Not a Winning Plan if You’re Interested in Long-Term Prosperity

Call me a geek, but I was surfing the Bureau of Labor Statistics web site today. I came across a seldom mentioned statistic that I had heard in the distant past, but that was brought home to me more directly after thinking about the implications. Only 64% of all Americans are working today – that includes both full and part-time employment. This is down from 67.2% in January of 2001. This is not a trend to be proud of.

Given that roughly half of working Americans paid no Federal Income Tax in 2010, this means that 32% of all Americans are footing the bill for Federal Government expenditures, including the amounts that social security, Medicare and Medicaid “borrow” from the general fund. And given that roughly 10% of those paying Federal Income taxes account for 70% of all tax receipts, then it stands to reason that 3.2% of all American are footing the majority of the Federal expenditures for the rest of us. If this isn’t a definition of success for the redistribution of income, then I don’t know what is.

You know, when politicians claim the rich aren’t paying their fair share, I want to just scream. What is fair about someone not paying any income tax and then claiming they have a right to someone else’s wealth through the force of law? What is fair about 3.2% paying 70% of the total bill for the other 96.8%? The answer is “nothing”. Nothing is fair about this – but since this group is a perpetual minority, they can be hammered all day long because just out of sheer numbers, the majority who pay no income tax are not going to vote to have their taxes reinstated and will happily take money from the small minority. This is nothing more than selfishness infused through divisive class warfare.

What’s equally disturbing is that while our workforce has been declining, our spending has been going through the roof. We paid for two wars totally on borrowed money and now we’re paying for a host of new government workers and services, 42% of which is paid for with borrowed money. This is not a winning plan if you’re interested in long-term prosperity.

I don’t know of any business that could survive if it increased its’ spending to the point where it was borrowing 42 cents on every dollar it spends while watching its’ customer base shrink by 5%. And only through the force of law could a government watch it’s tax paying base shrink, increase revenues by over 50% over a 10 year period and still have the need to borrow another 42% to finance all of its’ operations while letting (encouraging?) half of its’ tax base pay no income tax. It’s absurd.

You would have to be brain-damaged to think this scenario is sustainable. We need to shrink spending, broaden the tax base to include those who don’t pay income tax and grow those who work to increase the number of tax payers in the United States. Answers to this thorny problem abound and I don’t believe that either party has a corner on the full answer. However, the answer will involve our country making significant changes that are both politically and culturally unpopular. My fear is that we do not have have the fortitude or maturity to make these difficult choices. Perhaps we care more about American Idol and getting another beer than we do about grave danger we are in as a country. I hope not, but from what I can see, my hopes are likely misplaced.

Bill English, CEO


4 thoughts on “Not a Winning Plan if You’re Interested in Long-Term Prosperity”

  1. Pingback: Business and Faith Most Popular Posts for 2011 « Thoughts on Business and Faith
  2. This analysis reminds me of that movie “Dave”, where the fake President (Dave) brings in his personal CPA (guy named Murray as I recall) and asks him to analyze the federal government budget. Murray, a regular guy, is flabbergasted once he sees how much is being spent, and on what. He says the whole thing doesn’t make any sense at all.

  3. What you are forgetting is that many of the 96.8% who did not pay federal income tax last year (because they didn’t earn enough money to do so) did not do this by CHOICE. If there are no jobs, they can’t work, and therefore can’t pay taxes.

    However, they may have paid other taxes (property, local, state, etc.). I didn’t earn enough from my part-time jobs last year to owe federal income tax. I did however, pay my $4,500 property and school taxes.

    Guess what. I have no kids. I do not use the school system, nor any of its facilities. Fair? NO! But I still had to pay it for people with kids who weren’t responsible and decided to breed anyway. Why must I foot the bill for these stupid people who had kids?

    If we all took this attitude about taxes, our country and society would rapidly crumble. Who would then pay for things like sewers, clean water, education, roads, police, and the military? Business? Corporate Giants? The Wealthy? I hardly think so.

    1. Please re-read my post: I asserted that half of the 64%, or 32%, didn’t pay any Federal Income tax. What I didn’t note (and perhaps I should have) is that we all pay state, local, property and Fica taxes.

      As for attitude, our country is rapidly crumbling, but not because the wealthy aren’t paying their fair share. Our country is in decline, in part, because of the unsustainable fiscal policies of the Bush and Obama administrations. If Bush was bad, Obama is bad on steroids. We can’t spend more than what we have and remain solvent. Most seem to understand this except those in Congress (both houses) and the President. It is irresponsible to borrow this much money at any time, especially during a recession. You don’t strengthen the economy by weakening the Federal Government. Good economies need a strong, but limited government, in which to operate. We’re losing our country because of our inability to reign in spending. go to IOUSA.COM and take a look. Not only are we in debt over $15T now, but we have future obligations mandated in law that amount to more than $60T. I’m not kidding.

      My estimate is that when (not if) we can’t fulfill those obligations to the elderly, the poor, retired military, retired government workers and others, there will be social unrest that will make Greece look like a picnic in the park. People will be furious that they aren’t getting what they have been promised by the Federal Government. And they won’t take “no” for an answer, so they will take to the streets. And I fear that they will also take to the houses and person of whoever they think are “rich” to extract what they believe is owed to them. Plunder and assault and perhaps even killing will occur. Why? Because, IMHO, the root pedigree will be the government making promises to its’ people that it can’t keep in the long run, but because Congress is only focused on the short term at any given time, those promises were made with the best intentions but based on unsustainable principles.

      So why do we spend more and more? Because we have grown a dependency class that demands goods and services from the government that it doesn’t pay for. I don’t know how we solve this problem: How do we get people who receive goods and services from the Federal Government for free to vote for people who will take those things away from them? It’s a nearly impossible scenario, IMHO, to resolve short of a full financial collapse.

      As for jobs, there are still businesses that are rapidly growing and being very profitable. they are hiring. While this is not easy, I would suggest you look at the Inc 5000 list and see what industries and companies are doing well, then see what you can do to land a job in that space. I’m not saying it’s easy, but it’s an idea for you to follow up on.

      Bill English, CEO

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