Although you may not realize it, today is a day for celebration. It's Tax Freedom Day in the United States. Up to today, each and every dollar the average American has worked for has gone to pay taxes to the government. Beginning today, after supporting the government with your hard-earned money for one-third of a year, your income is now yours to keep.
Each year, the Tax Foundation, a non-partisan organization which monitors government taxation, calculates the tax burden of the average individual. This year, the Tax Foundation has determined that taxes amount to 34.2 percent of income, meaning that about 34.2 cents on every dollar Americans earn goes to the government.
If we take an annual perspective, we find that 34.2 percent of a year is 125 days. In other words, this year the government is forcing us to work 125 days just to finance its gargantuan desire to spend our money.
In a country which revolted from a government over tyrannical taxation, the current level of taxation in this country is utterly abhorrent. While it may be reasonable to force the wealthiest families to shoulder such a great burden, it is absolutely outrageous that the government imposes such a tremendous onus on the average person.
The average family simply cannot afford to work one-third of a year just to pay taxes. The income paid to taxes represents funds which could have been used to finance a college education, purchase a new home, or save up for retirement.
Unlike the government, individuals and private businesses have an incentive to spent money wisely and productively. Most Americans work hard to make a living. Since they value their earnings, they make sure that those funds are used efficiently.
For individuals and private firms, a dollar unwisely spent is a dollar wasted. They cannot afford to waste their income, since they have limited resources. The free market ensures that private actors direct their funds to productive uses.
The government, however, is a completely different story. When Congress wastes taxpayers' hard-earned income, it can simply raise taxes. The government has no restraint to its tax-and-spend wishes. Because of this, it's no surprise that both taxation and spending have gone up and up ver the past few decades.
This year's tax Freedom Day is the latest ever, Meaning that taxes are at one of the highest levels ever. We are getting to the point where the immense tax burden threatens to strangle economic growth. Almost every economist agrees that high tax stifle economic activity. In fact, rising tax burdens are partially responsible for the anemic "recovery" the country has been stuck with for the past few years.
The message from all this is clear: to stimulate growth, we need to dramatically reduce taxes. But President Clinton does not seem to get the message. Instead, Clinton and his Council of Economic Advisers complain about the Federal Reserve's decision to increase interest rates. While interest rates may be of concern, the Clinton Administration itself has the power to promote economic growth, create new employment, and raise the country's standard of living.
But Mr. Clinton continues to move the wrong way on taxes. Upon entering office, he promptly proposed one of the largest tax hikes in history. The 1993 Budget Reconciliation Act significantly increased both payroll and income taxes, the two taxes which even before the tax hike had accounted for most of the tax bill. The effects of the 1993 budget are evident in the movement of Tax freedom Day to later dates over the past few years.
Prospects for the future are not much brighter. As Chris Edwards of the Tax Foundation writes in a special report, "forthcoming health care legislation at the federal level promises to have a major effect on future Tax Freedom Days... [I]t would push Tax Freedom Day almost into June."
Yet the Tax Foundation's calculations of Tax Freedom day even underestimate the average individual's Tax burden, because it does not include the burden of regulations. Although technically not categorized as taxes, regulations are essentially taxes, since, like taxes, they impose additional costs on businesses. For example, firms have to spend great deals of money to comply with the myriad of regulations and mounds of red tape. Last year, an estimate of Tax freedom Day which included the burdens of regulations pushed the day into July.
Sure, the government has a legitimate need for some tax revenues. But the fact remains that taxes are simply too high. The colossal tax bite Americans face each year siphons money away from the private sector, and gives it to a gigantic bureaucracy which seems to take and take while never giving much in return.
The Clinton Administration has shown signs of recognizing the importance of lower taxes. For example, during the campaign Clinton once spoke of a "middle class" tax cut. And a few months ago the president himself advised Japan that it could rescue itself from economic recession by lowering taxes. Unfortunately for all Americans, Clinton has failed to implement the few economic truths that he seems to understand.