One day, it could be a monument: the Last Taxpayer

Several recent news reports had me thinking of the 1973 Charlton Heston movie Soylent Green, an “Al-Gorean” view of the Earth’s future as a dying planet no longer able to provide enough food to sustain the human population. At one point during the film, the mayor of New York treats his children to a visit to Central Park, where they get to see the tree. That’s right–the tree, because it is the last one, a feeble specimen ensconced in a guarded geodesic dome.

No, the inspiration for my thoughts was not the story about the Academy Award-winning former vice president’s huge carbon footprint due to his profuse use of energy at his Tennessee home. What brought this apocalyptic film to mind was a report prepared by economist Gary Shilling that shows that an increasing number of Americans–52.6 percent, up from 49.4 percent in 2000–receive significant handouts from government programs, and a second story about the shrinking percentage of Americans who are paying income taxes.

Combined, I wondered if these two trends show that we are moving toward a day when children will be taken to visit an amazing curiosity, the Last Taxpayer.
As reported by the Christian Science Monitor, Shilling’s analysis found that about one in five hold a government job or a job reliant on federal spending.

Approximately the same number receives Social Security or a government pension. About 19 million get food stamps while another 2 million receive subsidized housing. Another 5 million get education grants.

While many of these programs are popular, and some are arguably worthwhile, there are limits on how much government can provide without impairing the economy that makes this largess possible.

In 1950, only 28 percent of Americans received income from the government, but by 2040 it is projected to reach 60 percent. We must exercise caution if we are not to make a reality of Ben Franklin’s prophetic words, “When the people find that they can vote themselves money that will herald the end of the republic.”

A second story about a trend that impacts our taxpaying future appeared in the Los Angeles Times and told of the shrinking proportion of Americans that are paying income tax. This year an estimated 50 million Americans–nearly a third of adults–will not pay income taxes. This is up from 18 percent in 1980.

For this, lawmakers from both political parties can take credit or blame, depending on your point of view. Both Democrats and Republicans like to push tax exemptions for groups they see as their constituencies. And let’s face it, those who receive the tax breaks almost universally believe they are just, while deductions for others are considered grossly unfair.

If the percentage of those receiving income from government continues to increase along with the percentage of those exempt from taxation, fewer citizens will be interested in opposing increases in taxes. As taxes go up, more people will scramble to be exempted or to get their hands on some of the proceeds, further compounding the problem.

As Alvin Rabushka, a senior fellow at the Hoover Institution and godfather of the flat tax, likes to say, “Taxes should be obvious and painful.”

Why? Because without these qualities, there is no opposition. Consider first a value-added-tax where an additional tax is imposed on a product at each stage of manufacture and distribution. By the time it gets to the customer, it is unclear as to how much they are paying for the item itself, and how much is going for taxes. Taxes like this are very hard to fight because they are virtually invisible. These invisible VATs are popular with politicians in Europe, and the countries that have them have the biggest governments.

On the other hand, for an example of the value of Rabushka’s dictum, imagine a 10 percent decrease in your paycheck due to a tax increase. There is a good bet that this highly visible tax will inspire you to get in touch with your congressional representative without delay.

And it is this reaction by average citizens that provides the only limit on how high taxes will go–as history tells us, King George didn’t give a hoot until the colonists took up arms.
If we are to survive as a viable nation where the economy prospers, government has the wherewithal to provide essential services and taxpayers are allowed to keep much of their hard earned income, Americans need to reexamine their priorities for taxing and spending. No one wants to end up as the Last Taxpayer.