Wednesday, April 15, 2009

Who Will Bear Those Deferred Taxes?

Mark Thoma blogged on the issue of tax progressivity and received a lot of comments. My two cents on this ended with this:

Besides – a lot of Federal taxation was deferred under the previous Administration. Who will pay those deferred taxes? It seems that the past White House wanted to claim no one had to. Now that was very dishonest.

Economist’s View reader Blissex made this important point:

over time the take of the federal level is around 20% of GNP and the take of the local level is around 10%. Higher incomes contribute a bit more to the federal level and lower incomes a bit more to the local level. Overall for most incomes the total tax take is around 30%, and very much flat, except perhaps for the top 10% and the bottom 10%, where various funny things happen.

His point is that the total tax bite including deferred taxation is around 30 percent – the ratio of government spending to GDP. If all income groups ended up paying an effective tax rate equal to 30 percent, then we would have overall balanced budgets. While the Republican Party pretends to be about limited government so everyone can have lower tax rates, the reality is that Republican governments spend as much if not more than Democratic governments. What the Republican Party is really about is seeking ways that the burden of these deferred taxes be shifted onto lower income groups so the higher income groups will not have to pay for them. Alas – we rarely hear Republican politicians and their apologists admitting that this is their real agenda.

1 comment:

Anonymous said...

"While the Republican Party pretends to be about limited government"


What they do is reduce or at least attack "entitlements", while expanding "discretionary" programs.

Entitlements go generally to the people, usually needy people, aged and disabled. These are attacked for consumming two thirds or so of federal spending.

While 2/3 of federal spending is too much for republicans, the 17% of GDP for corporate welfare is miserly.