Common sense tells us that taxes are necessary in any organized society. There are many kinds of taxes, some of them are called fees or tolls or surcharges of various kinds. Take a look at your phone bill, rental car receipt, airline ticket, license renewal, permits, a bill for changing your oil. They all contain fees and taxes. Add it all up and your total tax bill if far more than your income and payroll taxes.
All that taxing is okay as long as the money is spent prudently for the things we collectively need and desire and as long as we know in advance how all our needs are going to be paid for. In other words, affordable. All too often that is not the case. For example, senior citizens wanted a prescription drug benefit, but it wasn’t paid for. State workers wanted generous pensions and other benefits, but they weren’t paid for. We welcomed tax credits for buying a home, a car and an air conditioner, but they weren’t paid for. The list goes on and on.
In fact, the list is so long that today the federal government spends forty percent more than it receives in revenue (taxes). Sure, you can argue a lot of that 40% is due to the wars and the financial crisis, but that does not change the equation. Up to a point you can simply keep raising taxes (or the debt) as the list of wants and needs expands, but sooner or later there is nothing left. Ultimately there are no more wealthy people to blame for not paying their fair share.
As you borrow more and more to fund your spending, you eventually must borrow just to pay the interest expense (think Social Security Trust Fund now surviving on the interest paid by the U.S. Treasury). The U.S. spent $414 billion on interest expense in fiscal 2010,the recent downgrade in our credit rating is estimated to add an additional $100 billion. What an awful waste of our children’s future.
Knowing the impact of interest payments is why the federal government passed laws that require credit card companies to show you exactly what you are paying in interest along with the long-term impact of making minimum payments. Congress makes laws to protect borrowers from lenders; don’t you find that ironic?
Keep in mind we can’t lay the blame for this mess on Congress alone. Every penny spent was lobbied for by individuals or organizations representing some group of Americans or some industry. Everyone wants his or her share of the pie, but too many people don’t want to pay for the filling or the crust. When the bill comes we can’t honestly say, “it’s on him.”
The “him” is the next generation that will pay in the form of higher taxes, a lower standard of living and higher inflation – most likely all three.