finem respice

Join My Fantasy Accounting League (Deux)

Submitted by ep on Sun, 04/19/2009 - 00:39
throw it in

One of the pure vanities of blogging is the luxury of spilling one's late-night thought experiments out to a wider audience than may otherwise have been prudent. This is particularly riskless on a weblog that has no public comment system activated. This means that if, for instance, one grows more and more skeptical of the attitude that "The cost of taking care of old folks is going to go up a bit. We'll pay it. Relax."1 a thought experiment in the earning power of leftist fantasy taxation scenarios is not a difficult exercise to undertake and expose an audience to. Let us, in this direction then, away:

Let us therefore assume:

Per Capita Income (United States) 2008: $39,7512
Average Rate of Income Growth 2009-2023: 4.33%3
Average Tax Rate (All Taxpayers) 2006: 12.60%4
Average Tax Rate (All Taxpayers) 2009-2023: 15.12%5
Tax Returns With Positive Adjusted Gross Income (2006): 135,719,160.6
Annual Growth in Population: 1%7
Annual Growth in Tax Returns With Positive Adjusted Gross Income (2009-2023): 1.5%8
Income Tax as Percentage of Total Federal Receipts (2007): 45.30%9
Income Tax as Percentage of Total Federal Receipts (2009-2023): 45.30%10
15 Year Discount Rate: 3.45%11

These assumptions result in a net present value of the next 15 years of fantasy tax receipts of around $60 trillion.

The total public debt at present according to the United States Treasury is around $11.2 trillion.

More aggressive GAAP figures for "Total Federal Obligations" are around $65.5 trillion.12

If you accept the first figure as holistic, then, assuming a total moritorium on interest and a balanced budget tomorrow, the United States need "only" dedicate about one dollar in five of the next fifteen years of fantasy tax receipts to debt service to clear the slate.

It will be seen that the consequences of the accuracy of the Shadowstats figures are a bit more daunting.

This is only about an hour's unproofed work. Feel free to toy around with my assumptions or calculations. I've put these figures on a Google Docs spreadsheet13 for giggles.

  1. 1. CKMichaelson "SAR #9108/Weekender," Some Assembly Required (April 18, 2009).
  2. 2. U.S. Dept. of Commerce, Bureau of Economic Analysis. Released March 24, 2009.
  3. 3. This is the larger of the arthmetric and geometric mean of the last six years of percentage growth in this figure. This represents what can only be expressed as the unadulterated fantasy that massive taxation increases will have no effect on the rate of personal income growth in the economy for the next 30 years (i.e. the Laffer curve is false in any relevant sense, or that we are far on the left-hand side of it) and that the debt funded massive boom of the last 6 years can be replicated over the next 30 years if only the proper "great leaders" can be installed and maintained at the top to impose the proper policies. It also allows for the rather sketchy practice of "model shopping" by picking the larger of the arithmetic and geometric mean.
  4. 4. Gerald Prante, "Summary of Latest Federal Individual Income Tax Data," The Tax Foundation (July 18, 2008).
  5. 5. Assumption. This represents a 20% Income Tax hike on all taxpayers because: why not?
  6. 6. Gerald Prante, "Summary of Latest Federal Individual Income Tax Data," The Tax Foundation (July 18, 2008).
  7. 7. Below the world average of 1.19% but above the 2007-2008 gain according to the United States Census Bureau.
  8. 8. Assumption. Based on the popular fantasy that all that is required to increase the tax rolls is to boost enforcement (and that this will produce no related capital or taxpayer flight) and that a rate of increase can exceed population growth for meaningful periods).
  9. 9. Tax Policy Center, "Historical Amount of Revenue by Source," Tax Facts (February 8, 2008).
  10. 10. Assumption. Representing the fantasy that all tax receipts will grow at the rate of fantasy Income Tax receipt growth assumptions, which are based on fantasy personal income growth rate assumptions. (i.e. Fantasy CDO^2 2009 vintage).
  11. 11. This is the average of the 10 and 20 year rate for U.S. Treasuries as a crude attempt to extrapolate the 15 year rate from the yield curve. Based on the fantasy that rates in the current Treasury bubble will be sustainable for 15 years and that these represent legitimate "cost of capital" figures for the Treasury (ignoring average interest rate figures on Treasury debt today). United States Treasury, "Daily Treasury Yield Curve Rates, April 2009," Office of Debt Management (April 17, 2009).
  12. 12. Shadowstats.com.
  13. 13. Equity Private "Tax Experiment," finem respice (April 18, 2009).
[Art Credit: Unknown Artist "Boston Tea Party," Print (1846), The Bridgeman Art Library. From the famous (notorious?) print house Currier and Ives, "Publishers of Cheap and Popular Pictures," and extensive purveyor of hand colored lithographs.]

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