Milton Friedman on Tax Freedom Day ( May 14 )
Americans will work until May 14 this year to be free from the burden of federal, state, and local spending.
by Chris Edwards at Cato @ Liberty
The Tax Foundation reported that Tuesday was Tax Freedom Day (TFD), which is the day that Americans stop “working for the government” through their tax payments and start working for themselves.
TFD is calculated by taking total federal, state, and local taxes and dividing by national income to get a ratio representing the share of income that the average person pays in all taxes. That ratio is applied to the 365-day calendar. This year the ratio is 29.2 percent, which translates into April 17 for TFD. Time to party!
But maybe not quite yet…
When I worked at Tax Foundation in 1993, I mailed a letter to Milton Friedman asking about his view on TFD. He kindly responded with a letter and a 1974 Newsweek article in which he proposed a “Personal Independence Day.” That day would be based on total government spending, which is larger than total taxes, and thus our day to celebrate freedom from the government hasn’t yet arrived this year.
In his letter to me, Friedman stressed that total spending is the important variable in assessing the burden of government: “If government spends an amount equal to 50 percent of the national income, only 50 percent is left to be available for private purposes, and that is true however the 50 percent that government spends is financed.” And while some economists focus on how government borrowing may “crowd out” private investment, Friedman said, “What does the crowding out is government spending, however financed, not government deficits.”
In its TFD report, Tax Foundation includes a supplemental calculation looking at spending. The thinktank figures that Americans will work until May 14 this year to be free from the burden of federal, state, and local spending. The Foundation is lacking a snappy name for that important day, but now we are reminded that Friedman has already suggested one.
Friedman hoped that “Personal Independence Day” would complement our national Independence Day of July 4. The latter is the day we celebrate independence from the “Royal Brute of Britain,” as Tom Paine called him in Common Sense. But for Paine and the other Founders, the deeper goal of July 4, 1776 was to create a limited government to ensure the maximum space for the exercise of individual freedom. As Paine noted, private “society in every state is a blessing, but government, even in its best state, is but a necessary evil.”
So Milton Friedman’s Personal Independence Day can be our annual reminder that while our forefathers gave the boot to the “crowned ruffians” of Old Europe, we’ve still got work to do in limiting the power grabbing of our own elected ruffians in Washington.
Rep. Allen West on tax day:
Happy Tax Day America…and remember, if you decide that your future includes another four years of President Barack Hussein Obama, you will experience the largest tax increase in American history starting 1 January 2013.Tax Day is not just a day for requiring American citizens to cut their annual check to Uncle Sam; it is an opportunity to highlight a series of facts and figures to examine the merits of U.S. tax policy. Given the recent increased discussion surrounding tax reform, this information can assist in determining the most prudent direction to pursue reform:
1. The Impact of the President’s “Buffett Rule” Proposal:
President’s proposed tax increase would require Americans making over $1 million per year to pay an effective tax rate of at least 30%. The President stated of the Buffett Rule “…if applied to our tax code, could raise enough money” to “stabilize our debt and deficits for the next decade…This is not politics; this is math.”
According to the Joint Committee on Taxation, the Buffett Rule would raise $47 billion over ten years. The President’s budget calls for adding $6.7 trillion to the national debt. The Buffett Rule would cover ½ of 1 percent of the President’s spending plan.
If the government collects the Buffett Rule tax for 250 years, it would not cover the Obama deficit for 2011 alone.
The Buffett rule would pay for 17 days of the President’s deficit spending over the next 10 years.
The House passed Republican budget lowers the debt 62 times more than the Buffett Rule.
2. The Complex, Inefficient, and Inequitable Internal Revenue Code:
Americans are taxed too much and too often. The average American employee will work 107 out of the 365 days per year to pay federal, state, and local taxes. 29.3% percent of their year is spent working for the government.
In 1955 there were 409,000 words in the entire tax code. There are now 3.8 million words in the tax code.
There are at least 480 tax forms on the Intern Revenue Service (IRS) web site. As a result of this complexity, it takes 300,000 trees each year to create and distribute all necessary tax forms.
To deal with such a convoluted code, the IRS employs 114,000 people. That is double the amount of employees at the Central Intelligence Agency (CIA) and five time the amount of employees at the Federal Bureau of Investigation (FBI).
Americans have been working countless hours to comply with our nation’s burdensome tax code, 6.1 billion hours a year according to the National Taxpayer Advocate.
3. The Tax Code and American Competitiveness:
On April 1, 2012 the United States claimed the mantle of having the highest statutory corporate tax rate in the world at 39.2%.
According to the World Bank, there have been 133 major corporate tax cuts globally since 2006. None of which were enacted by the U.S.
Of the 33 non-U.S. Organization of Economic Cooperative Development (OECD) countries, 28 cut their corporate rate during the past ten years while two had no change.
2012 marks the 21st year in which the U.S. corporate tax rate has been above the average of OECD nations.
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