Government as Addiction

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One of my pet peeves has long been the fact that most people seem to have no idea how much they pay in taxes.  The reason for this is obvious:  many of the taxes we pay, by design, are hard to keep track of.  In this category are sales taxes, utility taxes, taxes on gas, etc.  (This does not include the taxes paid by corporations and other businesses (they do not pay taxes, they collect taxes) that are passed on in higher prices for the products and services that we purchase, or in the social security share of employees paid by employers that effectively reduce the wages that employers pay employees.)  In the Wall Street Journal we find that the average worker has a tax rate of approximately 40 percent:

But tax rates are already high—much higher than is commonly understood—and increasing them will likely further depress the economy, especially by affecting the number of hours Americans work.

Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes—Edward Prescott has shown (especially in the Quarterly Review of the Federal Reserve Bank of Minneapolis, 2004) that the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60.

Research by others (including Lee Ohanian, Andrea Raffo and Richard Rogerson in the Journal of Monetary Economics, 2008, and Edward Prescott in the American Economic Review, 2002) indicates that raising tax rates further will significantly reduce U.S. economic activity and by implication will increase tax revenues only a little.

Go here to read the rest.  Our society in its addiction to government resembles a heroin addict.  We spend every free dollar we can get on it, and we amass huge debt to buy more.   A current example, an ad being run by the Feds about a free government program to help to pay your mortgage:

 

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We are far past the point now where we can wean ourselves easily and painlessly from our addiction to big government.  A brutal era of “Cold Turkey” withdrawal from it will soon be on the horizon brought on by fiscal collapse.

 

7 Responses to Government as Addiction

  • Karl says:

    Nor do I want to know. Such knowledge is beyond my ability to cope with it. Similarly, as my divorce progressed, to survive, I chose to ignore the costs. I
    survived.

    As ignorant and, perhaps, selfish as it may sound, I believe, in extreme cases,
    ignorance can be bliss and the only way worse harm can be prevented.

    I will never again vote democratic, nor, should my wife die, would I even consider marrying, again.

  • T. Shaw says:

    Thank God Obama lets us keep so much: elections have consequences . . .

    Off topic: Today marks 150 years since the Confederate victory at Fredericksburg. It was worse (they fell faster) in front of Marye’s Hts. than depicted in the movie.

    The 2014 IRS 1040 will have two slots.

    1. How much you made (all loopholes rescinded):

    2. Send it in:

  • Pinky says:

    I remember reading an analysis that found that a single mother earning $32k got $57k take home pay, after government support (all numbers approximate, because I don’t have the article in front of me), and a single mother earning $70k got $57k take home pay after taxes. If you think about it, that’s an effective marginal tax rate of 100%. Would you work an extra who-knows-how-many hours, or more likely work at a higher-level job that required more schooling, if you were guaranteed to get nothing in return?

  • Greg Mockeridge says:

    To the tax and spend left, taxes are not, nor have ever been, about revenue. It’s is and has always been about the seizure and power and control over the lives of others.

  • Micha Elyi says:

    …the U.S. average marginal effective tax rate is around 40%.

    …compared to the average marginal effective tax rate on a U.S. means-tested handout of around 0%.

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