Arnold Kling  

A Suggested Tax Calculator Tool

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In a comment on this post, Daniel Kuehn explains what is going on with the new government tax receipt tool. It simply allocates Social Security taxes to OASDI and Medicare taxes to Medicare. What is left to allocate are income taxes, to other programs.

For most people, the income tax has to look like quite a bargain. According to the calculator, a family of four with $80,000 in income pays $3683 in taxes, and in return they get all this great stuff. What's not to like? It's great for people who are not in the top 10 percent of the income distribution.

What this suggests to me is a different tool. How about a tool that would show how much the government could afford if everybody paid the same amount of income taxes as you do? Suppose we have 150 million households. Based on the hypothetical household that pays $3683 in taxes, that gives roughly $550 billion for the government to spend on everything other than Social Security and Medicare. That's even stingier than Rand Paul's budget. A lot stingier.

The tool I have in mind would spit out, "On everything other than Social Security and Medicare, the government spends ___ times what it could afford to if yours was the typical household paying income taxes." In the example, the blank would be filled in with a number close to four.

I think that would be an educational tool.


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COMMENTS (9 to date)
Daniel Kuehn writes:

An interesting tool... but perhaps misleading. What would be great is if we could do the same sort of thing as that, except with everyone sharing the same marginal disutility of taxation as everyone else. Two problems:

1. We'd have no idea how to make such a calcualtor, and
2. If we did no one would understand it

But that seems more meaningful to me than everyone paying the same rate (much less amount - your proposal).

Your calculator also seems to assume a balanced budget... that seems like both an unnecessary and unrealistic restraint on the spending available to work with.

Daniel Kuehn writes:

Ya the more I think about it this is kind of goofy. It's not even "what would happen if everyone were treated like me"... it's "what would happen if I were the pivot point of a massively regressive income tax?".

"Typical" ought to at the very least be defined as a rate, although even that - in presuming a flat tax - doesn't make all that much sense to me. It certainly shouldn't be thought of as a regressive head tax.

Curt writes:

Is it possible that Arnold had to write a check today to Uncle Sam? Just wondering...

Various writes:

Well I still think this would be a more useful tool if it included SS and Medicare. That would, however, require some basic actuarial assumptions in my opinion. Both are defined benefit plans, and some of the current funding will pay for future benefits.

P writes:

So, DK would like something that nobody would understand but which would be meaningful to him. Magic.

P writes:

The easiest coalition in the world to form is the one that says, “join our group and you will never get stolen from, but you’ll get to steal from others.” There’s one like it in every democracy.

You know what irks me most about that coalition? I've never heard them say "thanks".

James Rogers writes:

I created a calculator and posted it at my blog:

http://www.theamateurthinker.com/2011/04/taxes-what-if-everyone-paid-the-same-as-you/

It's not perfect, but it's the best I could do with my amateur web developer skills.

What do you all think? Any suggestions for improvement?

James Rogers writes:

I'm not sure if my comment from yesterday got lost in the spam filter, so here goes again.

I thought that the calculator was an interesting idea, so I created one to let people see what would happen to government revenue and the deficit if everyone paid the same taxes. Here is the link:

http://www.theamateurthinker.com/2011/04/taxes-what-if-everyone-paid-the-same-as-you/

Floccina writes:

If the rich invest a large portion of their money would they capture all of the benefit of lower taxes on the rich?

How much of the taxes on the rich lower the consumption of the rich?

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