The Tax Foundation tells us American taxpayers reached Tax Freedom Day April 17. The concept is that if you had to work to pay your tax bills before spending money on anything else — food, shelter, clothing, luxuries — you would have worked from January 1 through April 17 to be rid of that annual tax burden.
Walter Williams‘ latest column delves more deeply into the numbers associated with that tax burden.
According to the Congressional Budget Office, Congress will spend $3.8 trillion this year, about 24 percent of our $15 trillion gross domestic product. But federal tax revenue will be much less, only $2.5 trillion, or 16 percent of the GDP. That means there’s a shortfall of $1.3 trillion. Some people, including economists, say there’s a deficit. That’s true, but only in an accounting sense, not in any meaningful economic sense. Let’s look at it.
If Congress spends $3.8 trillion out of this year’s $15 trillion GDP, what must it do to accomplish that goal? If you said it must “find a way to force us not to spend $3.8 trillion privately,” go to the head of the class. One way to force us to spend $3.8 trillion less is to tax us that amount, but we’re being taxed only $2.5 trillion. Where does the extra $1.3 trillion come from? It surely doesn’t come from the tooth fairy, Santa Claus or the Easter Bunny.
The fact of business is that if Congress spends $3.8 trillion of what we produce this year, it necessarily must force us to spend $3.8 trillion less privately this year. The most honest way to force us to do that is through taxation. Another way is to enter the bond market and make interest rates higher than they otherwise would be, thereby forcing us to spend less on private investment in homes and businesses. Then there is debasement of the currency through inflation, which is taxation by stealth.
