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Thread: Budget Deficit: Government Handouts Top Tax Income

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    Budget Deficit: Government Handouts Top Tax Income

    That chart below shows me exactly which direction the country needs to be headed in, and confirms my beliefs. It shows that both the percent of government money received per household, as well as the percent of money paid in taxes per household, have steadily gone up over the last 90 years, and that's the problem in a nut shell.

    The belief held by most on the left, is that we need to raise taxes and generate more government revenue to keep that red line on the chart ahead of the steadily rising blue one. Put simply, that's a path that will eventually lead to our destruction. That chart makes it crystal clear that the solution isn't to support increased spending by generating more revenues, but to support less revenues being generated by decreasing the amount of government spending.

    The direction of that chart has to be changed before we end up in economic ruin


    Budget Deficit: Government Handouts Top Tax Income
    By JAMES C. COOPER, The Fiscal Times
    April 18, 2011

    Excerpt

    For the first time since the Great Depression, households are receiving more income from the government than they are paying the government in taxes. The combination of more cash from various programs, called transfer payments, and lower taxes has been a double-barreled boost to consumers’ buying power, while also blowing a hole in the deficit. The 1930s offer a cautionary tale: The only other time government income support exceeded taxes paid was from 1931 to 1936. That trend reversed in 1936, after a recovery was underway, and the economy fell back into a second leg of recession during 1937 and 1938.



    As then, the pattern now reflects two factors: the severe depth of the 2007-09 recession and the massive fiscal policy response to it. The recession cut deeply into tax payments as more people lost their jobs, and it boosted payments for so-called automatic stabilizers, such as unemployment insurance, that ramp up payments as the economy turns down. Plus, policy actions, including the Recovery Act, boosted payments to households by expanding and extending jobless benefits and creating other income subsidies while extending the Bush-era tax cuts and adding new reductions in income and payroll taxes.

    Government transfers of income to households started to overtake personal taxes at the start of 2008, and the gap has been widening. In February, households received more than $2.3 trillion in income support from unemployment benefits, Social Security, disability insurance, Medicare, Medicaid, veterans’ benefits, education assistance and other cash transfers of government funds to individuals. In the same month, households paid $2.2 trillion in income, payroll, and other taxes. The difference was about $150 billion, equivalent to more than 1 percentage point of overall personal income and about four times the amount Republicans and Democrats agreed to cut from government spending through Sept. 30.
    Budget Deficit: Government Handouts Top Tax Income
    Last edited by Grim17; 04-18-11 at 04:31 PM.

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    Re: Budget Deficit: Government Handouts Top Tax Income

    The solution is for the government to give more to the people than they are receiving from the people? I thought that was the exact opposite of your argument?

    I have to admit I'm having trouble reading this graph as well as understanding the exact meaning of all the terminology the author of this article is using. I mean what exactly is a "government transfer of income to a household?" But I hardly think its as simple as a single graph explaining whats wrong with everything.

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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by Wiseone View Post
    I have to admit I'm having trouble reading this graph as well as understanding the exact meaning of all the terminology the author of this article is using. I mean what exactly is a "government transfer of income to a household?" But I hardly think its as simple as a single graph explaining whats wrong with everything.
    The graph is based around the average household income in the US. They get that average by taking the incomes of every household in America and adding them together, then taking that number and dividing it by the total number of households.

    The blue line on the graph represents the percentage of the average household income, that comes from the government. You know, through income subsidies, welfare, unemployment benefits, stimulus money, etc...

    The red line on the graph, is the percentage of the average household income that is used to pay taxes.

    So, 18% of the average household income in America comes from the government, while only 17% of that income is used to pay taxes. In other words, the average American household receives more money from the government than they pay to them in taxes.

    Hope that helps.
    Last edited by Grim17; 04-18-11 at 07:30 PM.

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    Re: Budget Deficit: Government Handouts Top Tax Income

    I know I did. When I filed my taxes for 2010 I got more in my refund than I paid during the year in taxes. How in the hell can that be right? I redid the numbers 3 times before filing online and every time it showed hundreds more in return than I paid. WTF?

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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by dontworrybehappy View Post
    I know I did. When I filed my taxes for 2010 I got more in my refund than I paid during the year in taxes. How in the hell can that be right? I redid the numbers 3 times before filing online and every time it showed hundreds more in return than I paid. WTF?
    My sister got four grand back last year.

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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by Grim17 View Post
    The graph is based around the average household income in the US. They get that average by taking the incomes of every household in America and adding them together, then taking that number and dividing it by the total number of households.

    The blue line on the graph represents the percentage of the average household income, that comes from the government. You know, through income subsidies, welfare, unemployment benefits, stimulus money, etc...

    The red line on the graph, is the percentage of the average household income that is used to pay taxes, they are not government handouts. Don't you work for a living, Grim????

    So, 18% of the average household income in America comes from the government, while only 17% of that income is used to pay taxes. In other words, the average American household receives more money from the government than they pay to them in taxes.

    Hope that helps.
    I hope you realize this analysis uses Social Security, Medicare and Unemployment Insurance for it's calculations. Workers contribute to all three of these.


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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by pbrauer View Post
    I hope you realize this analysis uses Social Security, Medicare and Unemployment Insurance for it's calculations. Workers contribute to all three of these.
    Dont confuse the issue (JK)

    Payroll taxes are not income taxes and the items that payroll taxes pay for should not be used when discusing income taxes and benifits from the government


    Unless all govenment taxes are used in the calculations
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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by pbrauer View Post
    I hope you realize this analysis uses Social Security, Medicare and Unemployment Insurance for it's calculations. Workers contribute to all three of these.
    I think that's kinda what his point is. It is going to get much worse as more baby boomers retire too.

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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by Grim17 View Post
    The graph is based around the average household income in the US. They get that average by taking the incomes of every household in America and adding them together, then taking that number and dividing it by the total number of households.

    The blue line on the graph represents the percentage of the average household income, that comes from the government. You know, through income subsidies, welfare, unemployment benefits, stimulus money, etc...

    The red line on the graph, is the percentage of the average household income that is used to pay taxes.

    So, 18% of the average household income in America comes from the government, while only 17% of that income is used to pay taxes. In other words, the average American household receives more money from the government than they pay to them in taxes.

    Hope that helps.
    I commend you for knowing the basics upon which your graph's numbers were derived. Too many people just throw graphs & charts out there as an argument without bothering to understand where the numbers came from.

    "Too often we enjoy the comfort of opinion without the discomfort of thought."
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    Quote Originally Posted by Montecresto View Post
    It would seem that the constitution is just a god damn piece of paper, to be trotted out when expedient.

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    Re: Budget Deficit: Government Handouts Top Tax Income

    Quote Originally Posted by pbrauer View Post
    I hope you realize this analysis uses Social Security, Medicare and Unemployment Insurance for it's calculations. Workers contribute to all three of these.
    Of course I realize that Pete. In fact, I even mentioned unemployment in the post of mine you quoted. Put simply, The article and the attached chart breaks down what the average family pays to the government in taxes, and what the government pays out to the average American family.

    For the first time since the great depression, the government is giving families more money than it's collecting from them. Historically, the percent of household income used to pay taxes is normally around 8 points higher (give or take) than the percent of household income that the government provides.

    Do you realize Pete, according to the article the amount of money the government transfered to American households in February was nearly 2.3 trillion dollars? That's 579 billion dollars more than what the government paid out at the end of 2007, a 34% increase. On the flip side, household payments (taxes) to the government in that same month were 2.2 trillion dollars, down 312 billion from 2007, a 13% decrease... But the current numbers alone don't tell the whole story.

    If you take a look at that graph from the article, you will see that not only does it show what households have received from the government and what they've paid in taxes over the years, but it also reveals something very disturbing that I believe poses a threat to our economic future. What disturbs me is not the difference or gap between the taxes paid line and the income received line, but rather what both lines have in common. The graph clearly shows that the amount of income households receive from the government, as well as the amount of taxes households pay, have both been steadily increasing over the years.

    In 1929 the government was only responsible for about 2% of average household earnings in America, with less than 3% of those earnings going to pay taxes. In 2007 just before the recession hit, the percentage of the average household income received from the government, as well as the percentage of income used to pay taxes, have gone up 7 fold since 1929, with no sign that the upward trend will be reversed anytime soon.

    When you take into consideration both the information provided by that graph, along with current economic numbers, it paints a pretty clear picture of our financial situation, what led us here, and the direction we need to go in order to fix it.

    I'll give you a hint... the problem isn't with the red line, it's with the blue one.

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