# 45 + 40 Still Equals 85, Right?

I realize we're living in bizzaro-world these days, but...

Dr. Paul has consistently called for an end to the Income Tax. I couldn't agree more- it's immoral to tax the fruit of a man's labor.

But, Dr. Paul has also strongly said NO to any further Federal government borrowing. I also agree with that- when your debt exceeds your income, like it or not, you gotta stop spending.

So- if the income tax represents ~45% of the Federal budget

and

Borrowing/(printing) represents ~40% of Federal spending

To accomplish these two goals would require an 85% reduction in the Federal annual budget? What am I missing?

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### No one said it could be accomplished ...

...overnight. The problem is the spending. If we limit the federal govt to its constitutionally enumerated powers (Art. I, Section 8), which was the original intent, 90-95% of the spending goes away. This is what needs to happen.

Dr Paul's plan to eliminate 5 Cabinet departments is, as he knows, just a start, but it is one hecque of a BIG start compared to what anyone else would even talk about.

This necessarily takes years and years, because our side wins only through education. Their side wins thru contrived emergencies, panic and exercise of illegitimate and unconstitutional power, by which they justify their demands for yet more power.

Time is short. Keep spreading the truth!

### First, income tax is 45% of

First, income tax is 45% of federal revenue not 45% of federal spending. You list the deficit as 40% of federal spending. Spending and revenue are not the same things. Then you add up the percentages of two different things to come up with 85%. The sum does not represent 85% of anything because they are two percentages of two separate things. If you wanted to add the percentages together, you must calculate the income tax revenue as a percentage of spending not as a percentage of total revenue. The income tax revenue is 32% of federal spending. Additionally the current deficit of \$1.3 trillion on \$3.8 trillion spending is 34% of total spending, not 40%. Together the income tax revenue and deficit spending total 66% of current federal spending.

To do both of those things would require a very huge (but not quite 66%) reduction in the federal government. The positive economic benefits of no federal income taxes at all, however, would increase revenue elsewhere and offset the necessity of a 66% reduction of the federal government but it would still require a very large reduction. Those accomplishments (eliminate all deficit, all federal income taxes and huge reduction in federal government) would be very, very nice indeed but not feasibly achievable in a single year. While they are likely ideal goals of President Paul and many of us, they are not what are proposed in President Paul’s recently released plan.

The current 1.3 trillion deficit is 34 percent of the current federal government’s 3.8 trillion spending. Dr. Paul’s proposal to slash \$1 trillion the first year does not eliminate the entire deficit the first year but is by far the best start anyone has proposed. The \$1 trillion represents 26 percent of current federal spending. While President Paul would surely like to eliminate the entire income tax, his recently released plan does not progress that far yet. The plan lowers corporate tax rate, ends savings, dividend and death taxes resulting in a net static reduction in federal revenues equal to 4 percent of current federal government expenditures.

In a static vacuum these two elements of the plan alone are a \$1 trillion reduction in spending and a \$155 billion reduction in revenue resulting in a net reduction in the deficit of \$845 billion. However that assumes there is no net increase in revenues elsewhere resulting from the positive economic benefits of that \$155 billion remaining in the economy from the tax elimination, and the multiplier effect as that savings is traded and invested throughout the productive economy. Thus the net dynamic effect of these two items is a greater than \$845 billion reduction in the deficit the first year. Other elements of the plan such as reduced regulatory burdens would also have positive benefits increasing revenues elsewhere and thus the net dynamic result is a first year reduction in the deficit greater than static \$845 billion.

Let it not be said that we did nothing.-Ron Paul
Stand up for what you believe in, even if you stand alone.-Sophia Magdalena Scholl

### The answer is of course that the income tax won't go away soon

Ending the income tax is an eventual goal, but I don't think Dr. Paul has ever said that he expects to accomplish it immediately, or even soon. In particular, here is an excerpt from the recently released plan:

Lowers the corporate tax rate to 15%, making
America competitive in the global market. Allows
American companies to repatriate capital without
additional taxation, spurring trillions in new
investment. Extends all Bush tax cuts. Abolishes the
Death Tax. Ends taxes on personal savings, allowing
families to build a nest egg.

Here is a link to the full document:

http://www.ronpaul.com/media/RestoreAmericaPlan.pdf

### the plan

the plan does not mention eliminating the IRS, because it's a long term goal.

primary problem is debt, and to address the debt, you have to stop deficit spending first.

paul's plan does that in the first 3 years, somewhere in the last year of his first term, we should be on a balanced budget.

from that point forward, the people should demand, and we should be educating that it's not time to relax now. it's time to start paying down that 15 trillion.

that 40% you mention, comes from borrowing. it's gone by the 4th year. that's what happens when you cut a trillion the first year, and eliminate 5 departments, withdraw our presence overseas in grand fashion.

eliminating the IRS will become realistic about 15 years from now.

that too long for you to wait? how about fighting for it for future generations?

15 years is nothing. if we don't talk about it now, and plan, then it won't suddenly come true out of the blue, in 15 years.

neither will paying down the debt to less then half of what it is now.

look at paul's plan again. i think you're missing the big picture.

### Thank you.

That's all I wanted! So the plan does require some continued borrowing, but at smaller amounts until borrowing is no longer required (or a tax on people's income). Thanks again!

### Yes, we still borrow. But the plans stops it in 3 years.

No serious plan is more aggressive then Ron Paul's, but it will take the will of the people to implement it, and within 3 years of implementation the borrowing stops.

All this happens without firing federal employees, or cutting into near term veterans benefits or medicare/medicaid.

### conservative estimates

all ways better to give up front sticker shock then if you have to drop the price.

### Apples and oranges, as Herman Cain might say

One percentage is for revenue - the other is for spending, so you can't add them together like that.

### There are only three forms of revenue

for the Feds

Taxation. Borrowing or Printing (devaluation)

If direct taxation (an income tax) represents 45% of the budget and borrowing represents 40% of the budget, then those two things together represent 85% of the Federal budget.

If Ron's eliminating the income tax (45%) and has vowed to borrow no more (40%), then one must reduce Federal spending by 85%.

All I really wanna know is; Does Dr. Paul's new trillion dollar spending reduction plan include some amount of new borrowing- and if so, from whom?

### Maybe...

While I'm tempted to answer by asking, "Have you ever heard the phrase, 'the gov't shouldn't do 80% of the things it does'?", maybe this will help clear things up.

For FY2010 according to Wikipedia:

Total Revenue (ALL TAXES/RECEIPTS) \$2.16 trillion
Total Expenditures \$3.46 trillion
Deficit (BORROWING & PRINTING) \$1.30 trillion

Income Tax is included in Total Revenue and was approximately 0.9 trillion in 2010. If you eliminated it, Total Revenue would still be 1.26 trillion, just about what it was in 1994-95.

I'm a serial entrepreneur and liberty activist from Texas!

### The personal income tax provides 45% of the revenues

not 45% of the budget.

Let's say revenues are \$100, so income taxes would provide \$45 of that. If 40% of spending (the budget) is borrowed, then the budget would be 100/(1.00-.40)=100/.6=166.67.
That would mean 66.67 of the 166.67 budget is borrowed, and sure enough, 40% of 166.67 is 66.67 - the amount that is borrowed (spending - revenues).
Now that we know what the budget is, we an figure how muh it would need to decrease if personal inome taxes were removed from revenues. First part is easy - subtract the \$45 personal inome taxes from the \$100 revenues to give \$55 revenue from other sources. The last step is to compute the perentage drop from the \$166.67 budget that would be required to meet the remaining \$55 revenue. x = (166.67-55)/166.67 = 67%. So you'd need to reduce the budget by 67% to have spending equal revenues if personal income taxes were eliminated. Of course this is only a static analysis, and does not consider other economic effects of eliminating the personal income tax.

### the Income tax is no WAY the

the Income tax is no WAY the only tax they levy. Let's see. There is federal tax on our telephones, gasoline, cigarettes, liquor, airline tickets, port taxes, excise taxes, fuel taxes, and I have not even started yet...

### Agreed. But from Ron's statements, he's saying 45% of revenue

is from the income tax. If another 40% is from borrowing, then...

I LIKE the idea of reducing the government by 85%! I'm just trying to understand the numbers as presented.