tax-please

Government expenditures and indebtedness have gone through the roof in many countries. The United States is no exception. The federal budget deficit in the fiscal year ended September 2011 was $1.3 trillion, similar to the previous year’s results and a tad below the all time record of $1.4 trillion in fiscal 2009. The last deficit was estimated at 8.7 per cent of GDP.

The inability to balance the budget for many years adds continually to the level of indebtedness in the US. Public debt outstanding exceeded $15.2 trillion at the end of December 2011, equal to (more or less) 100 per cent of GDP, one of the highest ratios in the world.

The federal government took in tax receipts of $2.3 trillion in fiscal 2011, an amount insufficient to keep up with spending. As a result, a major tug-of-war continues to be waged in Washington whether to tax or not tax the wealthy, however defined, to raise revenues and reduce the shortfall. Some of the very richest Americans have come forth and stated that they are not being taxed enough.

The billionaire and world’s third richest man, Warren Buffett last year made a personal appeal by publicly comparing his last tax returns with those of his employees, indicating he had paid a smaller percentage of his income in taxes compared with some of his employees. As an investor, Mr. Buffett makes money only when he sells his financial assets and then is taxed at the lower capital gains rate. He sells little and thus earns relatively little. Much poorer people, including Buffett employees, earn most of their money via salaries and wages which are taxed at a higher rate than financial income from the profits on stocks, bonds and other financial asset sales.

Observers of this financial discourse often ask why the very rich simply do not give more money over and above their tax liability to the federal government. It is possible to do so. The United States Treasury eagerly accepts donations to augment its revenues. Altruistic donors can access the Financial Management Service website of the Treasury where they will find the following receptive statement:

Citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called ‘Gifts to the United States’. This account was established in 1843 to accept gifts, such as bequests, from individuals wishing to express their patriotism to the United States. Money deposited into this account is for general use by the federal government and can be available for budget needs. These contributions are considered an unconditional gift to the government. Financial gifts can be made by check or money order payable to the United States Treasury and mailed to the address below.

The Treasury’s Credit Accounting Branch address is given to receive contributions.

Then there is another option. It is possible to make a contribution specifically to reduce the debt of the federal government. A different branch of the Treasury handles these donations. Instructions indicate there are two ways to make a contribution for debt reduction: online by credit card or withdrawal from a checking or savings account, or by sending a check payable to the Bureau of the Public Debt. A corresponding deposit is made to the account “Gifts to Reduce the Public Debt”.

The possibility of making voluntary donations to reduce the federal deficit or debt raises the question: How much does the Treasury actually receive from gifts? Ploughing through mounds of budget data, one can find the heading “Receipts by Source Categories” for fiscal 2011 and a section headed “Gifts and Contributions”.

Under the item “Gifts to the United States to Reduce Debt Held by the Public, Bureau of the Public Debt” the amount listed was only $3.28 million. Meanwhile, “Gifts to the United States, Not Otherwise Classified” totaled a mere $1.7 million. Total donations of $4.98 million are a disappointing revelation.

A few of the super-rich have taken umbrage at the insistence that they should pay more taxes and have pointed a finger at the bottom end of the income scale where millions of households pay no income tax at all. According to a recent study by the Tax Policy Center in Washington, approximately 46 per cent of American households will have paid no federal income tax in 2011 due to their income level or to various deductions and exclusions.

On their tax returns American taxpayers now have the opportunity to allocate $3 of their tax payments to help finance the “Presidential Election Campaign”. The form could be amended to include a line formally asking all taxpayers for an additional, voluntary contribution to help out government finances. Some states that have income taxes do allow this on their tax forms, but usually to a listed charity or nonprofit. For example, in New York State taxpayers have the option of making a voluntary contribution to eight preselected nonprofit organizations.

The billionaires (and mere millionaires) who are “begging” to be taxed more evidently do not put their money where their mouth is. How much grander it would be if the super rich were to convert their pleas into payments to the US Treasury, rather than say (with the wink of an eye?): “Please tax me more!”

Vincenzina Santoro is an international economist. She represents the American Family Association of New York at the United Nations.

Vincenzina Santoro is an international economist. She represents the American Family Association of New York at the United Nations.