Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 19, 1990 TAG: 9004190582
SECTION: EDITORIAL PAGE: A15 EDITION: METRO
SOURCE: Ray L. Garland
DATELINE: LENGTH: Long
As long as the government is seen as the arbiter of who prospers and who doesn't - a condition common to all socialist systems - we may expect rising levels of rancor, distrust, cynicism and fraud. Taken to extremes, such as Poland, a generalized collapse of honest effort may be anticipated.
Around April 15 each year, the Tax Foundation gains maximum publicity for a useful device they call "Tax Freedom Day." That is the day after which Americans start working for themselves. This year, "Tax Freedom Day" is May 5. To that point, the foundation assures us, and I can't vouch for their accuracy, the average American is working full time to satisfy his federal, state and local tax burden.
This "day" has crept steadily forward, but at a slower pace than many of us might warrant. From 1965 to 1990, an era encompassing such budget-busters as Medicare, Medicaid, Social Security, food stamps, etc., "Tax Freedom Day" advanced only from April 15 to May 5.
But that doesn't take account of the enormous taxes paid by business and hidden in the cost of everything we consume, nor those taxes that would be required to wipe out those $200 billion annual operating deficits. By my calculations, just putting the country on a pay-as-we-go basis would make that great "day" arrive closer to the end of May than the beginning.
The "official" deficit for the federal fiscal year ending last Sept. 30 was $152 billion. It would have been more than $200 billion if the Social Security surplus designed to cover future benefits had not been "borrowed" to make the deficit smaller. Nor does the official deficit take account of such "off-budget" obligations as the savings and loan bailout. And it makes no provision for those other bailouts which may be needed down the road to make good on federal guarantees for private-pension funds, home mortgages, farm loans, etc. Also conveniently unprovided for are those astronomical sums that will be required to honor the generous promises made to growing numbers of military and civil-service retirees.
A sober appraisal of that mountain of past, present and future obligations is enough to give a total abstainer a case of delirium tremens. One thing is certain, as the years roll by, "Tax Freedom Day" will advance toward the glorious Fourth of July.
It ultimately comes down to the cost of capital and a return on capital. The "official" national debt recently topped $3 trillion, which doesn't include those unfunded liabilities. Interest payments in this fiscal year are estimated at $255 billion, or more than $1,000 for every man, woman and child in this country. When a quarter of all taxes paid must be dedicated to servicing the debt - and a substantial portion of that to the credit of foreigners - we have clearly arrived at a moment of critical choice between higher taxes or lower expectations.
It is not a lack of revenue that has landed us in a pickle. In fact, federal revenues have advanced smartly, from $517 billion in 1980 to $909 billion in 1988. But spending went up from $590 billion to $1.05 trillion. Had the increase in federal outlays been limited to 75 percent of the growth in revenue, we would now be close to a balanced budget. But that would be too simple, wouldn't it?
As we look around, there are plenty of unmet needs, beginning with reducing the deficit. But aside from that, there are plenty of things that need fixing and plenty of people in need of help. Covering a substantial portion of the deficit and only those "needs" enjoying widespread popular support, however, would require an overall tax increase of the magnitude of 20 percent.
To the question of whether Americans - and which Americans at that - should pay higher taxes, the answer must be highly qualified. The certainty is that they will. But a nation already giving up a third of its effort to support the operations of government must surely ask what happens when it is required to give up half? Sixty percent? For that is the road upon which we are embarked, and we don't even have to speculate as to where it will lead us, for it is a well-traveled road.
Soaking business will drive up prices. Soaking the well-off will dry up investment and drive capital to more hospitable shores. Soaking the "working poor" through indirect taxes is plain immoral.
While this scenario warrants that taxes must inevitably rise, the trick is to make them rise as slowly as possible. For it is as certain as the sunrise that "needs" will expand endlessly to consume all revenues. I am entirely satisfied that if we imposed an average 50 percent tax burden on the American people right now, to put the country on a pay-as-we-go basis and accommodate those demands for additional spending now commanding broad popular support, that it would be only a matter of a few years before sizable deficits would again appear and additional pressing "needs" discovered.
The bottom line on a political system based on assurances to as many people as possible that they deserve to receive more in benefits than they pay in taxes is that there will be no light at the end of the tunnel, only another tunnel.
by CNB