Where do our taxes go? Only receipts will tell

TheStar.com – business/article
Published On Wed Apr 20 2011.   By David Olive, Business Columnist

Taxes are the cost of civilized society, Oliver Wendell Holmes said.

Agreed.

And in brutal society they exact a terrible cost.

There will always be taxes, no matter the regime you live under. They will be collected by governments that we can remove at the next election.

Or they will be collected by the ruling monarchy, military junta, theocracy or kleptocracy. In which case you’ll have no say in how much is taken from you, or what is done with it.

I cheerfully accept that it costs money to create the caring society we’re building here in the world’s most nearly perfect country.

But I don’t know exactly where my tax money is going.

Oddly, this is my one big-ticket expense for which I don’t get a receipt.

There’s a movement afoot in the U.S. to introduce tax receipts, and I hope it migrates here. That way I’d know my share of the cost of the RCMP, mandatory flu vaccinations, street repair, maintaining our armed forces, and my contribution to our foreign aid.

The hostility to taxes and government that many of us feel might be lessened if we knew the necessary uses to which our money is being put. And of course we’d also be better able to demand that spending on ineffectual programs stop.

The Obama White House (whitehouse.gov/taxreceipt) and Third Way, a U.S. centre-left think tank (thirdway.org/taxreceipt) each has nifty “tax receipt calculators” online. Just type in your most recent federal tax payment, and the form turns into an itemized list of what you spent this year on national defence, Medicare, the criminal justice system, national parks and so on.

Bills co-sponsored by Republicans and Democrats are also making their way through both houses on Capitol Hill to provide detailed receipts to every taxpayer.

David Kendall of Third Way, one of the tax-receipt advocates, says, “The problem is that Americans think every dollar they send to Washington is wasted. But it turns out, for instance, that $15 of my taxes goes to the FBI. I think that’s a bargain. If people know where their money’s going, we can have an informed debate about the nation’s spending priorities.”

And with this simple device of tax receipts for all, we could slay a few myths.

Foreign aid spending has always been an easy target for cuts, since Canadians and Americans imagine themselves to be generous here. But if you paid $6,883 in federal tax in the U.S. — the figure used by Third Way as the tax bite for someone with gross earnings of $50,000 — only $42.81 of your taxes, or just 0.6 per cent, was spent on foreign aid. (Most Americans believe that figure is 25 per cent.)

Arts and culture is another easy target, a seeming luxury in hard times. Yet the cost to that same taxpayer of helping subsidize the work of millions of people engaged in the arts comes to $4.92, or 0.07 per cent of the total tax bill. (Most Americans, according to a March CNN poll, incorrectly believe that figure is $345 for subsidizing PBS and National Public Radio alone.)

With trillion-dollar deficits for as far as the eye can see — so severe that Standard & Poor’s on Monday cut its credit outlook on the U.S. to negative — spending reductions have to be made somewhere.

The above taxpayer’s receipt shows that more than two-thirds of his or her tax expense went to just five items (in declining order): defence, Social Security, Medicare (mostly for seniors), low-income assistance (food stamps and related programs) and Medicaid (mostly for the poor and disabled).

In the Americans’ current, gut-wrenching debate over how to stave off long-term insolvency, those figures show that the place to look for savings is defence (19.9 per cent of one’s tax bill) and health care (Medicare and Medicaid together account for 19.7 per cent). The case for health care cost reform couldn’t be made more urgently than this.

Conversely, scrapping NASA missions, AIDS/HIV programs in Africa, and federal sponsorship of dance companies and theatre workshops in Dayton and Sacramento would shave all of 1.4 per cent off this typical taxpayer’s bill.

The 111-year-old Philadelphia Orchestra, one of the world’s great symphonies, was forced this week to declare bankruptcy. Meanwhile, America is still spending one in five tax dollars on defence — or 43 per cent of the planet’s defence spending — two decades after the end of the Cold War.

We have our own misplaced priorities in Canada. But it’s hard to grasp where we should be investing more, and spending less or nothing at all, when we have no tax receipt to examine at the kitchen table.

A taxpayer receipt would be a quantum leap in the transparency required to bring about a truly citizen-based government.

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