Igni ferroque

Some friends told me that a movie "Freedom to Fascism" they recently saw espoused the below myth:

"All Federal income taxes are used to service the U.S.
government debt, and that the fees and tariffs are used for all other
spending."

Rebuttal:

Not true. Below is a pie chart of the federal budget for 2004. The insert may be difficult to see so there is a link to the gif file as well.



federalbiudget2004.gif

Federal revenues sources are not tagged for any specific spending such as
debt service. Further, the Federal budget is extremely complex made even
more so by the current administration's dubious reputation with respect to the quality and validity of data.

From the www.gpoaccess.gov website, the Federal debt service spending of FY2004 was estimated by the WH to be $319 billion. This is offset by interest from trust funds like Social Security, the Railroad Pension Fund etc. which earns about $163 Billion annually. Tax data is taken from http://a255.g.akamaitech.net/7/255/2422/02feb20041242/www.gpoaccess.gov/usbu
dget/fy05/pdf/budget/tables.pdf, pg 22. Oddly, this differs from
http://a255.g.akamaitech.net/7/255/2422/02feb20041242/www.gpoaccess.gov/usbu
dget/fy05/pdf/hist.pdf, pg 290. The numbers for 2003 and 2004 differ. For example 2003 actual individual income tax revenues are $793.7 Billion and 2004 are estimated $765.4 Billion on the http://a255.g.akamaitech.net/7/255/2422/02feb20041242/www.gpoaccess.gov/usbu
dget/fy05/pdf/budget/tables.pdf document while the http://a255.g.akamaitech.net/7/255/2422/02feb20041242/www.gpoaccess.gov/usbu
dget/fy05/pdf/hist.pdf document's 2003 individual income tax revenues are $781.7 Billion (2003 actual) and $721 Billion (2004 estimate).

Total individual income tax revenues
2003 $793.7 Billion
2004 $765.4 Billion

Total corporate income tax revenues
2003 $131.8 Billion
2004 $168.7 Billion

Total for all non income tax revenue (fees, tariffs, excise etc.):

2003 $144 Billion
2004 $172 Billion

Social security revenues (taxes and interest on the trust fund)

2003 $713.0 Billion
2004 $732.4 Billion

While this is not cogent to this analysis, the Social security revenues are on par with the individual income tax revenues. Also, as will be shown below, actual bussiness and corporate tax revenues are about half IRS estimates.

Debt Service:

2003 $318 Billion
2004 $319 Billion

An interesting thing to note is that the 2004 WH budget's table summaries
( http://www.gpoaccess.gov/usbudget/fy04/pdf/budget/tables.... ) estimated
the income tax revenue to be:

Individual income tax estimated revenues WH:

2004 $849.1
2005 $849.9

Corporate income tax estimated revenues WH:

2004 $143.2 Billion
2005 $169.1 Billion


According to the Economic Policy Institute (
http://www.epinet.org/content.cfm/webfeatures_snapshots_2... ) 'The latest research from the Internal Revenue Service puts the amount of taxes owed but not paid "voluntarily and timely"--also known as the "tax gap"--at $353 billion, or about 15% of total taxes owed.'

Tax Gap:

2001 $353 Billion

The biggest component is the unreported business income with unpaid taxes of $155 Billion, underreported non-business income $57 Billion, underpayment $32 Billion, corporations $30 Billion. Oh and the "death tax" comes in last at $4 Billion, but it is lumped in with the excise tax.

Conclusion:

My best guess (and I emphasize best and guess) is that the statement should have been:

If the IRS collected on all the taxes owed to the Federal government, then even using the 2001 IRS number of $353 Billion, then there would be no budget deficit.


This has a more truthful ring than the original statement. Unfortunately, I have been unable to find the data for the years after 2001. The 2005 budget indicates a $571 Billion deficit, but does not take into account the supplimental expenditures for Katrina, Iraq, or Afghanistan. The 2006 budget is even more opaque. The 2007 budget proposal by the WH is even more opaque and its estimates are even more out of touch than the 2004 budget.