Pulitzer Prize-winning tax beat reporter David Cay Johnston thinks that those who think that the government is spending too much have it wrong. The problem is that we aren’t paying enough taxes:
There is a simple, factual way to describe what is happening to our government: We have a revenue problem.
Maybe not. Yes, revenues have plunged in the recession — as you would expect from a system where taxes are collected overwhelmingly from corporations and a narrow base of high-income individuals — the ones with the most volatile taxable incomes. But this chart (charts courtesy Reason.com) shows that a revenue drop has been, oddly, accompanied by a spending binge:
It’s as if, when one member of a two-earner couple loses a job, the couple responds by taking a cruise.
The idea that the federal budget would be fine if we would just do a better job of collecting taxes looks even worse if you look ahead a few years:
The projected spending on medicare and social security will swamp any attempt to solve the problems by tax increases alone. But Mr. Johnston seems to think we have no choice:
Mitchell’s tax ideas are great if you want a government with no money to track al-Qaida’s money or under which our food-borne illness rate (now 21 times that of France) would make death by salmonella rank with cancer and heart disease in the mortality statistics. In Mitchell’s ideal America, we would not have a cent for scientific research, a foundation of wealth creation in the future, as the governments of China, India, Korea, and most of the rest of the civilized world understand.
Actually, around 60 percent of federal spending consists of payments to individuals — taxing some of us to write checks to everyone else. That doesn’t kill many salmonella bugs. Even if you think federal efforts are all that keeps food companies from killing all of their customers, there’s a lot of room to cut spending before you fire the food inspectors. Ethanol subsidies and farm payments alone amount to $20 – $40 billion in annual transfers to mostly-prosperous folks.
When a couple comes in for credit counseling, of course they need to think of ways to raise new revenue — but they’re doomed if they don’t control their spending. The government is no different.
UPDATE, 6/26/2011: Links to Junior Deputy Accountant’s posts mentioned in the comments: