Pricing Spending Properly: News: The Independent Institute

Has President Biden hit the road in an attempt to sell out to the Democrats? mega expense package: a package that originally had a blazing price tag of $ 3.5 trillion. It now appears that haggling among Democrats has lowered the advertised price to $ 2.3 trillion or less. Or, at least, that’s what the president claims. Don’t believe a word of it.

In whatever waste Democrats come up with, there will be hidden costs and excessive burdens associated with taxes to fund it. What are these costs and charges?

There are burdens on taxpayers that go far beyond the visible tax payments they make. These include myriad compliance costs: record keeping, studying tax laws, performing calculations, filling out forms, struggling with compliance actions, etc.

These administrative and compliance costs are relatively easy to understand. A more difficult concept is the additional tax burden, disincentives and distortions they impose on the economy. Without those taxes, the economy would generate more income and do it more efficiently.

Hidden costs associated with IRS administration and taxpayer compliance are estimated to be in the range of ten cents to 25 cents for every additional dollar of tax revenue collected. The late Martin Feldstein, in 1999 Article For him Economics and statistics review, estimated the excess burden of federal taxes to be $ 3 for every additional dollar of income. The late William A. Niskanen, in a Article released by the Federal Reserve Bank of Dallas, he put the figure at $ 2.65.

Therefore, hidden costs plus excess charges amount to approximately $ 3 for every additional tax dollar collected. Therefore, to determine the true cost of the big government proposals put forward by the Democrats, it is necessary to multiply the advertised price by three. Consequently, the original announced price of $ 3.5 trillion will generate a real burden (read: cost) for taxpayers of $ 10.5 trillion. Even with the trimmed and new package ?? low ?? Advertised price of $ 1.9 to $ 2.3 billion, a real cost of $ 5.7 to $ 6.9 billion will be realized.

Regardless of the numbers President Biden announces on his road trip, you can be sure that they will not reflect the true cost of any proposed spending package.

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