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Wednesday, May 07, 2003

Doing Away With the Income Tax?-Ben might of taken his lead from a post of mine last month for yesterday's post on doing away with the personal income tax, but I don't share his optimism. Based on page 20 of this White House report, here is the 2002 revenue summary.
2002 Inflows
Personal Income Tax 858.3
Corporate Income Tax 148
FICA and Medicare 700.8
Excise Tax 67
Estate Tax 28.5
Customs Duties 18.6
Other 33.9
Total 1855.2
Between the personal and corporate income taxes, there is a bit over half of the total revenue. However, what Ben fails to point out is that almost all of the remainder is Social Security and Medicare receipts. Outside of that, you've got about $150 billion left to finance the non-geriatric part of the federal government. Under the Domenech Plan, he proposed to trim off the following departments-Energy, Labor, and HHS. To be fair to Ben, he was focusing on discretionary spending that could be cut elsewhere, but here are the grand totals for the three departments
Department Billion $
HHS 465.8
Labor 64.7
Energy 17.5
Total 548
That's a little over halfway there. Even at that, we'd have taken out Medicare, Medicaid and unemployment insurance, stuff that state governments would likely pick up; thanks for sending me the tab for all the sunbirds' medical care, Ben. To do it fully, lets try to figure out if we can do without some more departments.
Department Billion $
HUD 31.9
HHS 465.8
Education 46.3
Agriculture 68.7
Commerce 5.3
Energy 17.5
Labor 64.7
Transportation 56.1
Interior 9.7
Office of Personnel Management (reduction) 40
IRS 33
International Assistance Programs 13.3
NASA 14.4
Corps of Engineers 4.8
National Science Foundation 4.2
Small Business Administration 0.5
Other Independent Agencies 16
Total 892.2
We're still coming up a bit short, especially considering that since we're no longer doing Medicare, we're no longer bringing in about $130 billion in Medicare payroll tax money. The states are now stuck with all the cost of managing the poor, all their road and airport expenses and won't get any "help" on education. That is doable, but not all of that tax cut will stay in our pockets, for states will wind up spending money on the poor, transportation, parks and other stuff that the feds used to do, and we'll pay higher state taxes as a result. Also, there isn't a lot of room for additional general revenues to rise; income taxes make up 87% of the non-payroll-tax part of the budget, and we wouldn't be able to count on the explosive growth in excise taxes and tariffs to fund the government. We'd have to raise taxes in order to meet even a bare-bones government, unless you're planning to gut the military in the process. Ain't gonna happen, Ben. Not without a political WWIII and some alternative tax sources, such as a sales or consumption tax.

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