Many people have no idea of how the government’s revenues break down. Most think that Corporate Income Taxes are a big part of the picture. In fact, in 2021, Individual Income Taxes represent $2T in receipts. This is way up from 2020, and even from 2019. The next largest component of revenues is Social Security and Medicare Taxes, at $1.2T. Both of these categories are known as Payroll Taxes. Together, these three categories represent over 3/4ths of total revenues. Corporate Income Taxes are $372B, or just 9% of the total.
This explains why the best way to increase revenues to the government is to increase the number of people working and paying payroll taxes in the form of income taxes, social security, and medicare.
Let’s say we raise corporate taxes by 50%. This means they go from 9% to 13.5% of taxes collected. However, raising taxes by this percentage can result in layoffs and companies deciding to manufacture offshore, or source their products offshore. Any of these consequences reduces payroll tax collections.
This means that the 13.5% might fall to 12%, as an example. All these displaced workers cost the states in unemployment compensation payments. Some might need food stamps or other welfare benefits. So you see, raising corporate income taxes has adverse consequences to states, and the overall impact of the increase in taxes is partially offset by decreased payroll tax receipts.
Why Increasing Inheritance Taxes Makes Little Difference to Revenues
Now, let’s examine increasing inheritance taxes, something that has been floated by the Biden Administration. These were $27B in 2021. This is only .7% of overall revenues to the US Government(For those that struggle with decimals, that is less than 1%). If these increase, family farms can be lost.
Kristi Noem gave us a poignant example of this. When her father died, taxes were owed that she could not pay. She was lucky that she was able to borrow money to pay these taxes and so she could keep the farm. She indicated in an interview that this is why she decided to run for Governor of South Dakota. She thought this situation was wrong and needed to be corrected. Many are not so lucky as Governor Noem, and this results in the consolidation of agricultural land into mega-farms.
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Unless they die unexpectedly at a young age, most very wealthy people protect their assets in trusts. The dollar amount that can be passed on free of taxes is currently $12.06 Million. This amount my be reduced in the future. I have read that $5 million is under consideration as a new, lower threshold. But even if .7% gets raised to 1% (a 40% increase), it is still a drop in the bucket of overall revenues to America.
Hopefully these data have convinced you that the best way to increase revenues to the government is by increasing the number of working Americans ON PAYROLLS.
How Immigration Impacts Payroll Taxes
Generally speaking, no payroll taxes result from the underground economy of maids, childcare workers, gardeners, and pick-up laborers who hang out at Home Depot every morning to get picked up and taken to job sites to receive cash for their work. These people, many of whom are here illegally, pay sales taxes, and gas taxes, but few pay any income, medicare and social security taxes, whether Federal or State. A few pay property taxes as it is possible to band together in an extended family to buy real estate. A real estate agent and friend told me that a few years ago in California, it was not uncommon to see two or more siblings from Mexico band together to buy a home.
Illegal immigration hurts this population as it exerts downward pressure on what these people can earn.
If there are twice as many gardeners in my community, they will compete for my business by dropping prices; its just supply and demand economics.
Educating(and feeding two meals, at school) a child from K-12 costs around $8-$10,000 per year, depending on the state of residence. Medical costs are another large factor. Ask anyone in America who has had to pay for their own medical insurance, and they will tell you that $10,000 a year for a single individual is considered affordable. Many must pay up to $14,000 per year. The cost to the state and federal government of maintaining a family could easily be $40,000-$60,000 per year, depending on the size of the family. This analysis does not account for the cost to the schools of employing ESL teachers, and the cost to the nation of our plummeting achievement scores.
The tax revenue paid by the aforementioned family for gasoline and for goods might be $8000 if the family is successful and brings in $100,000 per year. Those that argue that illegal immigration is good for this country do not have a grasp on economics. They get particularly angry when you present the economic rationale against illegal immigration, crying out in a purple-faced rage that illegal immigrants DO PAY TAXES.
Legal immigration that brings in people based on job skills needed in America, particularly in engineering, medical, and scientific fields, introduces a labor force that pays payroll taxes. This type of immigration that is need- and skills-based helps the country. Illegal immigration hurts the country, and it particularly hurts illegal immigrants that participate in the underground, cash economy, many of whom have been here for a generation or more. This explains why a Texas border town that was blue for 150 years just turned red and elected the Republican wife of a Border Patrol Agent, Mayra Flores. We now have our own AOC-like, young and beautiful politician, but one who is intelligent and respectful of American values.
The Incalculable Costs of Illegal Immigration
Last July 4th, 2021, I attended a parade in my California Sierra Foothills town. I sat next to a grandmother and her grandchild, neither of whom could read the children’s book I just published which I had on display to introduce it to the local community. Though illiterate, they both picked up the book and turned the pages to be polite. The grandma explained to me that her ten-year-old granddaughter was being bullied at school and that she was going to have to transfer her into another class. She witnessed the bullying first-hand because she was a volunteer in the classroom. She said that two sisters from Guatemala who had made it to our town recently and were placed into her daughter’s classroom kept calling her granddaughter an a…hole, in Spanish. When the child complained to her teacher and explained what she was being called, and that it hurt her feelings and made her reluctant to come to school, her teacher ignored her. When the grandma went to the Principal to explain the situation, they asked her to start volunteering at another school where a larger percentage of the population were Spanish-speaking.
These newly arrived illegal immigrants from Guatemala were not happily learning English, grateful to be here, and quickly fitting right in to their new school. They were angry and they lashed out at the only other Spanish-speaking child who could understand their language. Who knows why they were resentful of her. Perhaps it was because she had friends, and spoke some English so she could communicate with the teacher. Very few of our teachers in California have the language skills and ESL training to deal with a classroom in which a substantial number of students speak Spanish and other languages.
The Biden Administration’s rationale for unfettered illegal immigration is, ostensibly, compassion. The real reason that a flood of illegal immigrants is being allowed to enter, and that tens of thousands of immigration legal cases have recently been dropped, and that Arizona is being sued by the Justice Department for requiring proof of citizenship to vote, and that Texas is being investigated for violating the civil rights of illegals, is that Texas and Arizona are being targeted to turn blue in future elections.
This unspoken fact, and many other negative impacts of illegal immigration were detailed by Victor Davis Hanson in an interview in 2019. I watched it on You Tube recently, and Victor Davis Hanson of Stanford’s Hoover Institute spoke of the downward spiral in the economy, safety, community cleanliness, and education of his small town of Selma in the Central Valley of California.
He has lived there since 1970, and said that when his small town’s schools reached about 30% non English speakers they imploded as a result. Minority enrollment at the high school in Selma is now 95%. Proficiency in math is in the 20-30% range. English proficiency is not much better. The once diverse and thriving middle class has fled Selma.
Professor Hanson used to enjoy cycling in his neighborhood. Near his home, he now has three households inhabited by gang members. A cyclist was recently shot and killed. When a car or truck accident occurs, the offending driver flees the scene, leaving emergency medical services and law enforcement to try and save those who are injured. Now Professor Hanson surrounds his home with six guard dogs. He is being threatened from Mexico by gang members who he asked ICE to deport because of the mayhem they were causing in his neighborhood.
By Jennifer Mitchell Towner
Jennifer Mitchell Towner worked in the computer industry from 1979 to 1998. Under a program called Encorps, she became a high school math, French, and Consumer Finance teacher in 2009, retiring in 2019. She holds two BAs from U.C. Berkeley in Math and French and an MBA from Stanford University. The books she published in 2021, Good Boots and Kipper the Nipper are on Amazon.
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Featured photo by Alisdare Hickson from Woolwich, United Kingdom, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons