Thursday, March 29, 2007

Logic Freedom Day

Every year around this time I see news reports about the Tax Foundation's ridiculous "tax freedom day", and this year is no exception. From the Tax Foundation's absurd press release:
Tax Freedom Day® will fall on April 30 in 2007, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.

...The report compares the number of days Americans work to pay taxes to the number of days they work to support themselves.

"Americans will work longer to pay for government (120 days) than they will for food, clothing and housing combined (105 days)," said Hodge. "Since 1986 taxes have cost more than these basic necessities. In fact, Americans will work longer to afford federal taxes alone (79 days) than they will to afford housing (62 days)."
There are just a couple of problems with this type of "report". The first problem is the deeply flawed underlying premise, and the second problem is the profound lack of logic embodied in the comparisons that they make.

The flawed premise: The notion that it makes any sense at all to compare the cost of something without thinking about what one gets in return.

The flawed logic:
The categories included in the list above are all categories of goods and services that Americans receive for their spending - except for the one category of "taxes", which is a completely different type of category, since it doesn't represent what people receive for their spending but rather who they pay for it. Otherwise, why not include on a list of outrage the fact that Americans spend 13 days of their year just working to make money to send to Walmart? (Based on ~$9,600 bn in personal outlays in 2006, and ~$350 bn in Walmart sales.)

If you want to go through the stupid exercise of calculating how much of American's working time is spent to pay for government services, then please, at least be consistent. I suppose that I will never convince the Tax Foundation of this point, so let me direct this plea to reporters covering this "news": please do not report this nonsense without noting the profound lack of logic and consistency inherent in it.

As a helpful guide, here's a consistent list of how many days of the year (out of 365) go toward paying for each category, using the Tax Foundation's own numbers along with the breakdown of federal government spending by the CBO:
  • housing and household operation: 62 days;
  • health and medical care: 52 days;
  • food: 30 days;
  • transportation: 30 days;
  • recreation: 22 days;
  • clothing and accessories: 13 days;
  • public education for all children through 12th grade, an excellent system of local roads and bridges, a high level of public safety services such as police and fire protection, and other state and local government services: 41 days;
  • national defense against foreign military power, and the ability to militarily protect and project American interests abroad: 17 days;
  • income security for all American senior citizens: 16 days;
  • health care for senior citizens and the impoverished: 17 days;
  • interest on the US government's debts: 7 days;
  • a good system of public education, including heavily subsidized college education, an extensive and well-maintained national highway system, lots of pubicly funded basic science research, a safe and well-monitored national air transportation system, safe and regulated food and water, enforced protections for the environment, an extensive and well-functioning legal and judicial system, assistance for and support of veterans, an ambitious space program, and many other publicly provided services: 14 days.
Doesn't seem like such a bad deal to me when you put it that way.

No, government spending is not perfect. And you may not be happy with some of the specific things the government spends its money on (I know I'm certainly not), or how much it spends in general. But any attempt at intellectual honesty has to admit that Americans get a lot of services in exchange for the taxes they pay.


UPDATE: Mark Thoma points me to the Center for Budget Policy and Priorities, who note that the Tax Foundation's data is as flawed as their logic, and significantly misrepresents the true tax burden that average Americans face.

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