It IS a Spending Problem

Blue Hampshire proves this week once again that they just don't get it.  They put up an article this week titled "Focus... repeat after me "We don't have a revenue problem"" in which they attempt to claim it's not spending that's the problem but the revenue.  You can read their article in full HERE.  They base this claim around a single quote supplied from a USA Today article found HERE.

Let's start by looking at the quote they supplied:

Federal, state and local taxes - including income, property, sales and other taxes - consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports

That's an interesting claim.  Now if your like me you look at this claim and do a mental calculation in your head of the taxes you pay.  Personally I stopped adding when I hit about 35% of not just my person income but my household income which includes my wife's salary.

If you continue reading in the article you see the follow up statement:

That rate is far below the historic average of 12% for the last half-century.

So on average we only pay 12% of our income in taxes?  Property taxes in the town of Merrimack alone come out to be more then 12% of the average income.

This leaves thinking people to question how can they make such a claim when clearly those of us writing checks to the government each year can see it's not true, at least in our cases.

The answer is simple, not everyone pays taxes.  When you factor in the 47% who pay nothing, and factor in the fact that the lowest level income earners actually get money back they never paid in in the first place the over all average after wealth redistribution is accounted for comes out around what this article claims.  Here's a quote from the article found HERE that shows the full picture.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.


The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes.

That means while the overall average might only be 9.8%, those of us who actually pay the taxes are paying more and more while 40% actually get checks take from our tables for doing nothing.

Kind of sheds a different light on the whole matter doesn't it?

Getting back to the USA Today article, let's look at another point they bring up that accounts for why people paid less in taxes.

Sales tax. Consumers cut spending sharply in this downturn, thereby paying less in sales taxes.

In other words people paid less on taxes they could avoid.

One additional point that should be looked closely at is what they are discussing, "personal income".  Businesses are being hit harder then ever.  Just look at NH at how many new taxes have been leveled against small business owners and businesses in general.  When a company is taxed does that money come from heaven?  Of course not, it is taken out of the money that would otherwise be used to hire employees and pay salaries.  But they don't get into that little bit of information do they?

But I digress, let's go back to the Blue Hampshire claim that started this discussion.  They claim it's not spending that's the problem.  Ok, let's actually assume for a moment that each of us does only pay 9.8%, this only covers 60% of government spending. did a report that was released earlier this year in which they pointed out how much it would take to actually pay off our national debt.  I already wrote about it HERE and you can read the report in full HERE.  Here are some key statements from the report:

Actually, we did a calculation on what it would take just to eliminate the deficit and got a 242 percent increase in income tax rates. The 10 percent bottom rate would have to be 24 percent, and the top rate would have to be 86 percent.”

He added, “That would do nothing about the national debt.”

So Blue Hampshire folks, when income tax rates would need to increase 242% just to pay for the current level of spending do you seriously think it's a revenue problem?  Of course it's easy to think otherwise when you only look at a single out of context quote from a USA Today article.