Why wait for the tax hike?

Many Americans think tax rates are too low (Warren Buffet included), and that the 2001/2003 tax rate reductions should be allowed to expire in 2010.  Although I disagree, I respect honest differences of opinion among mature adults—and I'm also a strong believer in freedom of choice. 

Coincidentally, as I was browsing around the US Treasury's website, I stumbled across some new information (for me, anyway).  Before I found this, I didn't know that the Treasury already has a way for those who think taxes are too low to remedy that situation, and set an example for everyone else.  I decided to share this important information so readers here can spread the word. 

I've noticed that those who favor tax rate increases tend to justify that opinion based on an objection to the deficit and the increasing national debt.  Well here's the good news: it's not necessary to wait for the federal government to force a tax hike on everyone; it's possible to take a grass-roots approach.  Here's what the US Treasury has to say (see this page at their website):

How do you make a contribution to reduce the debt?

Make your check payable to the Bureau of the Public Debt, and in the memo section, notate that it is a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept G
Bureau Of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188

The deficit isn't very large now, so it shouldn't take much of a grass-roots movement to completely eliminate it.  (As I said, I think my taxes are already high enough, but I'll be keeping my eye on the numbers to see if this movement catches on.) 

Comments

[MarkG Fm Pa]

Assuming that there a few crack pots out there who would actually send in checks for this purpose, I'd love to see data on # of donors and total receipts.

On an unrelated topic, if anyone is considering any additional "charitable giving" for 2007 for tax planning purposes--I recommend the Cato Institute. Although not traditionally what you would think of as charitable giving I can easily rationalize it as helping to expand individual freedom, free trade, and economic growth prolicies world wide as the highest form of gift to my fellow man.

[Fersboo]

The IRS will also compute your taxes for you. I knew a couple in NYC that would send in their form with supporting documentation and a signed blank check. According to their children, they had been doing this for decades. I never got the chance to discuss this as I discovered it during the husband's funeral.

[Aaron]

"When I was old enough, I was to be apprenticed to Joe, and until I could assume that dignity I was not to be what Mrs. Joe called "Pompeyed," or (as I render it) pampered. Therefore, I was not only odd-boy about the forge, but if any neighbour happened to want an extra boy to frighten birds, or pick up stones, or do any such job, I was favoured with the employment. In order, however, that our superior position might not be compromised thereby, a money-box was kept on the kitchen mantel-shelf, in to which it was publicly made known that all my earnings were dropped. I have an impression that they were to be contributed eventually towards the liquidation of the National Debt, but I know I had no hope of any personal participation in the treasure."

Charles Dickens - Great Expectations

I think that we should have a donation mechanism for many government social programs that would extend their reach from the normal mandates. Take SCHIP for example. Liberals could donate their own money to extend the program to higher income families.

Would they oppose this?

[Jeremy]

Great reference Aaron (no pun intended). As well as a brilliant idea, allow people to give to those causes they see fit. In fact we already have a system setup by which this can take place through non-profit companies. While I don't believe that markets can solve all problems, I do believe that social issues are a good candidate to be funded this way.

[Syphax]

The exact same thing came to my mind when I heard Warren Buffet complain his taxes are too low. If he really thinks "his" taxes are too low, he can simply donate money to reduce the national debt... I'm pretty confident that he will never do this.

What he really means when he says "My taxes are too low" is "I think Washington needs to force other rich people to pay more taxes."

PS: Quick question...

Who benefits the most when lower capital gains taxes encourage Americans to save and invest more, increasing the total amount of capital and therefore increasing the number of jobs and the productivity of American workers?

My answer: Who cares!

[Boghie]

Here is an easy solution for the rich folks who think they pay too little in tax.

Fill out the 1040EZ

Don't waste all the time and effort to figure out deductions (charity is already on the 1040EZ) and business expenses. You will then get a Flat Tax!!! Yea!!! 39%.

The 1040EZ is your 1 page solution to all your tax problems. Why hire accountants to play the tax avoidance games you dispise. Pay your fair share!!!

[TDM]

Even better: just go to treasurydirect.gov and you can reduce the debt to 'the rest of the public'. You can always get your money back, with interest, if you ever find that you really do need the money.

[Bob]

In a word:

Guilt.

Buffet feels guilty that his tax RATE is lower than his secretary's (lower than most of us, I bet). If his rate goes up (he can afford a lot of UP) he will feel less guilty.

I'd cut the guy some slack, though. He's on record that there will be no windfall inheritance for his kids and he's giving away the majority of his fortune. And, from what I can see, he doesn't have a hedonistic or lavish lifestyle.

I'd rather you pick on Gore and his energy hog house. Now that's a hypocrite.

[Bob]

BTW, my take is that his guilt is self imposed. I don't see him as the type that would let others lay guilt on him.

[muirgeo]

Take SCHIP for example. Liberals could donate their own money to extend the program to higher income families.
Would they oppose this?
Aaron

I think you are on to something. Here is an idea. If you voted for the President you and all you fellow like voters get to split the bill for all additional spending over reciepts while that president is in office.

So now the Bush voters who like tax cuts so much (cus they pay for themself) would owe about...hummmm what's 4.5 TRILLION divided by 59 million??? What ever THAT number is. That's what you each should owe. Sound good? Fair? I say let's do it.

[Gil]

Heck. Conservatives can now voluntarily chip in for imperial excursions abroad too?

[Bob]

Muriego,

One didn't have to vote for Bush to benefit from the tax cuts. So you can tell all the wealthy libs you know to pony up and mail in their debt reduction checks. Or maybe you can shame them into starting a low premium health insurance company. They'll settle for a below market rate of investment return, right? Heck, maybe they'll opt for no return at all.

It cuts both ways, sir.

[muirgeo]

No, Bob, I'm gonna have to insist you voted for Bush now you need to put your money where your mouth is and pay for his excesses. I think it comes out to about $80,000 for you...$160,000 if your wife made the same choice. Do you have any dependent children who were old enough to vote...just wondering...at least you can claim them as dependents. Oh and I don't think he's done spending on the credit card you gave him. I think you'll owe another $10,000- $20,000 by the time he's done...but yeah enjoy those tax cuts that paid for themselves. Yep...enjoy the bombs that are dropping and the Private militia you're funding as well...oh and the oil company CEO's big bonus check. Enjoy that cause now under my system YOU get to pay for it.

Now when the democratic canidate comes in most definately we'll pay for any overages that occur from him not collecting enough to pay for his programs. Fair is fair.

[Boghie]

Muirgeo,

FY2007:
Revenue: 2,568 Billion
DOD: 530 Billion
Social Security: $622 Billion

FY2007 in 2001 dollars
Revenue: $2,163 Billion
DOD: $446 Billion
Social Security: $524 Billion

FY2001 in 2001 dollars
Revenue: $1,990 Billion
DOD: $291 Billion
Social Security: $462 Billion

To Summarize - adjusted for inflation:
Revenue: +8.7%
DOD: +53%
Social Security: +13%

So revenue increased 8.7% from a high point (not the recession of 2002/2003), DOD spending increased during a war and after Clinton drove such spending down to the dirt, and Social Security outlays banged up. Bush and the Republicans cannot control Social Security spending – and that rate of growth is now rapidly accelerating. They would not have increased DOD spending by the $90+ Billion supplemental for FY2007 if given the choice of not fighting a war – thus increasing DOD spending by 22%. And, the revenue growth over the years would have been far greater if we had no dot.com recession or 9/11 attack.

Basically, not a bad job for BusHitler.

Also Muirgeo, please don’t complain about using Clinton’s last budget year and not the year of Bush’s tax code change – those numbers actually benefit Bush’s claim.

FY2007 in 2004 dollars
Revenue: $2,308 Billion

FY2004 – actual numbers in 2004 dollars
Revenue: $1,880 Billion

Revenue Growth: 23%

Lastly, please don’t argue that we should not be fighting the Militant Islamists. That is boring and old and a matter of opinion.

So, what is left of your argument? That you assume that there is no correlation between the tax code changes and revenue stream. That you do not buy Christmas gifts when they are on sale. That folks like me (probably upper middle class) didn’t stop wasting time playing Arianna Huffington style tax avoidance games when the tax code became fairer.

Or are you going to offer a corporate income tax argument. When did corporate income tax growth start to flatten – when the libs got control of Congress. Can’t get my head around that. Maybe investors and corporations are adjusting to the impending increase in corporate taxes and dividend taxes. Time to adjust their books, eh…

[Boghie]

Muirgeo,

The above DOD expenditures include the war supplementals.

Two website are of interest to anyone wanting to review government revenues and expenditures:

The Monthly Treasury Statement
http://www.fms.treas.gov/mts

and,

Bureau of Labor Inflation Index
http://data.bls.gov/cgi-bin/cpicalc.pl

This site did not permit anchor links...

[Mike H]

Muirgeo,

You've been coming to this site for a long time. Have you not been the slightest bit convinced by Steve's main theme that the debt isn't a bad thing? You might not agree with what the money has been used for, but I believe Bush has been fiscally responsible. The debt level is at a very sustainable level and it hasn't moved much in the past year. I wouldn't want anyone to pay down the debt by choice, that would be a very dumb idea even if they believed the country needed it. That extra money should go towards investment. And if we pay off the debt, that means the fed has to by private bonds to control the money supply. These are all things that have been discussed at length here, I was just surprised you don't seem to be convinced by Steve's reasoning, but maybe I misunderstood your post.

[Boghie]

Mike H.,

Personally, I would prefer a bit of pay down. In FY2007 $430 Billion out of expenditures of $2,730 Billion was used to pay the interest on the outstanding Treasury Bonds. That amount to spending 16% of outflow on interest. However, I see you point solidly. Do we really want to early redeem the Treasury Bonds our Baby Boomers are counting on during retirement - do we really want them to be forced to invest in junk bonds or the stock market in their golden years???

By the way, the ratio of interest payments to total spending in FY2001 was 19%.

So, Muirgeo you lose on that one as well. Yuk, yuk. I didn't expect that one... So, BusHitler is spending less as a ratio on debt than Clinton - and the interest rates are higher. Too funny.

[Boghie]

Way too funny...

FY2007
Interest Payment / revenue = 16.8%

FY2001
Interest Payment / revenue = 18.0%

So big spending Bush pays less toward interest as a ratio of both payment to revenue and payment to expenditure than Clinton's final budget.

That is something I did NOT expect.

Too funny...

Way too funny...

Muirgeo, I want you to send the redemption request to the oldsters. I want you to force them to invest in the scary stock market and evil corporations rather than the US government. Obviously, investing in the stock market is not something you would propose since you most likely did not support Bush's Social Security plan. I bet, right now, you are investing in a money market for your retirement as a thirty something - yuk, yuk.

[JorgXMcKie]

Ah, Boghie, fish in a barrel. For those like Muirgeo it's simple: Any Republican (*especially* GW Bush) or non-Progressive economic activity or policy = BAD. Saves a lot of thinking.

[Bob]

Muriego,

You're rambling. Quite pathetically, I might add. There's not an ounce of rationality in any of your retorts. Quite frankly I'm now convinced you are incapable of rational thought. You definitely have BDS (Bush Derangement System)and I suggest you
get help.

[muirgeo]

Muirgeo,

You've been coming to this site for a long time. Have you not been the slightest bit convinced by Steve's main theme that the debt isn't a bad thing?

Posted by: Mike H

Mike are you and I reading the same Business papers? Sub-prime crisis, liquidity crisis, inflation, millions of foreclosures, declining dollar, the federal reserve flooding in money....????

And yes worst of all is what the money IS and isn't being spent on. Our countries infrastructure is complete disrepair while billionaires are made on Hedge funds with customized rules, getting the oil companies product to market, using the Farm bill to plow under family farms and give more to multinational mega-farm/corporations, a Medicare drug bill that is anti-competitive.....

Steve's a bit heavy on the optimism and light and the skepticism IMO. Anyone who is for a free market approach to the economy and tries to claim Bush's economy as some supposed example of free markets isn't paying attention to definitions and is doing a disservice to anyone who wants to attempt to prove that free markets are better then well regulated ones.

[CoRev]

Muirgeo said:
"Steve's a bit heavy on the optimism and light and the skepticism IMO."

It appears that you may need to up your meds. That ole depression is gaining.

[Boghie]

Muirgeo,

Millions of homes in foreclosure? Provide a link.

Inflation? One month???

Sub-Prime Crisis? How could anyone have guessed that folks with no skin in the game, no assets on the books, and buying at the top of the market would have problems? Folks speculated on their home - the rich with HELs and the poor with no document loans. Next year the price will jump 20%!!! And, interest rates stay low. Regardless, this problem is almost washed out.

Liquidity Crisis? Is it the government's fault that folks and businesses were living off debt? A little tough love reminder was needed.

Declining Dollar? The higher interest rates will strengthen the dollar. The BusHitler economy was a bit too hot and unlike the dot.com boom it was pricked in time to avoid a big bust.

Our interest rates are still very good. The economy will adjust.

Farm subsidies? It’s very difficult to kill a government program once the bloated bureaucracy is humming that supports it. Who initiated this pig?

And, regarding infrastructure… Are you voting for someone that redirects money from a bloated and ineffective education lobby to infrastructure? Or, just paying for more studies and administrators and benefits? You can’t tell me my fiscally responsible state (California) can’t live off of $143 Billion, and that the state education system can’t survive off of $60 Billion – but it can’t.

And, Muirgeo, something funny is happening in California because of policies you seem to favor. The rich folks (who pay the vast majority of the taxes) are moving to the other side of Lake Tahoe and the poor folk (who use the vast majority of the services) are streaming across the southern border. That is how it works Muirgeo. A balance. California is out of balance. So baseball and football players along with Hollywood stars and Silicon Valley business moguls and left wing pundits move their homes and offices thirty miles to the east – even if they are drooling libs.

By the way. Can you provide any link love to enlighten me from your vast library of business acumen? I can’t seem to find anything outside of Money Honey comments that portend the end of the American economic system. It must be there, however. I am so scared I am growing beats and radishes in my back yard and herding cats and dogs in my front yard. Have to eat, eh…

[Grodge]

Aaron,
I like your idea of voluntary payments for SCHIP and other quasi-welfare programs.

But, the ideal way to manage this would be through BONDS. Much like a municipal bond, call them "health bonds", contributors can provide capital to pay for the health care for the next generation. Make the dividend tax-free, too, what the heck.

The bond market would then determine what the value of middle class kids' health really is. If it worked, we could extend this to other programs.

[Grodge]

My one departure with Boghie is that his comparisons are from recession years to recovery years, and the numbers regarding increased gov't revenues are not that impressive compared to other recoveries.

Also, consider the likelihood of an approaching recession -- or at least a dramatically slowing economy-- and the prospects are bleak.

And Boghie, before you launch into me about a lack of references, I'll tell you upfront, I won't be doing that homework for you. For starters, you can go to Barry Ritholtz' blog for a more in depth blow-by-blow. Or don't. The market will sort this out eventually-- and I'm just as confident in my surmise as you are of yours.

It may not be as dire as Muirego concludes, but the comparisons provided by Boghie need more context.

[Boghie]

Grodge,

Thanks for the reference. His site is now in my IE blogroll.

Living in California I too think at least this region is in for some turmoil. Other regions are at some risk too. I looked at the way housing was marketed from about 2004 onward and decided to stay off that table – I mean housing shouldn’t be marketed like used cars, by selling the payment not the cost.

But, wailing about end times is a bit premature. And trying to argue that visible patterns are not visible patterns is odd.

Things are not rosy. They are normal. We may even be in a downturn. Oh well.

On starting and ending points. Where else do I start? I used President Clinton’s last FY budget as one starting point and Bush’s first post-tax code modification FY as the other. Bush and 9/11 had little/no impact on FY2001 and complete influence on FY2004. A truly slanted review would have been to sneak in a starting point of FY2003 – before the tax code changes took affect, but were the revenues were at their lowest. A high point (FY2000 – President Clinton’s 7th budget) to current would be an odd study. Regardless, that review would still show a revenue gain (in 2000 dollars: from $2,025 in FY2000 Billion actual to $2,103 Billion in FY2007 actual). Not a huge jump, but a jump. And, to be honest we have to incorporate 9/11 – not everybody gets to deal with collapsing economic sectors and a disintegrating stock market (-40%). Every President – including President Clinton – has to deal with economic downturns. This President had to deal with a traumatic event – and not just one.

Thus, my end points seem honest to me.

[Stephen Reed]

I wonder if this donation is tax deductible? :)

[Aaron]

Muirgeo, my idea was to use any donations to increase the scope of the program, not to completely fund it, so your comparison should be allowing right wingers to fund better weapons or buy additional missiles or something. And if you want to begin making people pay for their choices, I suggest the two following ideas that you aren't going to like:

The Poll Tax: Thatcher got killed trying to implement this.

Voting based on one man per vote plus a bonus portion of a vote based on the amount of taxes you pay. Don't pay taxes? One vote. Pay a lot, 1.3 votes? (or whatever)

Ideally, you could just have enough extra umppph that the total votes ends up being a little less of a benefit fest. I am also not sure that this would push things to the GOP, as we know many rich and well educated people are Dems (Muirgeo is a doctor, so I assume he's paying a ton in taxes.)

[Tim Worstall]

"I'd love to see data on # of donors and total receipts."

There's another account called Gifts to the United States. I wrote a piece for TCS Daily about it. Gets $3 or $4 million a year from memory.

[muirgeo]

Voting based on one man per vote plus a bonus portion of a vote based on the amount of taxes you pay. Don't pay taxes? One vote. Pay a lot, 1.3 votes? (or whatever)

Posted by: Aaron

Now here is an example of some one not having a clue of what is going on in tis country.

I'd suggest that one number of votes is geometric with the number of millions of dollars you own. Rupert Murdoch is pulling a good 1,000,000 votes or more on his own. The top 800,000 wealthiest probably get about 25,000,000 of the 110,000,000 votes counted.

[muirgeo]

Back to my , "Mike are you and I reading the same Business papers? "

The US is heading for a recession and the rest of the world would be "dead wrong" to think this will not impact on growing Asian economies, Morgan Stanley senior executive Stephen Roach said Sunday.

http://news.yahoo.com/s/afp/20071216/ts_afp/australiauseconomymorganstanley;_ylt=AmzHEKL8OsAasiP0PNuoNbxvaA8F

[Grodge]

Boghie:
I never disputed the veracity of your numbers. The tax revenues did in fact increase, and the YOY tax revenue numbers looked nice-- as they always do when recovery years are compared to recession years.

The personal income tax revenues have yet to reach the pre-tax cut levels, and the pre-2001 recession levels of 2000. The corporate tax revenues have made up that difference,and that is mainly because the corporate tax rate was NOT cut. So it was in fact the lack of a tax cut that enabled the increased tax revenues.

From NYT: "Corporate tax payments are expected to exceed $300 billion, up from $131 billion three years ago. The other big increase is an extraordinary jump in individual taxes that were not withheld from paychecks, usually a reflection of taxes on investment income and executive bonuses..."

"The long-term outlook is such a deep well of sorrow that I can't get much happiness out of this year," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and a former White House economist under President Bush..."

"Over all, individual and corporate taxes have lagged well behind the economy's growth over the past five years. Government spending, by contrast, mushroomed far faster than the economy."

http://tinyurl.com/2obxw8