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Capitol Comment 290 – Congress Must Break the Invisible Whip of Taxation

If the tax burden on America’s workers is not reduced this year, one has to wonder if substantive tax relief will ever become a reality. For four consecutive years, the government has taken more from the wallets of the American people than it has spent on all government services combined.

And let’s remember, this is no small government we are talking about. In 2000, the federal government spent a total of 1.7 trillion dollars! That equates to 18.7 percent of the total dollar value of goods and services produced in America during the entire year. Yet, this astonishing spending spree was still $179 billion less than the federal government collected from the pockets of American taxpayers. Estimates suggest that this overpayment will continue to occur for the next ten years, reaching a climax of $500 billion in 2010.1

The level of taxation has never been higher in America’s peacetime history. Today’s enormous tax burden is a product of the economic growth of the 1990s. America’s tax system is so progressive that the nation’s tax burden increases faster than total income increases. For example, while the nation’s income has increased at 6.2 percent over the past decade, income tax collections have grown by 7.9 percent.2

Without an across-the-board tax cut, this trend will continue and the government will gain more and more control over the American economy. Each day a tax cut is not passed is another day the government collects and spends an even larger share of the nation’s income.

But an across-the-board tax cut is not only needed to slow the stealth expansion of the government, it is needed to jump-start an economy in serious jeopardy of a downturn. According to a Zobgy poll conducted on January 14-16, 51 percent of respondents said they expected the economy to fall into recession.3

This perception is based on a preponderance of evidence. DaimlerChrysler recently announced 26,000 layoffs and expects domestic sales of cars and trucks in 2001 to be at least 14 percent below 2000 levels.4 Similar drops were seen in the high-tech sector. Gateway lost over $94 million in the fourth quarter of 2000, Hewlett Packard saw its earnings plummet, and the stocks of Microsoft, Dell, Intel, and others fell significantly.5

To further complicate matters, energy prices are up considerably across the United States. A spike in natural gas prices and OPEC’s decision to cut oil production by 5 percent in early January has forced American consumers to pay higher bills, lower the thermostat, or both. American consumers are also burdened by higher prices caused by costly regulations that prevent energy exploration and increase business expenses.

Such price increases may be more manageable were it not for record levels of consumer debt. Savings are now at their lowest level – 0.2 percent – since monthly records began in 1959.6 Certainly the death tax, which penalizes many Americans by taking over half of their life savings at the time of death, does not help this trend. Aside from the pure morbidity of the law, its practical application is to punish many Americans of all backgrounds for owning a high value, low-income venture such as a small business or farm, or simply saving for their family’s future.

To make matters worse, from January 1 to May 3 American workers go to work, not to feed and clothe themselves and their families, but to pay government. The combination of federal, state, and local taxes is an invisible whip that forces every taxpayer to spend four months of every year doing the government’s bidding.

The system is in desperate need of reform. The Bush tax proposal offers a big step in that direction. The president’s plan would help rescue American workers from their own government with an across-the-board income tax cut. In addition, the tax cut would also eliminate the aforementioned death tax as well as the “marriage penalty.” These changes will make the code more neutral and not discourage marriage or savings.

Ultimately, defenders of the invisible whip will attempt to pit Americans against each other to perpetuate the growth of government. This class warfare is not only insidious, but also false. As Table 1 demonstrates, after the Bush tax cut is enacted the top 1 percent of taxpayers would actually shoulder a greater percentage of the overall tax burden than under current law.

To present the tax cut any other way is to pervert the facts. That defenders of the invisible whip would rely on such perversion merely exemplifies their class warfare strategy to defeat a much-needed tax cut for American consumers.

Table 1: Individual Income Taxes:
How Much Will Various Income Levels Pay?
($ in Billions, 2001-2010)7

Current Law Bush
Amount % of total Amount % of total
Top 1 percent $4,321 33% $3,971 34%
Top 10 percent $8,234 63% $7,379 63%
Top 50 percent $12,470 96% $11,240 96%
Bottom 50 percent $555 4% $492 4%

1 Congressional Budget Office.(2000, January). The economic and budget outlook: Fiscal years 2001-2010. Washington, DC: U.S. Government Printing Office.
2 The Tax Foundation. “Tax Bites” found at
3 The Bulletin’s Frontrunner, Bulletin Broadfaxing Network, Inc., January 22, 2001, Poll conducted by Zogby International over January 14-16, 2000.
4 Swoboda, Frank, “Chrysler to Cut 26,000 Jobs,” The Washington Post, January 29, 2001.
5 Feder, Barnaby J, “Grim Reports from Hewlett and Gateway,” The New York Times, January 12, 2001,
6 Rifkin, Jeremy, “Another Wolf at Our Door,” The Guardian of London, October 24, 2000.
7 JCT, CBO, and Senate Budget Committee staff calculations.

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Citizens for a Sound Economy
Capitol Comment 290:
Congress Must Break the Invisible Whip of Taxation
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