For 2017, there was $6.1 trillion of total government spending (OMB historical table 14.2) and around $3 trillion for regulations and other indirect costs by government (referenced below), totaling $9.1 trillion of government created costs. Out of roughly $17.5 trillion total income (Tax Foundation), that was 53%. There's a higher spending estimate from the BEA of $6.6 trillion (BEA table 3.1), which would raise it to 56%. The personal impact averages 2.5 to almost 3 of every 5 of the nation's workdays.
The spending was about 35% ('Spending Freedom Day' of May 7). That's on individual or business income, including manufacturers. So we'd have to be taxing at 35% to pay for all the spending. The indirect costs were about 20%. Taxes were 31% (Tax Freedom Day of April 23), but we borrowed 4% for the federal deficit, so around 50% total was paid, but 54% was closer to the real impact. The taxation is 20% federal (CBO) and 11% state and local (OMB).
Contrary to the rhetoric, the top 2% earners almost always paid at higher rates.
CBO, April 2009: "The overall federal tax system is progressive- that is, effective rates generally rise with income." On average, 28% was paid over $200k, 16% below ('CBO distribution of taxes'). The
rich who only paid a 15% investment tax were anomalies. A corporate tax sometimes precedes it and most income is taxed as ordinary income, which is steeply effectively progressive. Anyone paying just 15% was offset by others earning
over $200k, not the middle class. The investment tax was raised to 23% in 2013. The top ordinary rate should've been lowered or at least kept the same at 35%, but was raised to 39.6% because that's where the money is. Warren Buffet and the media
mentioned his investment tax, but excluded his corporate tax, which likely brought him closer to 34% (Cato blog) and his secretary either paid less than "33%" on $60k or she was paying above average. Including indirect costs, about 57% total was paid above $200k on average: 28% federal, 6% state and local (ITEP) and maybe 23% indirect. With borrowing, it'll be closer to 62% and the 2013 tax increase adds another 2% effective over $250k and 4% over $400k (CBO). Median $50k households/businesses pay about 35% and will incur maybe 40% with interest.
The government related costs cause the trade deficit with China. Even with some auto union labor reaching $70 per hour, the National Association of Manufacturers cited Census data that production level compensation in the mfg sector averages only 12% of total costs and there's almost nothing on labor costs on NAM's policy agenda. (BEA lists all manufacturing compensation at $1 trillion and government compensation at $1.8 trillion (table 6.2D). In 1956, employment totals were two to one, mfg vs. government (BLS). There were no “tax breaks for shipping jobs overseas”, only higher domestic rates. China's currency rose 20-30% against the dollar over 2008-2015 (M. Pettis, Carnegie), but the trade deficits kept growing at the same pace. It's easier to lower our government related costs, which almost equal their entire economy of $10 trillion (Vice Minister of Finance). The price discount on their side is mostly due to lower medical costs and 30% average subsidies (Usha and George Haley) in major industries which have helped run up their combined public/private debt to our levels in percentage terms (McKinsey Institute).
It's likely 25% or $2.3 trillion of the $9.1 trillion is wasted each year. That's more than the accumulated wealth of the bottom 50% of the population (Federal Reserve- Ponds and Streams). It equals 40 million jobs at $50k or $17k per household and it's a whole lot of environmental waste. $6.8 trillion would be about 40% of business/personal income.
We can easily save 16% of the spending within 3 years, which is about $650 billion federal and $350 billion state and local, reducing it to about 28% of income. From 1900 to the present, average taxation was 23% and spending was 26% (Tax Foundation). Citizens Against Government Waste lists $430 billion of available federal savings (Prime Cuts). The Government Accountability Office identifies $200-250 billion of pure waste and there's also increased needs-testing, using
voucher options, loans before grants including for direct health care,
using non-M.D.s first when possible, work requirements if able, local control and
government/private compensation equity.
$1.3 trillion of the indirect costs can be saved, reducing them to about 12% of income. The tax code itself was $300 billion (Tax Foundation) to $430 billion (A. Laffer) for compliance in time and money before the recent tax reform, but there are other costs. One example is inflation from the medical insurance tax deduction. The GAO looked at outside estimates of all external (besides taxes) costs in an August 2005 report and the median estimate totaled around $750 billion in today's dollars before the reform ('GAO tax policy summary'). The 2008 Tort (injury) Liability Index cited “excessive” costs of $589 billion for just that aspect of the state's legal systems. Federal regulatory costs, which included $150 billion of tax compliance at the time, were $1.75 trillion in 2008 (SBA). It's likely at least $400 billion is wasted.
Less government borrowing would increase credit for small businesses, help stabilize the money supply and the government credit rating.
Honest change requires 51/60 senators, 218 in the House and a president who believe in economic freedom, as do 70% in Gallup polling on policy rather than party. From 2000-06, there were only about 44 in the Senate who rated at least 70% on NTU Rates, the most comprehensive rating on spending, tax/reform and regulation votes. All were Republicans, who had a majority with an average 52 seats, but still short of "complete control" as the media often called it. Currently, there are maybe 50 of the 53 Rs and the House is in D control. The R's House/Senate average score was 78% and the D's 15%. Anyone can enter their own House and Senate members to check their scores. Biden rated 15% in his Senate career. Warren rates 13%, Booker 15%, H. Clinton rated 10%, Sanders and Obama 9%. The Ds had complete control in 2009, passing the 2,300 page medical bill, now with 20,000 pages of regulations, instead of tax reform, etc. and 3 other times in the last 80 years (67% of Senate needed before 1975) or they've been able to block change (Composition of Congress). Prior to ranked choice voting, some D and independent voters might reconsider their support and at least stay home.
The debt is near $22 trillion or $350k average per household since only about 60 of the 125 million households save anything annually (Federal Reserve Bulletin, June 2012). That's maybe $700k with interest. Spending, tax, regulatory and legal reform would allow 80 million households to pay the debt and reduce the bill to $524k.
The annual trade deficit with China of $300 billion (Commerce Dept.), about $30 billion of interest and Europe's $200 billion deficit (Eurostat) are funding China's military buildup. There's a roughly 15% cost difference between a typical landed import from China and what we can make it for, according to Outsourcing Cost Index (2010). The NAM has a similar estimate. Perhaps targeting at least manufacturing with a 15% tax reduction might get enough bipartisan support. Whichever party gets the credit probably won't matter that much since the 2 party system is replaceable.
