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Americans Pay More for Taxes than Food, Clothing & Shelter

With the April 15 tax deadline finally over, Americans must begin the onerous task of coping with this year’s tax liabilities.

In a stunning analysis, a Tax Foundation study  has revealed that the combined burden of federal, state and local taxes will cost the average citizen more than food, clothing and housing combined.

The study finds that in 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income.  That contrasts with 1900, when Americans paid only 5.9 percent of their income in taxes.

Despite calls to increase taxes on the rich, made popular by the Occupy Wall Street movement, President Obama, and progressives nationwide, a Heritage Foundation report  finds that recent increases disproportionately affect the working wealthy.  The top 10 percent of all income earners paid 71% of federal taxes in 2010, yet they earned 45% of all federal income.  On the other hand, the bottom 50% earned 12% of income yet paid just 2% of federal income taxes.

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Will all those extra dollars mean that Washington can pay down its debt? (pegged at $17, 580,937, 100 by the  US Debt Clock ) Unfortunately, that will not happen. According to the CBO, Federal outlays are expected to increase by 2.6 percent this year, to $3.5 trillion, or 20.5 percent of GDP.  The CBO projects that under current law, spending will grow faster than the economy during the next decade and will equal 22.4 percent of GDP in 2024. With no changes in the applicable laws, spending for Social Security, Medicare (including offsetting receipts), Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through exchanges will rise from 9.7 percent of GDP in 2014 to 11.7 percent in 2024. Net interest payments by the federal government are also projected to grow rapidly, climbing from 1.3 percent of GDP in 2014 to 3.3 percent in 2024.

Will that extra spending make our nation safer? Apparently not. The Congressional Budget Office notes that spending for defense, benefit programs other than those mentioned above, and all other nondefense activities—is projected to drop from 9.4 percent of GDP this year to 7.3 percent in 2024 under current law.

Should taxes be raised—or just kept at current high levels—to provide more funds for Washington? History indicates that higher taxes do not lead to higher revenues.  The Tax Foundation notes that “The Reagan tax cut ushered in an economic boom; federal revenues grew but the economy grew even faster. Despite pressure on state and local taxes following taxpayer revolts like Proposition 13 in California, the strong economic growth led to increased tax collections…”