Tax Complainers Only Looking at One Side of Budget
Between the perennial use of April 15 to protest federal taxes, all of the misguided hype about something called tax freedom day, and the public relations stunts staged by tea party folks, you had to look very hard last week to realize that the federal government spends as well as taxes and actually does things for people rather than just demands financial tribute from them.
[IMGCAP(1)]This is incredibly ironic. At most points in the year the federal budget almost always is referred to in terms of what is spent rather than the revenue collected. For example, the stories written when the White House releases its budget usually have a lead that says something like, “The president today submitted a $3 trillion budget that calls for … ” The $3 trillion (or whatever the actual number is that year) refers only to the spending that will be done. Revenues are mentioned much later in the story, if they are mentioned at all.
But last week’s events and press releases were all about taxes. What the government does with the revenue at most was an afterthought.
Both of these one-sided views of the federal budget are incredibly wrong. The budget is neither just spending nor only revenues, and doing what the tax complainers did last week by looking at one without the other is so inappropriate that it has to be seen for what it was: intellectually lazy and intentionally misleading.
There are a number of problems with complaining only about the amount of taxes you’re paying without any reference to the other side of the budget.
First, being unhappy with federal taxes without saying what you personally are willing to have the government stop doing, not start to do, or do less of is disingenuous at best. This is especially the case when the complaints also include the size of the federal deficit and national debt; if they don’t also say what spending should be eliminated, both will increase if taxes are cut as the complainers said or implied they wanted.
But I saw or heard virtually nothing last week that showed the tax complainers suggesting or supporting proposals for spending reductions. Add to that the poll discussed in last week’s Fiscal Fitness that showed very little support for any spending cuts other than foreign aid, and you get a clear sense about just how dishonest the tax protests really were.
Second, tax complainers need to understand that revenues are collected both to meet current needs and so the government can make good on previous obligations. They may not like the fact that Washington has hundreds of billions of dollars in current annual interest payments because it has borrowed in the past, and they may not think they’re getting much in return. But the time to deal with that borrowing was years, or in some cases decades, earlier when it was being considered. If they didn’t support additional revenues or spending cuts to pay for entitlements, wars and natural disasters when the decision was made to undertake them, they shouldn’t be surprised, dismayed or angry that Washington has to make interest payments now to pay for what it has already borrowed — and that tax cuts are more difficult because of that.
This point seems to be completely lost on tax complainers. The opportunity to reduce the national debt and annual interest payments and to make it possible for tax cuts to be considered now because of those decisions came earlier in the decade when the budget was in surplus. But rather than paying off the debt by the end of this decade as it promised, the Bush administration chose to use the surplus for doing what the tax complainers also wanted then — tax cuts. Not only is it not surprising that today’s large and rapidly growing annual interest payments make further tax cuts difficult or unlikely, it was entirely predictable.
Third, tax complainers seem to forget or refuse to admit that it sometimes costs the federal government more to do something today than it did yesterday simply because the need is greater or prices have increased. A terrorist threat that didn’t exist 20 years ago today requires $40 billion to be spent annually. No matter how valuable it may be in terms of keeping the U.S. safe in today’s world, even in peacetime technology is expensive. And, of course, benefit programs often cost more than they did last year not because Congress and the president agree to new or increased benefits but because, as was fully expected, more people are eligible this year than last.
Had the tax complainers put their complaints in the context of spending as well as revenues, at least paid lip service to the fact that the surplus was used by the Bush administration to cut taxes rather than reduce spending on interest on the national debt, or admitted that some decisions made in the past had made additional tax cuts more difficult, I could and would have thought better about last week’s events. But the fact that they didn’t even try makes it hard to take them seriously.
Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”