"Knowledge will forever govern ignorance

 and a people who mean to be their own governors

 must arm themselves with the power which knowledge gives."

Tuesday, March 01, 2005

Taxpayers and Tax Receivers

When it comes to taxes, there are really just two groups – taxpayers and tax receivers. A person’s philosophy and position on government tax policy and spending often depends upon which group the individual belongs.

Tax receivers are people that are net beneficiaries of tax policy - people receiving more from government than they pay in taxes. This group also includes people that earn their living in the public sector – those whose income, benefits etc. are dependent upon taxes.

Keep in mind, all politicians are tax receivers – the very heart of their power stems from their ability to take from taxpayers and give to tax receivers.

Tax payers, on the other hand, are those that are the net losers under tax policy – people paying more in taxes than they receive in goods and services from the government.

The country is quickly reaching the point where tax receivers will out number taxpayers. As it stands now, roughly 122 million Americans or 44 percent of the U.S. population pays no federal income taxes. How easy to call for higher income taxes when you pay none personally.

In the current fiscal year about 47 percent of the country’s gross domestic product, is going directly to government at all levels - federal, state and local. This figure does not include regulatory and compliance costs or other off-budget items, which if included would push the number closer to 50 percent.

So government soaks up nearly half of the income produced by the nation and yet for some this isn’t enough. The state of New Jersey spends about $42 billion a year and the citizens of the Garden State will send in an excess of $ 91 billion in taxes to the federal government annually. That is a total of $133 billion dollars. How much is enough?

The bulk of this tax revenue is not spent for legitimate functions of government, national defense, ensuring public safety, building bridges or roads or other programs designed to benefit all citizens. In fact government spending does not create wealth in our society; it merely redistributes it to others.

An ever higher rate of spending for government is not sustainable. The more we spend on government, the less wealth created for all to share because it robs businesses and consumers of spending power. The more money spent on government, the less money available for the creation of more goods, services and jobs.

Ken over at Smadanek shows how the growth in government jobs in New Jersey out paces the growth in our population and that this rate of increase is triple the national average. This is no way to solve the state’s fiscal crisis and certainly no way to grow the economy. Clearly the tax receivers are wining in New Jersey to the detriment of the entire state.

When will our elected leaders figure this out? It will be interesting to see where one of the nation’s foremost experts on the economy, Jon Corzine, comes down on this debate. Can he get away with only representing the interests of tax receivers and still win the governorship? Taxpayers of New Jersey unite!


At 8:45 AM, Blogger Sluggo said...

Oh, I think our elected officials have this figured out very well. They're not all morons, even in Monmouth County. Some smart person (maybe Ken Adams) has to come up with an analog to the Laffer curve which will show the relationship between (x axis) tax rate and (y axis) incumbancy. Have to plot participation in services in there as well. Up to a certain point, I suspect, a rising tax rate will boost incumbancy as it places resources in the hands of our 'benefactors'. Where is the tipping point, though?

At 12:34 PM, Blogger Ken Adams said...

I think there are actually two possible tipping points. Either the number of tax receivers gets shrunk so far that they revolt, or the number of tax payers gets expanded so far that they can no longer stand the pain.

Right now, the average per capita state spending of about $5k is probably enough to keep the tax receivers quiet. I don't know exactly where the other tipping point lies, but this year's new tax of $800 (my lost NJ Saver rebate) is pushing me toward it.

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