A Dollar Spent Is A Dollar Taxed

Article contributed by “The Ed”

A dollar spent is a dollar taxed.  I am not the first person to say that.  I am happy to attribute it to Steve Pratt in an article sent to the Alaska Standard, though I do not know if he is the first one to come up with it.  I want everyone saying it.  I want it internalized so everyone saying it will understand what it means and what its ramifications are for them and their fellow Americans.  I want the words spread so that nobody cares who really said it first.

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The idea is profound and you would think that it would be said all over the TV, radio and the internet.  It is not.  If I google the phrase, the listing is 4 pages long and many of the references I find are ones that I put on the net.  Okay, Arthur Laffer said something similar when he said “Government spending is taxation. When you look at this, I’ve never heard of a poor person spending himself into prosperity; let alone I’ve never heard of a poor person taxing himself into prosperity.”  But in the full quote he was saying that government could not spend the economy into prosperity.  While true, it is not where I am trying to go.

It should be obvious.  Our government cannot spend money without taking it out of the economy.  It may come out of taxpayers’ pockets as direct taxation.  It may come out of lenders’ pockets with the promise that the taxpayers will pay it back at a later date.  It may come as inflation when the government prints money to make up the shortfall.  It means that the moment of taxation is not the bite that the accountants take out of our paychecks each period.  The moment of taxation is the moment of government spending.  Arthur Laffer got it right in his first sentence:  “Government spending is taxation.”

So what about the Republican tax cuts?  What would it mean to you if your spouse went on a spending spree and paid for everything with the credit card?  Would it be okay if your spouse showed you the checkbook and said, “See, our bank account is still in the black.”?  The tax cuts only meant a shift from the checkbook to the credit card.  The spending increased.  The Republican tax cuts were a tax increase in disguise.

Bush43 was correct in that taxes are a burden on the American people and that tax cuts boost the economy.  But in the Bush era, we had the wars in Iraq and Afghanistan, No Child Left Behind, the Medicare Prescription Drug Plan and the TARP (Troubled Asset Relief Program).  The tax cut was only a cut in how much came off the top in income taxes.  It was a sham.  All of these increased spending by the Federal Government.  They were all put on the credit card so the people of the U.S. would not feel the bite.

The Obama regime has topped the Bush regime with extended unemployment benefits, more food stamps and gutting of the welfare rules.  In the meantime, unemployment climbs and baby boomers are lined up to start retiring.  All of this means more spending which means more wealth taken out of the economy.

Let’s suppose that you make $100,000 each year.  The Medicare tax is 1.45% so that you would pay $1,450 each year for Medicare.  But the Medicare tax does not cover Medicare expenditures.  There was $549 billion spent on Medicare in 2011.  Medicare taxes were only $196 billion.  “A dollar spent is a dollar taxed” means that you are really paying $4061 in Medicare taxes to make the system work.

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Unfortunately, the absence of “A dollar spent is a dollar taxed” is ruling Washington.  The ability to put the expenses on the credit card has kept the American people from realizing just how onerous their tax burden really is.  President Obama has successfully gotten an increase in tax rates and is campaigning for more.  In the short run increases in the tax rates will further burden an economy that is already weak.  But the taxpayer will find ways to reduce their taxes just as they did when the maximum marginal income tax rate was 92% between 1952 and 1953.  The deficit will continue to be financed with debt.

The absence of the sense that “A dollar spent is a dollar taxed” means guilt free lobbying.  A lobbyist can ask for further expansion of Medicare, greater farm subsidies, student loan forgiveness, housing subsidies, Pell grants, expansion of the military complex or any one of thousands of causes and never worry that they ask for too much.  Congress will not object.  Congress is not spending its own money.

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“A dollar spent is a dollar taxed” is a very easy concept to grasp.  But it takes moral courage for Congressmen to give the taxpayer a seat at the table when spending is discussed.  Recognizing what “A dollar spent is a dollar taxed” really means and acting on it takes principled steadfastness.  It will take a cultural change to fix what is wrong in Washington.  “A dollar spent is a dollar taxed” will be a small but critical part of the change.