Anyone who’s been paying attention is aware that the Federal budget is out of control, unsustainable, and politicians dare not display any consensus on what to do about it. So several wealthy foundations are funding the “America Speaks” project, which seems to have focused on a fleet of 19 “town meetings” (plus a few dozen less-connected gatherings) held today. I attended Chicago’s, at Navy Pier.
The concept is at least a little bit promising. I guess we had about 600 people, assigned to tables of a dozen or so each, and we talked about how the Federal financial situation might be improved. But first we had a very loud presentation from Philadelphia. (Philadelphia is apparently standing in for Washington and New York, so we won’t suspect that political professionals and Wall Street are involved in the effort.) We were told that, yes, the deficit is a big deal(as described in this pdf). And before talking about the options for reform, we were directed to determine our values. The “values” are listed below (and on worksheet #3 of this document), along with the reasons that they make no sense at all. Continue reading America Speaks “National Town Meeting”
With governments at all levels in fiscal distress, I just want to describe a solution which would be effective, would save money for most taxpayers, and would encourage productive enterprise. Georgists will already be familiar with everything below. Continue reading Solution for governments’ budget woes
…but part of what they work at seems to be under-reporting their taxable incomes. A paper (pdf) from economists Andrew Johns and Joel Slemrod estimates that folks with “adjusted gross income” below $50,000 understate their incomes by less than 7%, whereas those “earning” $200,000 to $1,000,000 understate by 21% or 22%. One reason is that the government monitors some types of income very strictly, whereas others are virtually unrecorded. So they estimate that 99% of the “tax liability” on wage and salary income actually shows up on the tax forms, compared to only 88% for capital gains, 48% for rent and royalty income and 28% for farm income. The research is based on 2001 tax year data.
It’s a bizarre subject to study. Researchers cannot know what “true income” actually is, but can only estimate it by looking at what IRS agents found in a sample of returns selected for intense audit. One intriguing assumption they make is that the IRS examiner’s ability to find hidden income is correlated with her pay grade.
Very high income taxpayers, over $2,000,000, are estimated to have a much lower propensity to underreport than their $200K to $1 million brethren. Do they hide less? Perhaps, but there remains “the plausible possibility that the misreporting of upper-income taxpayers is more sophisticated and thus harder to detect.”
All the estimates of under-reporting are looking at the tax laws as they actually exist, and do not consider the various special-interest loopholes to be anything other than part of the rules (pretending, of course, that someone actually understands the income tax code).
A surprising result follows from the “progressive” nature of the income tax: Even tho low income taxpayers hide relatively little income, their underreporting actually reduces their taxes by a much greater percentage than does that of the high income folks. [This is because, if your income is low, only a small part of it is actually subject to income tax.]