Not taxed enough - a challenge to my friends!

April 15 is coming up, which is the deadline for income tax forms here in the U.S. Shelly's already finished ours and sent them in (thanks to J.K. Lasser's online service!) so we should be getting big refunds any day now... and that made me wonder a bit. With all our exemptions and deductions, our federal income tax rate ends up being roughly 3% of total income. Social security and medicare taxes are more than double that - about 6.5%, and I believe my employer pays another 6.5% on top of that so quadruple federal income tax if you count both. We also paid around 5% (not quite double the federal tax) in NY State income taxes, and over 5% in local property taxes. Not to mention that state and local government gets 8.625% of every dollar we spend on taxable items here, plus whatever other taxes and fees apply.

Add that all up and we as a family are contributing something like 30% of our family income in taxes to various levels of government. But the tiniest amount of that (only 1/10) is the federal income tax. So why do people get so up-in-arms about the federal government's taxation levels? I just don't get it.

The federal government does lots of stuff I don't like, but it also does an awful lot of things that I heartily approve of. Most funding for scientific research comes from federal dollars. NASA, of course, and all the health research at NIH. The weather service, GPS satellites, the standard-setting functions at NIST. The federal justice system and their efforts to protect us (in large measure good). Emergency aid, the coast guard and at least some level of military readiness are essential. Protection and regulation of the food supply. The US dollar. At least some minimal level of support for the poor and disabled. Relations with other countries have to be handled somehow at the federal level, and while I can disagree with some of the actions taken there, I understand it takes money to pay for diplomats and all the other things we do internationally.

All of that stuff (and I'm not even talking about the social security/medicare piece, supposedly walled off) I value at considerably more than 3% of my income. I'm sure I'd be happy sending 10%, and wouldn't grumble even too much at up to 20% going to federal income taxes. 3% just seems ridiculously low. But that's what current law assessed our family at this past year.

Now much of the recent complaining is rooted in fear about the level of debt the federal government has taken on. But lowering taxes, which seems to be what every politician is always calling for, makes the debt worse, not better. The present federal debt of close to $13 trillion amounts to just over $40,000 per US citizen. Somebody will someday have to pay that debt that we as a nation have incurred. If we don't take care of it we are leaving it for our children or grandchildren. The addition to the debt in 2009 was about $1.4 trillion, or about $4,000 per person, or $24,000 for our family of six. That is far, far more than the 3% in taxes that we, as a family, paid for 2009. Do I really want to leave that debt for my children and theirs to pay through their lifetimes?

It turns out we can do something about this. 31 U.S.C. 3113 authorizes the Secretary of the Treasury to accept conditional gifts to the United States for the purpose of reducing the public debt. There's an online form that takes those payments here at 'pay.gov'.

I've decided that our family can contribute at least $50 to help right now. But I'd also like to see everybody else do their part; the debt is not just our family's, it's the responsibility of every person in this country. Will you join us? Here's the challenge:

  • For every friend who pledges up to $100 to pay down the public debt - go here to do that - I will match that contribution, up to $100 per person.
  • To make a pledge, just add a comment here (on the arthur.shumwaysmith.com page) with who you are (how I know you if you think I might not recognize the name), and how much you're giving.
  • My goal is 100 pledges - if there's greater enthusiasm than that, well, we'll see at that point whether I can continue to match contributions.
  • Whatever happens, if I don't get any pledges, I'll send in the $50.

So, will you join me? Let's be responsible citizens, and voluntarily pay down the debt!

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Well, that went over like a

Well, that went over like a lead balloon!

I'm sending in my $50 this morning. I'll leave the challenge open though - add a comment here if you would like me to match your contribution to reduce the federal debt; I'm happy to do it.

Note that paying down the debt reduces future expenditures of the federal government since it eliminates interest payments on the amount reduced. On the other hand, perhaps we all have better things to do with our money at the moment that return greater value to society - the interest rate charged on US debt right now is not that high. Of course, it could get higher and become much more of a problem if we don't address it at some point. But perhaps now is not the time.

But anybody who thinks it is time, just drop in a comment here on what you'll do about it, and I'll go along. Thanks!