A Depressing Implication

So, apparently a few days ago on the Jay Leno show, Ron Paul made the claim that getting rid of the federal personal income tax would only cut federal revenues to the point they were at in the year 2000. The Washington Post, in nitpicking him revealed a rather depressing bit of information (my emphasis):

Expounding on his proposal for abolishing the income tax, Paul claims this would still leave the U.S. Treasury with roughly the revenues it had in 2000, in the final year of the Clinton administration. A post on the Paul campaign website explains that individual income taxes account for “approximately one third of federal revenue.” Unfortunately for the tax slashers, the one-time Libertarian candidate for president is wrong on both counts. According to the Congressional Budget Office, individual income taxes represent between 45 and 49 percent of federal tax revenues, depending on the year. For financial year 2007, total receipts from individual income tax were in the region of $1.1 trillion dollars. If you eliminated all that revenue, the federal budget would shrink to the size it was around 1995.

So, if you eliminated about half of the federal government’s revenue, you would only get it back down to the anarchist utopia of 12 years ago? What that implies about how fast the federal government has grown in the past 12 years is truly depressing. Over those 12 years, the US population grew about 15% from (~261M to ~301M this year), while the federal government grew by over 100%. So, what exactly are we getting now for that extra $1.1 Trillion that we weren’t getting then?

Is it just me, or are they actually making Ron Paul’s case for him?

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Jonathan Goff

Jonathan Goff

President/CEO at Altius Space Machines
Jonathan Goff is a space technologist, inventor, and serial space entrepreneur who created the Selenian Boondocks blog. Jon was a co-founder of Masten Space Systems, and is the founder and CEO of Altius Space Machines, a space robotics startup in Broomfield, CO. His family includes his wife, Tiffany, and five boys: Jarom (deceased), Jonathan, James, Peter, and Andrew. Jon has a BS in Manufacturing Engineering (1999) and an MS in Mechanical Engineering (2007) from Brigham Young University, and served an LDS proselytizing mission in Olongapo, Philippines from 2000-2002.
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6 Responses to A Depressing Implication

  1. Joe Mansfield says:

    There is a difference between the take in income tax and growth in the size of the government. It could (for example) simply reflect a rebalancing of taxation from corporate and indirect taxes to income taxes. However you don’t have to look for anything that complicated in this case just checking the numbers against some published data is a worthwhile exercise as it paints a slightly different picture.

    1995 Individual Federal Income Tax Recepits: $590.2 (http://www.house.gov/jct/x-83-99.pdf)
    Total aggregate Inflation 1995-2007 ~ 39.5%( http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=0 )
    Population Increase (261-301m) 15.3%.
    Adjusting just for raw population and inflation the 2007 equivalent per capita income tax number would be $947m.

    The discrepancy is then 16%. I seem to recall that there is a very expensive war on and that might have something to do with the difference.

  2. meiza says:

    Also as people get older healthcare costs will explode and GDP will drop.

  3. Jardinero1 says:

    For something to double in value in 12 years equates to compound annual growth of six percent. This is way more than inflation over the corresponding period.

    No one defines income taxes in this analysis. Does income tax refer to income tax only or does it refer to income tax and social security payroll tax.

    The public does not realize that social security payroll taxes fund up to half of the government’s general account these days, not exclusively social security benefits as is commonly misunderstood.

  4. ザイツェヴ says:

    It’s very simple, really: about one third of government revenue goes to serve the interest on past borrowing.

    The war and the all the defense spending together is something like 1/10th of the interest. The entitlement programs (e.g. Bush’s drug plan and such) are about one half.

  5. Danny says:

    No, this does not include Social Security. It is individual income tax only that amounts to about 45% of the 2007 budget. A good portion of where it all comes from is just borrowing, and soon enough it will be just printing. Devaluing our money is always a good way to pay off debts. Right.

    Bottom line, though, is that one way or another, we pay for government spending. Redistribute is however you like, there’s no such thing as a free lunch. If it’s taxes or inflation or something else, we’re paying for it.

  6. Jon Goff says:

    Danny,
    I agree wholeheartedly that borrow and spend is just as (if not even more) insidious as tax and spend. I was more suggesting cutting the government back to the size it was 10, 20, or even 50 years ago, and getting rid of the income tax…

    ~Jon

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