He has said he'd do away with the IRS, end the income tax and repeal the sixteenth amendment. Some people find this incredible. Where would the government get the money it needs to defend the nation, enforce contracts and protect property rights? How much is that? A summary review of the 2006 federal accounts makes it look like the critics are right and Ron Paul is exaggerating his ability if not his desire to do away with the IRS in his first week of office.
|
|
|
|
SPENDING
|
|
|
|
|
|
$
2,715 |
2006 total federal spending |
Cut |
Spend |
|
|
|
|
|
|
|
$
64 |
executive and legislative |
75% |
$ 16 |
Cut 3/4ths |
$
14 |
tax collection |
100% |
0 |
Eliminate |
$
549 |
defense |
|
75% |
137 |
Bring troops home |
$
43 |
police, fire, courts |
50% |
22 |
Cut DEA, DHS, leave courts |
$
30 |
transportation( air, water, highway) |
0% |
30 |
No change at first |
$
14 |
space |
|
0% |
14 |
No change at first |
$
16 |
economic and labor affairs |
100% |
0 |
Eliminate |
$
34 |
agriculture |
100% |
0 |
Eliminate subsidies |
$
12 |
energy |
|
90% |
1 |
Eliminate subsidies |
$
680 |
health |
|
0% |
680 |
No change at first |
$
71 |
education |
|
100% |
0 |
Eliminate |
$
142 |
disability |
|
0% |
142 |
No change at first |
$
474 |
retirement |
|
0% |
474 |
No change at first |
$
126 |
welfare |
|
0% |
126 |
No change at first |
$
35 |
unemployment |
50% |
18 |
Less needed |
$
76 |
other income security |
50% |
38 |
Less needed |
$
277 |
interest on debt |
0% |
277 |
No change at first |
$ 59 |
other |
|
50% |
29 |
|
|
|
|
|
$
2,004 |
total |
|
|
|
|
$ 711 |
savings |
INCOME |
|
|
|
|
|
|
|
|
|
|
|
$
1,053 |
Income tax |
|
|
|
$
99 |
Prodn & Imports |
|
|
|
$
373 |
Corporate |
|
|
|
|
$
901 |
FICA & Med (payroll taxes) |
|
|
|
|
|
|
|
|
|
$
2,495 |
Total Income |
|
|
|
$
43 |
Net Investment |
|
|
|
$
263 |
Deficit |
|
|
|
|
So there is really too much locked in entitlement spending to totally eliminate the income tax. At best you could get rid of 70% of the income tax without having to impact entitlement spending. And that still implies deficit spending. A 50% reduction would be possible without deficit spending. It looks like we are going to need some type of income tax, flat tax or national sales tax to come up with $500 billion per year until we can start reducing entitlement spending.
As an alternative, a flat tax of $275 per person would raise $100 billion and could be collected from the states constitutionally. A 2.5% national sales tax would produce $150 billion. A $1.00 per gallon gasoline tax would produce $180 billion annually, at least until America gets the message and lightens up on gasoline consumption. None of these taxes would require the record keeping and invasion of privacy inherent in the income tax.
At some point reductions in entitlement benefits would be necessary to totally eliminate the federal income tax, but even that would leave the 15% payroll tax in place. Wouldn't it work better if we implemented a flat tax or a national sales tax as a transition strategy? From his writings it appears his plan is to cut spending first and so drastically that the Congress makes the cuts in taxes when he presents it with big surpluses. He has also said in debates that we couldn't eliminate the taxes unless we also eliminated the entitlement programs.
Looking at the list of expenditures above the entitlement that makes up the bulk of the spending is healthcare. Dealing with this $2 trillion industry, is where we need to put lots of emphasis.