Americans for Tax Reform Releases Cost of Government Day Report

MacIver News Service | July 12, 2012

According to Americans for Tax Reform, this coming Sunday will mark the date the average American has earned enough to pay for the cost of government for 2012.

Unfortunately, because of the increased burden here, the average Wisconsinite will have to wait for more than a week to hit that milestone.

Every year, the Americans for Tax Reform Foundation and the Cost of Government Center calculate the Cost of Government Day. This is the day on which the average American has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government at the federal, state, and local levels.

The national COGD is July 15. For Wisconsin workers, however, it is July 23. Wisconsin has the 41st latest Cost of Government Day, two spots better than last year’s ranking.

According to the report:

Cost of Government Day falls three days earlier than last year’s revised date of July 18. In 2012, the average American will have to work an additional 29 days to pay off his or her share of the cost of government compared to ten years ago in 2002, when COGD was June 16.

In fact, between1977and2008, COGD had never fallen later than June 26. 2012 marks the fourth consecutive year COGD has fallen in July. The difference between 2008 and 2009–from June 23 to July 17–was a full 24 days. The increase was spurred by massive goverment intervention in the form of the Emergency Economic Stabilization Act (EESA) that created the Troubled Asset Relief Program (TARP) and passage of the American Recovery and Reinvestment Act of 2009 (ARRA).

While 2012 marks the second consecutive year of an earlier COGD, this trend will only be temporary absent lasting and institutionalized spending reform. The start of the 2012 fiscal year came and went once again without a federal budget in place and the threat of bankrupt entitlement spending continues to loom large. What’s more, the largest tax hike in the nation’s history is scheduled to take place at the end of 2012 unless Congress acts to protect taxpayers. If this tax increase is allowed to hit, COGD could permanently be pushed back into August and beyond.

The report doesn’t just monitor government spending, but also looks at the fiscal impact of government regulations.

“In effect, taxpayers pay twice for regulations: once for agencies to monitor growing government regulations and again when regulations increase prices those citizens pay,” the report reads.

Americans for Tax Reform includes ominous warnings about the pending impact of the federal healthcare law and other spending and regulatory schemes in the offing.

“In addition to these regulatory burdens, for the fourth consecutive year President Obama is proposing taxing energy producers to fund his bloated government,” they write.

ATR holds out some hope, however. The COGD report looks at the potential benefits of increased energy production and transportation that may happen in the coming years if further attempts to explore oil and natural gas and construct the Keystone Pipeline are not impeded.

The report, which also includes a feature on Wisconsin Congressman Paul Ryan’s Path to Prosperity federal budget plan, can be found here. 

COGD Methodology:

The Cost of Government is determined by adding the figures for government spending (federal, state and local expenditures) and an estimate of compliance costs of government regulations (both on the federal and state level).

The total cost of government is then divided by estimated gross domestic product (GDP) to determine the percentage of national income consumed by the government. This percentage is applied to the 365.25 weighted calendar year to determine the Cost of Government Day. Previous studies, before 2012, used the net national product to determine this. As a result, the Cost of Government day appears to occur sooner than all previous COGDs; however, adjusting for gross domestic product it is evident that this year’s COGD falls only three days earlier than 2011s. GDP is found to be far more appropriate measure of the economy as well as a more standardized measure.

All spending figures are based on calendar years and, among others, utilize Congressional Budget Office (CBO) reports, Bureau of Economic Analysis’ National Income Product Account (NIPA) data, and the National Governors Association and the National Association of State Budget Officers (NASBO).

State tax increases are derived from the NASBO data with three adjustments.
The calculation of Cost of Government Day for each state is based on the varying government burdens suffered in each state. Federal spending burdens vary because relatively higher burdens are borne by states with relatively higher incomes. Of course, state and local tax and spending burdens vary by state as well.

A 2010 report for the U.S. Small Business Administration Office of Advocacy by Nicole Crain and Mark Crain provided the framework for determining the cost of federal regulations.

Data on federal and state works was provided by the US Bureau of Labor Statistics and the US Office of Personnel Management. The migration data was provided by the Internal Revenue Service Office (IRS).

The state by state breakdown can be found, here