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Financing Government
Hi, I’m Walter Hofheinz. I’m running for U.S. Representative for the 32nd District of Texas.
I know what I have to say on this topic won’t be popular, but someone needs to tell the truth and it might as well be me.
My tax policy teacher in law school was fond of the saying “There’s no free lunch.”
I don’t like taxes either, but we have to pay for those things we need and decide are most appropriately provided to each other through our government.
Current expenditures should be paid out of current income. Taxes must match such expenditures plus the amount needed to reduce any accumulated national debt. Our current tax base is about 15% of Gross Domestic Product. To pay current expenses, an increase of about 5% to 9% of GDP will be required (A change of this size requires that tax rates not only be allowed to revert to rates prior to the Bush tax cuts, but actually be increased.)
Some, including my opponent, say we should just cut expenditures.
To bring expenditures into line with revenues at current tax rates we would need to eliminate two of the following four completely: defense, Social Security, Medicare, all other spending (including infrastructure such as road and other transportation, basic research, education, and veterans benefits).
Which two would you choose? I believe they all are essential.
In fact, certain categories of spending, particularly education, research, and infrastructure have such enormous long-term benefits that they should be increased substantially instead of reduced — fortunately we could double or triple the expenditures for each without really adversely affecting the overall budget since they comprise so small a part of the current budget.
Debt can limit needed flexibility in times of difficulty. Thus I believe that the target cumulative national debt should be zero.
What is the appropriate period over which debt should be repaid? It is the expected period of benefit. For example, for spending needed to stimulate the economy during a down portion of the business cycle, it might be the expected length of the overall cycle, which, depending on other regulatory policies, might range from five to 20 years or longer. For spending on infrastructure and education, it might be 20 to 50 years, so that those receiving the benefits of the spending share part of the cost.
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We have accumulated over fifteen trillion in debt, primarily over the past 20 years, as those who wanted things but didn’t want to pay the price passed that price down to us. While it won’t be fun, it is essential that we pay down this debt burden. This will require taxes in addition to those that would otherwise be required. At present, the amount needed for this purpose is $960 billion each year, or about 6% of GDP.
Thus total tax revenue, to accomplish this goal, will need to be approximately 27% of GDP, an amount more nearly approaching our historical tax burden.
As unpleasant as this is, not dealing with the reality of the situation will be worse. Just look at what is happening in Greece, or, closer to home, Jefferson County, Alabama.
We’re on the wrong path. It is time to stop and set out for the right path, a path of principled use of government for the public good rather than the good of the few.
I’m Walter Hofheinz. I’m running for the 32nd Congressional District of Texas.
I ask that you join me in working to create more opportunity, a better, more secure quality of life, and a fairer and more just society for us and those who come after us. Please visit my website and sign up for emails, follow on Facebook, and ask others to work with us.