works best on a LOCAL LEVEL, where you can SEE what's happening. When you SEE what's happening with the alms you donate, you find SOLACE in your actions.

When some one in Washington decides to TAKE from you, and then has all the power to decide what to do with YOUR money, and we see the waste, the fraud, the subsidizing of moral degradation, we no longer want to GIVE what they TAKE from us.

But you do know that despite being called "the income tax," that is not the only tax levied directly on personal income and withheld from paychecks, right?

Posted 598 days ago: (2008 numbers straight from the IRS...)

http://www.irs.gov/pub/irs-soi/08in11si.xls

Consolidated from Column A (income group), Column C (% of returns) and Column R (Total tax)

Income group - % of returns - % of total tax
$0 - $25K-------41.3%-----------1.2%
$25K - $50K-----24.1%-----------6.4%
$50K - $100K----21.7%----------17.9%
$100K - $500K---12.1%----------41.3%
> %500K----------0.6%----------33.3%

Posted 632 days ago:

You defend it all? Well, how the heck are we going to continue to pay for it all? The quick answer I always hear is to raise taxes on the rich, control private corporations more, and increase wealth transfer to the poor. This endless cycle of government taking more, keeping more, and handing out more is the downward spiral of our nation. We can't continue to raise taxes and expect to get more in revenue. If you tax more, you'll get less business. With less business, you'll get less tax revenue.

In D.C. speak, my VA benefits have been cut two years in a row already, and I'm looking at a bigger cut next year. You don't hear me whining. And you won't hear me whine. When word gets out about the bigger cut next year, you'll see all the veteran lobbyists start to walk back and forth with signs. But I won't be part of it. I'm willing to take these cuts. But I'll be darned if I'll be happy with my benefits being the *only* thing cut in order to be able to continue paying for things like:

-National Endowment for the Arts. $167.5 million/year
-National Endowment for the Humanities. $167.5 million/year
-Woodrow Wilson Center Subsidy. $20 million/year
-John C. Stennis Center Subsidy. $430,000year
-Beach Replenishment. $95 million/year
-Exchange Programs for Alaska, Native Hawaiians, and Historical Trading Partners in Massachusetts. $9 million/year
-Economic Assistance to Egypt. $250 million/year
-General Assistance to District of Columbia. $210 million/year
-Presidential Campaign Fund. $775 million/year
-Taxpayer funded union activities by federal employees. $1.2 billion over ten years.
-Mohair Subsidies. $1 million/year

My proposal would put a floor on "need" so competition would be only for luxuries, or better versions of the necessities, so housing with standard carpeting (or maybe linoleum, simple tile or Bella wood floors and the like) would be provided, Persian rugs would require competing successfully for economic reward...

As for this statement, it smells too much of communism for me.

Annual income Tax rate
0 < 48,100 0%
48,100 < 100,000 5%
100,000 < 250K 10%
250K < 2M 25%
2M < 10M 50%
10M < 100M 75%
100M < 1B 90%
> 1B 100%