Obama plans to have tax cuts in his stimulus package:
Aiming to foster bipartisan support for his record-setting economic
stimulus, President-elect Obama plans to propose huge tax cuts for
businesses and middle-class workers that will total about 40 percent of
the package, or up to $310 billion, congressional officials said.The revelation is part of an intricately orchestrated roll-out of the
plan that includes an appearance by Obama on Capitol Hill on Monday and
a major speech about the economy later in the week.Obama plans to ask Congress for a stimulus package of $675 billion to
$775 billion, so the planned tax cuts will total about $270 billion to
$310 billion, the officials said.Obama strategists say he wants to get 80 or more votes in the
100-member Senate, and the emphasis on tax cuts is a way to defuse
conservative criticism and enlist Republican support.But officials say the tax cuts will be based on historical and empirical evidence of what works, not ideology.
I stopped reading there. First, I had to clean the coffee off my computer screen from my spit take. Is there no end to the humor of Washington? Second, I wanted to play a little game. I’m going to guess what kind of tax cuts have the evidence on their side. I’m going to guess it’s rebates to the middle class rather than cuts in rates that supply-siders would like. Let’s see if the article says anything else. Yes it does. Next sentence:
Rather, the targeted tax cuts will be designed to stimulate job growth
in the private sector and help middle class families, the officials
said.For families, the tax cuts include the $500 “Making Work Pay” payroll tax credit Obama proposed during the campaign.
For businesses, the tax cuts would include breaks for small employers and a “new jobs credit.”
So how’d I do? What grade do I deserve? Of course you’ll have to take
my word that I stopped reading at the line about ideology. But I did
sign the honor code.
The payroll tax credit is a rebate of payroll taxes for low-income workers. As faithful readers of this blog surely know, an increase in spending coupled with lower tax collections is an INCREASE in taxes. AN INCREASE in taxes. NOT A TAX CUT. If I spend more money and collect less, the government is promising to collect more taxes in the future. It is not a tax cut. Not a tax cut. Not a tax cut. And when you don’t cut rates but rather give people a lump sum of $500, there are no incentive effects other than to increase the probability that the US Treasury will be unable to honor its obligations in the future.
I can’t wait to see all the studies that show how a rebate creates jobs. What a relief to know that this is just one more example where the Obama administration will not let petty ideological principles get in the way of what works.
Podcast RSS Feed
Full EconTalk Text
{ 49 comments }
I'm surprised you make the argument that way at the end – that "spend[ing] more money and collect[ing] less … is promising to collect more taxes in the future."
Logically, that doesn't seem to hold water. I can think of more than one way in which the state can spend more while revenues decrease, without ever having to increase taxes in the future.
The most obvious alternative would be to hold taxes steady (or even cut them further) in the future while cutting spending by a larger amount in order to pay off the debt incurred in the first place.
Another possibility that occurs to me is keeping the deficit constant, so long as GDP is growing so that the debt-to-GDP ratio decreases. The debt matters less, just like your mortgage is effectively smaller and less consequential if you get a raise. In fact, the deficit could even grow just so long as it's not growing faster than GDP.
And, of course, all this presumes that there's a deficit in the first place – if there isn't (merely a smaller surplus), there's no question of ever having to increase taxes to make up a shortfall. Of course, in the US today that's a purely academic point to make.
Disclaimer: I am NOT arguing that these are desirable scenarios, I'm just saying that they're logically possible and the post above seems to miss that. Or am I the one who's missing something?
In any case, I'm also surprised that you didn't take the angle that tax rebates and credits aren't real tax cuts – they're just sugar water designed to get the gerbils (tax payers) to change their behaviour in ways that the state desires. All in all, repulsive and guaranteed to bring out an ever bigger swarm of lobbyists. And to do nothing to help the overall economy.
All government spending has to be paid for as it represents consumption by the recipients of the spending. One way or another, producers will have to pay the cost of the spending.
However the resources are transfered, it's a tax on the productive.
This is going to be the theme with the Obama administration. Every policy will be proclaimed to be "science based". Opposing or being skeptical of a policy will get you the label of being anti-intellectual or a denier or anti-science. This will make for the worst politics we've scene in a long time as opponents of his policies try to figure out effective rhetoric to counter the pseudo-science. If he keeps it up for four years, he'll be hated for it. Nobody likes anyone who claims to be smart and can't act wise or humble.
Sanjay – You missed the point of this blog post. Russell Roberts (correctly) takes issue, not with tax cuts, but with what Obama is calling a tax cut (and is actually a tax hike). Obama is increasing spending a lot and cutting taxes a little bit.
Russell Roberts wrote: "As faithful readers of this blog surely know, an increase in spending coupled with lower tax collections is an INCREASE in taxes."
I'm a pretty faithful reader but I'm not able to follow this logic.
Increases in deficit spending, especially when unemployment is moderate to high, are not inherently tax increases. According to economist William Vickrey (nobel prize 1996), "Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity."
Really lost me at the needing to "recycle savings." When I hear that, I have this sickening feeling that the explanations is built upon some notion that people stuff their savings under mattresses or in Scrooge McDuck vaults: Those damn savers! Ruining the economy — if only we could spend their savings, the economy would be booming!
Here seems to be the problem, "to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges." Basically if government spending is more profitable than the taxes that pay for them? Do we want the Federal Government in that business and what about opportunity costs rather than merely the costs? This seems to ignore the investment returns taxpayers might have received if Congress hadn't taken the additional taxpayer dollars to spend.
Jason,
I think you're misinterpreting the government disbursement clause. Vickrey is simply saying that if taxes and fees exceed the actual disbursements, then the deficits won't do any good (i.e. because the recipients don't end up with more spending capacity). There's no profitability requirement.
Savings in this case is simply the opposite of spending. To me it's clear that if there are willing workers beyond a structural employment minimum who are unemployed, then, in aggregate, people aren't spending enough to create the demand for extra labor. To employ an otherwise idle resource has little cost and in aggregate makes us better off as long as what's produced has some positive value.
While we must, of course, try to keep our socialist ship of state afloat, so long as we are on board, let us not forget that our efforts to do so are but a stop-gap, and that our ultimate goal is still to sink the whole damn ship, though in an orderly and safe manner.
Quote by Bret: "… in aggregate …"
There's your problem. Could you show me anybody that actually lives in this "aggregate" you speak of?
I disagree that an increase in deficit spending necessarily represents a future increase in taxes. What cannot happen will not happen. A future generation that cannot afford a large state will simply not pay for it. The final end of a fiscally irresponsible political class is the downfall of that political class – not the downfall of the people who support it. So I will happily accept my rebate – and continue to demand a reduction of tax rates (rental rates) as well.
Zachary: Russell is mixing up the two set of taxpayers responsible for this-that's the solution to this apparent paradox.
A Tax cut is a tax cut-we all, the present generation, have more money in our pockets.
A Government spending program is not necessarily a tax on us-it is a Tax on future generations, our kids, who have to return the Government borrowings with interest.
The present generation is one set of tax payers-the future generations are another. You can cut taxes for the present generation and increase taxes on the future generations-to increase Government spending.
The important question is not who is paying the taxes–present or future generations-but whether the taxes are going to be used for productive or unproductive purposes. A Government spending is very likely to be unproductive-a tax cut for the present generation is likely to be a productive use of capital.
Sanjay
Bret quoting Vickery:
"Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future.”
This is a fallacy; government has no power to create additional “purchasing power”.
Deficit spending is either:
1) The spending of money borrowed from the citizens, in which case it is merely money spent by the government instead of being spent by those citizens — so it does not constitute an increase in “purchasing power“, rather, it’s merely a transfer of purchasing power from one entity to another.
Or:
2) It is the spending of new money printed up by the Fed, in which case it is spending that reduces the purchasing power of all the other dollars in existence via inflation; since this inflation takes some time to work its way through the economy, this type of deficit spending is merely a reduction of future private sector purchasing power for the sake of increasing the government’s purchasing power in the short term. Again, we are only looking at a transfer of purchasing power, not the creation of additional purchasing power.
J.B.Say taught us over 200 years ago that an increase in “purchasing power”, i.e. an increase in demand, can only come from an increase in production. Borrowing fiat dollars from one party so they can be spent by another party — or printing up new fiat dollars — does not constitute the creation of new demand.
Bret said:
Savings in this case is simply the opposite of spending.
Actually, saving is a form of spending. Unless you are hoarding your money under your mattress, your savings are being loaned out to people who spend those funds on everything from capital goods purchases to automobile purchases to vacations, etc.
Every freshman legislator, in his indoctrination, learns that the CONTENT of a bill is not what counts; it's the TITLE, silly!
Thus if a bill is titled Tax Cut, then who cares if it's actually a tax increase?
You can turn to Daniel Hamermesh for that study (see discussion here).
In more practical terms, the "payroll tax-credit" proposal is an implicit admission that Obama believes the federal minimum wage is set far too high. Think of it as a face-saving (and yes, ineffective and inefficient) way of trying to undo the effects of the recent minimum wage hikes without having having the political will to take the more politically difficult step of actually fixing the real problem.
Isn't Obama's party the one who already made fun of targeted tax cuts by claiming 'all you could buy with that tax cut is a muffler?'
And isn't it also the same party who decried any changes to Social Security at all, especially doing anything to the payroll tax scheme that funds it?
Good call, Michael. You must be familiar with my patron saint, who wrote:
What is Ariste's object in saving ten thousand francs? Is it to hide two thousand hundred-sou pieces in a hole in his garden? No, certainly not. He intends to increase his capital and his income. Consequently, this money that he does not use to buy personal satisfactions he uses to buy pieces of land, a house, government bonds, industrial enterprises; or perhaps he invests it with a broker or a banker. Follow the money through all these hypothetical uses, and you will be convinced that, through the intermediary of sellers or borrowers, it will go to support industry just as surely as if Ariste, following the example of his brother, had exchanged it for furniture, jewels, and horses.
One point that never seems to come up in the debate about tax rate cuts and tax rebates is the systemic issues of efficiency. The government taxing a certain amount of money away from you, processing the credit and mailing a check so that it can be taxed again when spent is much less efficient than just not taking it in the first place.
Of course, science and efficiency have very little place in government…
It seems to me that the discussion has grown quickly esoteric as it usually does.
The point Russel made is this :
"I'm going to guess what kind of tax cuts have the evidence on their side. I'm going to guess it's rebates to the middle class rather than cuts in rates that supply-siders would like."
Forget the phony labeling and concentrate on the facts. Is Russel correct when he states that a gift of $500 to middle income tax payers a "tax break" that will have to be made up by the collection of increased taxes in the future? I personally agree with Russell on that because I have never in my long years seen actual spending "cut" by the federal government. Oh a program may get less this year but another always gets more.
The second part of Russell's point is that the gift of $500 does nothing about the actual tax rates to which the people are exposed, it changes nothing….it is just a gift with a generous label. So is Russell correct when he states that to be a tax cut the tax rates must be lowered. I agree with Russell that Obama's gift does not do that.
Anyone want to bet that within one year we will see increases in the actual tax rates on all classes of people in this nation?
Remember, if you don't want congress to squander your money, your only choice is not to give it to them in the first place.
It's NOT enough!
Obama's proposed amount to individuals is not enough to stimulate the economy. $500/individual and $1000/family is enough to pay a mortgage and a few groceries, it is not enough to stimulate wide-spread spending. The government has already bailed out the banking/mortgage industry, and they'll be the end-recipients of the proposed amounts from consumers.
Why not give every individual $10,000. We'd all run out and spend. (Many would buy cars which would have been a better bailout for the auto industry!) OR why not return any income taxes paid in 2008? We already work until May to pay our tax debts–refund that money! I promise to spend it!
vidyohs,
I agree, but would propose to take it one step higher.
First of all, the 500 is not a tax break. It is redistribution. Let's not make any illusions about that. It is being taxed at marginal rates and being redistributed across the board.
Second, I would argue (and if anyone has argued this before, I'd be interested in reading up if you have names) that the notion of a "tax on future generations" is a disgusting lie.
If I own a company, and declare a $2/share dividend payable 6 months from today, what happens. Does the stock price wait 6 months to increase by $2? NO, it changes on announcement to reflect a value close to the $2 (assuming the occurrence of the dividend wasn't a predictable event).
Likewise, does anyone on this board honestly believe that when a country spends future money, that everyone's kind enough to ignore it until it has to be taxed in the future? I can accept that perhaps it's not a direct dollar for dollar impact, but to say there's none?
If I'm incorrect, please correct me, but this feels like such an obvious thing that I'm ready to start bashing my head on my desk.
Dump the "future" description of the tax increase. The effect of wasteful government spending is immediate. By spending money on things that no one spending money he EARNed would buy, the "stimulus" subtracts value from the economy as a whole right now. We can read the details to find out who suffers more and which small group might get a short term plus, but — on average — there are fewer consumer goods and the average person is worse off, right now. No "future" qualification is needed.
Michael Smith & Perry Eidelbus wrote in effect (with the help of Bastiat): "To save is to spend."
Why am I reminded of Orwell?
To save is to spend, iff there are others who are interested in taking those savings and doing something with them (i.e., investing in production). Since short term interest rates are hovering near zero and long term rates are surprisingly low (to me), currently, few people are willing to invest. As a result, currently, to save is to not spend and we have the rare situation where the Paradox of Thrift is a factor.
Many of the things y'all are saying are usually, but not always, true.
Cheers,
Bash hurt, bash not good!
Good points and I may be agreeing for slightly different reasons.
I suspect that the so-called national debt is nothing more than numbers to dazzle people into believing the important part…..on all debts interest is owed on the principle. I really do not believe that the "national debt" is ever meant to be repaid; however, the USA does pay interest on it and that alone is billions enough to keep the creditor/owners fat and happy for all eternity.
The real wealth of this nation is in the productivity of its people and that is pledged as collatteral for that "debt", hence the interest payments. The debt can never be realistically repaid, especially "by the people", but we can be milked for that interest.
It was unfair of me to have implied that the participants in this discussion were trying to save the socialist ship of state rather than what was left of the free market. But I still say that the best tax policy is none at all.
piperTom wrote: "… the "stimulus" subtracts value from the economy as a whole right now."
Not if its primary effect is to cause resources that would have otherwise been idle to be utilized.
Oh vid, you always bring a smile to my face.
I appreciate the add on, and do suppose that it could be seen as a perpetuity as opposed to a loan, which makes for some interesting valuation calculations…
I think the thing I was more concerned about is the money in your pocket. I realize this may be a bit of a stretch, but here goes:
My assumption is that the sum of a country's fiat currency is essentially a valuation of the country's current and potential future production. Any form of government spending then must be "paid for" in some way. This can be through direct expansion of the money supply (printing cash) or the assumption of liability (putting it on credit).
If the original assumption holds true, and we can assume that investors are intelligent and understand that credit must be paid for (whether through interest and principal or or perpetuity arrangement).
We have two situations. In the first, money is printed, and given assumption A, then you have received money from the government, and each dollar in your pocket is worth fractionally less based on the amount you received. In the second, a loan is taken, and the country's obligations increase accordingly, and the money you hold is worth fractionally less.
If true, this means that any payment or obligation comes out of your pocket today, right now. If this is a 1:1 ratio, then the net effect of Obama's tax cut would be a $500 tax rebate for each person, $1500 of money redirection, and an average contraction of the value of your wages/money of $2000. (Yes, the $2000 is very ambiguous, and amorphous… there are a variety of ways it would be distributed or lost, and could be ultimately accounted against currency holdings or wages, but that's another post).
Cheers wrote: "My assumption is that the sum of a country's fiat currency is essentially a valuation of the country's current and potential future production."
Sure. The point of a stimulus package is to increase the current and potential future production. When resources are idle as they are now, this is plausible. In which case each dollar in your pocket is not necessarily worth fractionally less.
The Skeptical Optimist has a nice post on this.
Should have left the last paragraph in the post…
The point I'm making is that any notion of a stimulus would be an illusion. Money is being taken from individuals pockets and invested by the government. If you believe that government is somehow able to invest at a marginal return higher than every other private enterprise and individual in a country, then in this case, I don't believe that you have any recourse but to argue for the elimination of private investment. If not, I don't see any recourse but to eliminate any redistribution for the purpose of stimulus. Moving money through the economy at a loss doesn't spur investment, trade or growth. It just makes it the losses more painful when they do occur.
Heh, sorry Bret, looks like we're writing at the same time… I'll quickly relate my post then check out the link.
The point I'm making in the last post is that if there are idle resources, it's because of one of two reasons. Either there is no value to them being put into use or there is value that's undiscovered. If the government has a better ability to put those resources into use, why do we bother with private enterprise at all? If the economy is working at it's highest potential, and still cannot match up with the potential of government to invest, there is no purpose to an open economy. The government should decide what is built. If they are idle because there is no profit to them being put to use, then they should be idle and waiting for an investment that has a positive value. Using them when they don't have value yet simply increases the cost of labor (or whatever resource you're using) and stops growth from occurring because an investment that would be profitable tomorrow at a labor cost of $10 per hour is no longer profitable, and is not made.
Bret wrote:
“To save is to spend, iff there are others who are interested in taking those savings and doing something with them (i.e., investing in production). Since short term interest rates are hovering near zero and long term rates are surprisingly low (to me), currently, few people are willing to invest. As a result, currently, to save is to not spend and we have the rare situation where the Paradox of Thrift is a factor.”
Borrowing has gone down, but it has not stopped. Housing sales have declined, but they have not gone to zero; people are still taking out mortgages. Automobile sales have declined, but they have not gone to zero, either; people are still borrowing money to buy cars. Nor have credit card purchases stopped; they may have decreased, but again not to zero.
Do not forget that due to our fractional reserve banking system, a dollar of savings can become much more than a dollar's worth of spending.
And let us not confuse ourselves about the root cause of our economic problems. The problem we have right now did not occur because people saved too much — it occurred, because certain people were enticed to borrow too much and, in many cases, they cannot pay back what they borrowed. If, now that we have a recession, people are starting to save more, then that is an effect of the recession, not a cause of it.
Chicago has a new tourist slogan that proves we need a tax cut “IF YOU THINK DALLAS TEXAS YOU SHOULD SEE CHICAGO” Read why Chicago picked this slogan at, http://stopthepresses2.blogspot.com/2009/01/chicago-unveils-new-tourist-slogan.html
If spending more and collecting less is a tax increase, then is spending less and collecting more (say by increasing rates or increasing the base on which the tax is charged) a tax cut? No wonder the average person doesn't understand what economists are thinking or saying. If my local school district raises the property tax by 10% and lays off 20 teachers, while freezing all other expenses, I have a hard time calling this a tax cut. More like a tax increase and a services cut.
"If I spend more money and collect less, the government is promising to collect more taxes in the future. "
Phil,
You forgot the last part of his argument. If I'm reading him correctly, what he's saying is the government is necessarily spending into debt and will necessarily have to raise taxes later to cover that debt.
I'll let Dr. Roberts defend his assertion.
Proof by repeated assertion.
How would Milton Friedman grade that?
vidyohs asks:
In a world with prediction markets, such questions are bombast. Make your definitions concrete, create an Inkling market, and dare those who disagree with you to profit from your misperceptions.
Following Prof. Roberts' example:
You are wrong. You are wrong. You are wrong.
QED.
Unbathed,
Naw, couldn't care less about doing what you demand, don't give a damn 'bout you or your demands.
My offer for a bet was worded as speculation and as such can be as assumptive as I choose. Stick that in your neglected soap bar and live with it.
I am as free to speculate as I choose and my speculations may prove to be correct or they may prove to be wrong; however, at this point for you to state definitely that my speculations are wrong is just simply wrong wrong wrong.
Oh BTW, wanta bet?
Damn vid, you could have just said that it was just a turn of phrase. ;o)
Thank you, Cheers. Your posts at Jan 5, 2009 1:09:57 PM and 1:17:59 PM are exactly right and explain it better than I could. Everyone in Congress should have to read them and come up with a response before passing any spending bills.
MnM,
Gosh mijo, I just responded in the same tone as I was reproached and denigrated.
I didn't need Robert Kaplan to tell me about leadership demanding a pagan ethos, I discovered that long ago as I studied the left and its tactics.
When at odds with a pagan one can not be timid about using pagan tactics before the pagan can.
I do not bring a knife to a gunfight, my friend
Cheers,
I echo Jason's comment.
We can talk about the theoretical side of things, and in that case I will just quietly come in, go to the back of the room, and take a seat and listen because on that level there isn't a hell of a lot I can say. You and others are way above my head there.
Now if we talk reality, I can only tell you that I know that enculturation, conventional wisdom, and assumption are the determative factors in 99.999999% of people's lifes.
If we all step back and look at what is being done economically, call it financial if that pleases anyone, and try to draw some logical reasonable sense out of our observations we will all just go crazy. Trying to make government actions fit a reasonable template such as you and I have to work from in our ordinary lifes just doesn't work.
I do not trust govt., I do not respect govt., I do not admire govt., I no longer fear govt., and nothing said by any representative of government will ever be taken by me at face value.
So tell me about a national debt and you're left with the task of convincing me that there is actually a debt that could actually be called in or foreclosed on.
Private spending is MORE LIKELY to be LESS productive then Government Spending.
I purchase a Wii, a Starbucks coffee, a 50 HP Comaro are ALL less productive then the Government building an Electric infrastructure or repairing bridge in my state before they collapse.
Public infrastructure spending vs. Unemployment and Welfare payments? Public Infrastructure wins again, by keeping people employed and STOPPING THE DOWNWARD SPIREL OF HOME FORECLOSURES.
"Actually, saving is a form of spending. Unless you are hoarding your money under your mattress, your savings are being loaned out to people who spend those funds on everything from capital goods purchases to automobile purchases to vacations, etc."
This is not the case in the present situation. Currently, everyone is keeping a much larger level of cash compared to their level of liabilities than in the past. As a result, each dollar in the money supply is circulating much less frequently. This is the outcome of a rapid drop in aggregate demand. We have the capacity to produce much more goods and services than people want to buy. Theory suggests that prices will drop, resulting in an increase in demand, but in reality this can take a long time and an unexpected deflation can have even more harmful effects.
I purchase a Wii, a Starbucks coffee, a 50 HP Comaro are ALL less productive then the Government building an Electric infrastructure or repairing bridge in my state before they collapse.
The electric infrastructure, bridges, and roads so you can go to work to earn money to buy a Wii, Starbucks coffee, a Camera, etc.
What's it all for?
Mike99,
This:
"Private spending is MORE LIKELY to be LESS productive then Government Spending.
…are ALL less productive then the Government building…"
Posted by: Mike99 | Jan 5, 2009 11:22:12 PM
tells me that you don't know much about what does not go on in the vast majority government buildings.
The word productive suggest that someone may actually be working, maybe even on something that would benefit people. Thats a flaw in your thinking that you can cure by hanging out in government buildings for awhile and observing all the lack of productivity.
Mike99 -
The essential difference between private spending and gov't spending is that the individual, or the private business, has an incentive to spend in a manner that improves chances for success, however he chooses to define success.
The government has no such incentive, except to improve chances for re-election, and there are no rules in that game. The government has no fear of competition, thus waste is not an issue.
Damn, True_Lib, you nailed that one!
Cheers: You pretty much nailed my point. Even if the Government is equally as skilled at investment as the private sector, they still suffer from immense inefficiencies that force them to be far superior to acheive the same results.
Does anyone have numbers on just how much money is spent on the IRS every year?
True_Lib: Well done! If the Government were better at producing than private companies, we wouldn't have taxes, we would just go to the local FedMart to pick up some Victory Coffee, and FDRii and a Volkswagon.
"Does anyone have numbers on just how much money is spent on the IRS every year?
Posted by: Hammer | Jan 6, 2009 11:25:52 AM"
Can't speak to the exact dollar amount but I can tell you this:
The only complete audit ever done on the U.S. Government was done by the Grace Commission in the 1980s. The report came out prior to Reagan leaving office.
The Grace report says: That of the money that the IRS calculates it should be owed each year, fully one third is never collected, one third is spent on IRS costs, and the final third is sent to the IMF to pay interest on the National Debt.
So your answer is the IRS gets half of what it collects to pay its own internal operating costs including salaries.
Note that the Grace Report also states that not one penny of income taxes goes to pay toward what people consider as "services", or to build/repair infrastructure, none to the military….zip, nada. Half of what is collected goes to pay interest, nothing else.
So, send that income tax in, good people, and continue to believe that your neighbors in the ghetto will starve if you don't.