Issue: Economic: Taxes: Ron Paul's Income Tax Assertions

[wtl]

I've heard Dr. Paul state in several recent speeches that the income tax accounts for just 30% of Federal revenue, and that if we wanted to eliminate the need for the income tax, we'd just need to "roll back" Federal spending to the year 2000.

I've been doing my own primary research on this and related topics over the past weeks, and am having difficulty confirming this assertion. On page 7 of the Treasury's annual report from 2006 (http://fms.treas.gov/fr/index.html), they state a total revenue of $2.6T, with $1.8T (or 70%) raised via personal income taxes.

Then in searching the Ron Paul library, I found a Texas Straight Talk column from 2001 (http://www.ronpaullibrary.org/document.php?id=199) that reiterates the same assertion from 2001, with the corresponding need to "roll back" spending to the year 1990. Referring again to the Treasury's report from the year 2000 (http://fms.treas.gov/fr/00frusg.html on page 9) shows that in that year, individual income taxes made up 80% of net revenue.

Interestingly, on page 14 of the 2000 annual report, total Federal expenditures were $2.0T. While that's not too far from the $1.8T in 2006 personal income tax receipts, it still doesn't support the assertion that we could roll back spending to 2000 levels and survive without the income tax.

Am I missing something in my interpretation of this assertion? Is there a qualifier in the numerator and/or denominator that would take that 70%-80% down to 30%?

More generally, it would be great to have (or help create) a library of referenced position papers as we begin to discuss policy and execution as opposed to philosophy.

BJ

[tonyr1988]

Not sure about the 30% part, but as far as 2000 levels, remember that it's 2000 levels of spending, not 2000 levels of revenue. Remember that we're running a huge deficit right now. All of these numbers are from here (and I'm rounding, so it could be off):

http://www.whitehouse.gov/omb/budget/fy2008/

We get about $1.1 trillion from individual income tax (2007), with $2.8 trillion in expenses. Without individual income taxes, that would bring our budget to $1.7 trillion.

The 1999 budget was $1.7 trillion. 2000 was slightly more, but you get the point.

I could be wrong on these, but that's what I've figured out from my own investigating. :)

[wtl]

@tonyr1988: I guess I'm just a bit more confused. Here's the (written) quote from Dr. Paul on May 7, 2001:

You may be surprised to know that the income tax accounts for only approximately one-third of federal revenue. Only 10 years ago, the federal budget was roughly one-third less than it is today. Surely we could find ways to cut spending back to 1990 levels, especially when the Treasury has single year tax surpluses for the past several years. So perhaps the idea of an America without an income tax is not so radical after all.

In this instance, he's saying that since the income tax accounts for only 1/3 of revenue (which I can't confirm based upon the Treasury's data -- it looks more like 70-80%), if we could cut our spending by 1/3, then we could survive WITHOUT the (individual?) income tax. I agree, and do see, that we don't have to go back too far to see a reduction in Federal spending by 1/3. In 2000, you just needed to go back to 1990... and indeed, in 2006, you just need to go back to 2000. Scary!

But the key issue remains -- are income taxes 30% of Federal revenue? Or 70-80%?

Maybe he's looking at Social Security/Medicare withholding differently?

Thanks...

[Broadlighter]

My question would be how would eliminating the inflation tax affect the budget level. In some ways, it might help because the dollar's spending power would be enhanced, which would help reduce the actual expenditures.

[tonyr1988]

hmmmm.....interesting. I'm curious, too. Here's a quote from Paul on April 10, 2006:


Even today, individual income taxes account for only approximately one-third of federal revenue. Eliminating one-third of the proposed 2007 budget would still leave federal spending at roughly $1.8 trillion-- a sum greater than the budget just 6 years ago in 2000!

I'm getting the same numbers as you, though.

[wtl]

@Broadlighter, there's no question we need to eliminate both the income tax and the inflation tax for the good of our economy. I'm even a fan of the Fair Tax proposal -- I'd just prefer a Fair Tax in a Ron Paul Federal government, since that would cost a LOT less than the 23% national sales tax proposed as "revenue neutral" to replace the current income tax.

I'm just trying to understand where Dr. Paul's numbers come from... he uses this assertion authoritatively, and it's incredibly effective (if only I could back it up!)

[sickmint79]

http://en.wikipedia.org/wiki/Internal_Revenue_Service#Tax_collection_statistics

"During Fiscal Year (FY) 2006, the IRS collected more than $2.2 trillion in tax net of refunds, about 44 percent of which was attributable to the individual income tax."

anyone have any more info? i'm no expert on how this stuff works. is the above ignorning or including payroll taxes? is the government getting money from elsewhere; excess interst paid on bonds that the federal reserve holds over fed operating costs goes back to the treasury correct?