Q: What is Tax Freedom Day?
A: Since 1990, the Tax Foundation has calculated how many days a taxpayer must work from January 1 each year to pay taxes that year, including federal, state and local levies. Tax Freedom Day is the symbolic day that a taxpayer’s income no longer goes to paying taxes. This year, Tax Freedom Day arrives nationally on April 17, after 108 days of work. In Iowa, Tax Freedom Day came on April 9. According to the Tax Foundation, if the federal government raises taxes to close the budget deficit, Tax Freedom Day would come on May 14, instead of April 17.
Q: Would raising taxes reduce the deficit?
A: President Obama is pushing a tax increase that he calls the Buffett Rule, after billionaire investor Warren Buffett. According to the Joint Committee on Taxation, the nonpartisan scorekeeper for all tax legislation in Congress, the Buffett Rule, as introduced by Senator Sheldon Whitehouse of Rhode Island, would generate $47 billion of revenue over ten years, or less than $5 billion a year. That’s a minuscule fraction of the federal deficit, which is currently more than $1 trillion for the fourth year in a row. And, $47 billion is less than 0.3 percent of America’s $15.6 trillion national debt. In fact, the Buffett Rule would cover one day of deficit spending by the government in fiscal year 2012.
Raising taxes won’t help reduce the deficit unless spending is under control. This spring, the head of the Government Services Administration was forced to resign after the Inspector General found that $823,000 was squandered last year on an over-the-top Las Vegas conference for agency employees with outlandish spending on penthouse suites, entertainment including a clown and a mentalist, and gifts of electronics including iPods, along with other indefensible spending. Last fall, a Navy audit of a contract awarded for energy efficiency projects under the 2009 stimulus program found that $90 million was wasted, yet the Navy official responsible for the contract award has done nothing to stop the projects. Since 2008, federal spending has increased by 21 percent and would continue to increase under the President’s budget, where it would be more than 23 percent of the total economy through 2014 and never drop below 22 percent in future years. Given that government spending as a percent of the economy has averaged about 21 percent since 1970, the President’s budget proposes a massive increase in the size of government.
What’s more, there’s evidence that tax increases fuel more spending rather than reduce deficits. Professor Richard Vedder of Ohio University has studied tax increases and government spending for decades. According to his analysis, over the entire post-World War II era and through 2009, every dollar in new taxes has resulted in $1.17 in government spending. In fact, in the budget proposed in February by President Obama, only 16 percent of the $2 trillion in tax increases would go to deficit reduction.