Expanding Tax Details

The following is just a quick thought on one simple thing we could do to improve the tax conditions in the United States.

America is facing some very difficult decisions regarding taxation and spending. We are facing these decisions because of the amount of debt that the United States owes currently and the amount of money we have promised to pay for other things in the future. We owe a massive amount of debt that is nearly impossible to imagine. While the number is difficult to calculate, most economists agree that the number is above fourteen trillion dollars ($14,000,000,000,000).

We find ourselves in this situation for the same reason that any person or family would be in debt. We, the federal government, spend more money annually than we collect in taxes. Almost every year for the past sixty years the federal government has run a deficit and pushed the shortfall onto the debt pile to be paid later. For most of those years the deficit was tiny in comparison to the overall tax revenue. The problem is that over time, the deficit sizes have grown larger and thus the debt pile has not been paid down.

The problem exploded in the 1980s. The national debt tripled from less than $1 trillion in 1980 to more than $3 trillion in 1990. It continued to grow in the 90s but at a slower pace and in the year 2000 America owed more than $5.5 trillion in debt. However, the last decade has been reckless and by the end of 2010 we owed $13.5 trillion dollars. Since absolute dollars do not convey as much information, economists prefer to represent this debt as a percentage of the gross domestic product (GDP). In those terms, the debt to GDP percentage in 1980 was 33%. That increased to 56% by 1990, increased to 58% by 2000, and exploded to 93% by 2010. Without some change in either revenue or spending, our debt will exceed our GDP within the next few years.

There are two things that Americans can generally agree upon. One, they do not want to lose any benefits that they are receiving; however, it is acceptable if some other people lose their benefits. Two, they do not want to pay higher taxes; however, it is acceptable if other people pay a little more. In short, we tend to want the burden to fall somewhere other than at our feet. I will refrain from suggesting particular cuts or particular tax increases as both of those tend to polarize readers. What I will suggest is a simple reporting change to tax collection.

Examining the standard payroll stub a person will see the following federal taxes listed: Federal Withholding Tax, Social Security Tax, Medicare Tax.  Why can these not be expanded? We should list the primary things for which the taxes are being used. Every body's paycheck would have a several new lines. As an example, maybe under "Federal Withholding Tax" we would see:

Will this help pay off the federal debt? No, but we should consider it basic reporting regulations. Every bill I pay is itemized and I think maybe my taxes should be itemized also. In this way I can at least understand better where my money is being spent. It makes me a more knowledgeable citizen and in the end knowing is half the battle right?