Beware of Tax Freedom Day

Concord Monitor 4-26-15

I get irked by articles like Andy Koenig’s article promoting Tax Freedom Day (TFD).  TFD is a slick effort to pull the wool over our eyes by making us think that “roughly a third of your money doesn’t make it into your pocket;” that you don’t see a dime of your hard-earned income until after April 23.  If you read my series on The Joneses, the following assessment is an application of its themes.

TFD is the brainchild of the Tax Foundation, a well-known right-wing think-tank that Koenig refers to as “nonpartisan.”  The Foundation does some very fine research, and TFD could be a useful tool if it weren’t used to fool us.  It is a measure of national (and state) income and taxation -- “not a measure of any one individual’s tax burden,” as Kyle Pomerleau of the Foundation itself explains.

But beyond the misuse of TFD by Koenig and others, what irks me most is their perverted implications.  One twisted notion is that tax money “goes to politicians in Washington and Concord who never missed a chance to spend someone else’s cash.”  Not a hint from Koenig that most tax dollars fund such key basics as public education, public safety, health care, highways, retirement, and national defense. 

Another twisted implication is that “you and other hard-working New Hampshire taxpayers” would have more to spend, save and invest” without taxes.  That is true only if you don’t want education, defense, and the other items listed above.  Because, if families had to buy the same amount of these items as they currently get from government, two-thirds of them wouldn’t have enough left over to buy a decent home, car, food and clothing.  In fact, most would need tens of thousands more to buy those basics – and none would get a chance to enjoy such “luxuries” as a computer, birthday gifts for children, church dues, child care, or a vacation. 

A third twisted notion is that taxes deny freedom, that we are somehow enslaved until after April 23.  Actually Koenig himself inadvertently makes the best case for how twisted this notion is.  He singles out Louisiana as the state where taxpayers are “liberated” earliest (April 2) – three weeks ahead of us.  He might have added the next four earliest and “freest” states -- Mississippi, South Dakota, Tennessee, and Alabama.  It’s hard to imagine why Free Staters chose our “Live Free or Die” state over those superior bastions of freedom.

A fourth twist is urging us to think that we all pay 31% of our income on taxes (April 23 is 31% of the way through the year).  Almost all of us pay far less – and much research (by the Tax Foundation and by others like the Congressional Budget Office) shows this dramatically.

And a final twist is that government’s “spending addiction is getting worse,” that “TFD 2015 is three days later than last year (which) was three days later than the year before, (and that) this trend shows no sign of stopping.”  But the Tax Foundation’s website with TFDs since 1900 shows no such “trend.”  It shows only erratic ups and downs.  For example, the 2015 TFD is earlier than in many years of the presidencies of Ronald Reagan and both Bushes.  Another chart shows total days to pay off taxes and distinguishes federal taxation tax days from state-local days.  In the chart’s most recent year, 2013, it took 107 days to pay off all taxes including 70 days for federal taxes.  But 70 days was an average length of time to pay off federal taxes during the Eisenhower years, and has remained pretty constant.  Most of the added tax days since Ike are due to increasing state and local taxes.

Of course the whole TFD gimmick is intended to make us ignore certain realities of our society.  One is that a market economy produces massive wealth but distributes that wealth so unevenly that only a few (historically about one-third at best) earn enough to pay for an average amount of private basics (housing, food, etc.) and public ones (defense, education).

Another reality is that this uneven distribution is fair by market rules but profoundly unfair by democracy rules.  To compete, market enterprises keep wages as low as they can, and that results in low shares of market wealth for most workers.  But this outcome is intolerable to democracies, for it disrespects majorities of citizens and devalues their contributions – the polar opposite of what democracies stand for.

Therefore, in market democracies such as ours, government must correct this market outcome by making sure that most everyone gets at least a decent share of our massive wealth – at least an average share of modern basics.  To do this, government can require enterprises to pay higher wages and benefits if they have sufficient revenue; but primarily it must tax those who get the lion's share of wealth (most of our nation’s wages and benefits, dividends and capital gains, and inheritance income).  Taxing this crowd won’t impoverish them, for they would be immensely rich even if their tax day was July 4 rather than April 23.

But it is this fear by some very rich people – that their immense fortunes would become less immense – that gives rise to gimmicks like TFD and to the backing of rich people and companies and their policy advisors.  So it is no surprise that Koenig is senior policy advisor at Freedom Partners Chamber of Commerce, a nonprofit, tax exempt organization that is sometimes referred to as the Koch Brothers Bank.  It uses Koch money, supplemented a bit by dues from member companies to fund initiatives (to the tune of over $250 million in 2012) aimed at demeaning government regulation and taxation.

This crowd would prefer an America that looks a lot like the Freedom Partners Chamber of Commerce itself.  It is tax exempt and its membership is open to any business – any business, that is, that pays the annual dues of $100,000 (an amount, incidentally, that exceeds the gross income of a majority of America’s 32 million businesses).

Copyright © 2019 by Paul Levy. 

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