Saturday, October 02, 2010

Thanks for Paying Your Federal Income Taxes, Here's Your Itemized "Taxpayer Receipt"

From the policy paper "A Taxpayer Receipt" from a D.C.-based policy group called "The Third Way":

"Corn syrup, milk chocolate, sugar, cocoa butter, coconut, almond, soy lecithin… any consumer can read these ingredients and their nutritional value on every package of a75-cent Almond Joy. What is provided to a taxpayer with a $5,400 tax bill? Nothing. For many Americans, the amount they pay in taxes is larger than any purchase they make during the year, but studies show they know almost nothing about where that money goes.

An electorate unschooled in basic budget facts is a major obstacle to controlling the nation’s deficit, not to mention addressing a host of economic and social problems. We suggest that everyone who files a tax return receive a “taxpayer receipt.” This receipt would tell them to the penny what their taxes paid for based on the amount they paid in federal income taxes and FICA."

MP: See the example above of an itemized tax receipt for the median tax filer in 2009 making an adjusted gross income of $34,140, and paying $2,790 in federal taxes, and $2,610 in Social Security and Medicare "contributions," for a total federal tax bill of $5,400. 

And here's a slightly different version of an interactive itemized tax receipt calculator at a website called "Where My Money Goes," which allows you to put in any income amount and see an itemized tax receipt (thanks to Alex Rodriguez for this website).


At 10/02/2010 2:38 PM, Blogger Buddy R Pacifico said...

A receipt based on a break-down by maybe cabinent level positions might be interesting. For example Secretary of State might incluse foreign aid. Sec. of Defense would be the military component. Sec. of Agriculture would be all the agricutural subsidies. Etc.

Each category would have a percentage of the total spending and individual amounts your taxes went to for each component. Also if you did not pay any taxes then a big zero would appear.

At 10/02/2010 3:56 PM, Blogger Milton Recht said...

The implicit assumption in these types of budget presentations is that the only way to cut the budget is to reduce benefits, entitlements, subsidies or whole line item programs, e.g. head start. Ignored in the analysis and presentation of the US budget is a business approach to the problem.

The itemization does not break out the personnel cost, including number or employees, benefits and pensions, of the Federal and State employees involved from the payments paid to the beneficiaries and from the materials used for improvements, such as for parks, space program, highways, etc.

The implicit assumption is that the only way to cut the budget is to reduce benefits or services, but that it not how business would look at the problem. Businesses would try to reduce personnel, material and process costs without eliminating or reducing the end service and benefit to the user, consumer or beneficiary.

We do not even know if it costs the government more to run any program than the dollar value of the services or benefits that program provides.

As we have seen in the current recession, businesses can recover a large percentage of US GDP without rehiring employees by becoming more productive.

Like a company that makes too many products and does not achieve economy of scale, too many inefficient government benefit, entitlement and subsidy programs cost the government too much to run.

Before we go about cutting dollars and services to beneficiaries (whether we believe in the program or not, such as ethanol subsidies), the American people should know whether or not the government is doing its job in a cost effective, productive manner.

It would be nice to know how much money could be saved:

1. If government employees were as productive as private sector employees at the same wages and benefits of the private sector. As I remember the older studies, the general rule was it costs the government 20-30 percent more than the private sector to do the equivalent job.
2. If the number of government programs were simplified and combined, e.g. why is head start separate from k-12? Couldn't head start be run in schools under the same bureaucracy as k-12 with reduced overhead costs for personnel, rent, heating, etc?
3. If all health benefit programs were combined. Why is there one bureaucracy for Medicare, another one for Medicaid, and another for child medical benefits?
4. How much money could the government save, without reducing the value of the benefits to the recipients, if we switched all entitlement and benefit programs to a voucher system like food stamps?
5. If we combined all the disparate benefit and entitlement programs and just paid one monetary lump sum in monthly payments to individuals for all there entitled needs, food, rent subsidy, medical expenses, etc. The same for corporate subsidy programs.

My guess is that if government were viewed as a business, a CEO could find many ways to reduce costs and to save a lot of money without affecting the consumer product or service produced by the business/government.

If we then reviewed and eliminated our import tariffs and other price support policies, we probably could reduce the cost to households for necessary items, like food and clothing. Likewise, a similar review for corporations could reduce their operating costs. These extra dollars in the pockets of households and corporations would be equivalent to a government subsidy and reduce their need for other government benefits.

There is a lot that could be done to reduce government budgets and costs before we have to get to looking at reducing the value of benefits to the consumer.

At 10/02/2010 3:56 PM, Blogger Milton Recht said...

This comment has been removed by the author.

At 10/02/2010 8:02 PM, Blogger Nathan Straub said...

Milton, this is a little off-topic from the original post, but I want to examine your idea of giving all government benefits to the taxpayer in one lump-sum. This might be more efficient, but it wouldn't achieve the goal of helping people with particular needs like food, housing, education, etc. It would just install the image of government as a donor rather than government as a leveler of opportunity.

George Lakoff talked about this psychology of taxation in 2008, using the example of "cap and dividend" legislation. By giving taxpayers cash dividends from taxes on carbon-suppliers like gas companies, the government can get the taxpayers to tangibly appreciate the idea that we all own the atmosphere... and that we all ought to be compensated for allowing it to be degraded.

Giving taxpayers an itemized receipt might have a similar effect. What are other ways that you think we could build such a psychology into our system of government benefits and services, while also increasing efficiency?

At 10/02/2010 9:27 PM, Blogger juandos said...

I see a problem here...

Making a big assumption that these folks are right in their breakdown of what happens to the federal income tax, why is there this line: 'Federal Highway - $63.89'?

What did the clowns do with the billions of dollars already collected?!?!

At 10/03/2010 11:22 AM, Blogger Michael Cottle said...

This is lame and misleading. The defense section is broken into several small pieces. Defense was the most expensive portion of 2009 spending. To tame the budget, the military industrial complex must be controlled.

On a side note, the social security looks odd. I can not find a source that validates. Hmmm.

At 10/03/2010 11:23 AM, Blogger Michael Cottle said...

In large buckets, US spends $1 trillion on each; defense, pensions and healthcare. Each will need to be dealt with.

At 10/03/2010 9:41 PM, Blogger juandos said...

"The defense section is broken into several small pieces"...

Interesting that the Third Way did that...

"Defense was the most expensive portion of 2009 spending"...

Ahhh, not even close for all the money that's spent there...

"To tame the budget, the military industrial complex must be controlled"...

Hmmm, maybe to some degree you're right but consider the following from the PGP Foundation: CBO Releases the 2010 Long-Term Budget Outlook

The long and the short of it, just to many 'nanny state programs' and not nearly enough money to cover them and every other thing Uncle Sam has his fingers in...

At 10/03/2010 11:30 PM, Blogger misterjosh said...

Several different varieties of bullshit here. SocSec & Medicare is said in the text to be $2610 & that roughly accounts for the employee's contribution, but the "employer's contribution" is strangely missing. Unless I'm wrong, it's still common knowledge that both amounts come outta employees' pockets right?

But then the numbers on the receipt don't even add up to that smaller number. Somehow, what should be $4233 for SocSec + $990 for Medicare get strangely mutated. to $1040 & $625?

Could these be outlays per person per month? so great, give me a receipt for money you're giving to somebody else. Thanks.

At 10/04/2010 3:34 PM, Blogger Benjamin said...

The entitlement programs are largely funded by payroll taxes.

We see from this chart that debt and military oulays are what eat up income taxes.

You want an income tax cut?


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