Biden’s Spending Binge Is Costlier Than Advertised

The new taxes he proposes would cost money to collect and put a drag on the productive economy.

By Steve H. Hanke. Excerpts:

"Look no further than Mr. Biden’s proposal to increase IRS funding $80 billion to collect the taxes to fund his new big-government programs.

There are also burdens placed on taxpayers that go well beyond the visible tax payments they make. These include myriad compliance costs: record-keeping, studying tax laws, making calculations, filling out forms, grappling with enforcement actions, and so on.

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

The hidden costs associated with IRS administration and taxpayer compliance are estimated to be in the range of 10 cents to 25 cents for each additional dollar of tax revenue collected. The late Martin Feldstein, in a 1999 article for the Review of Economics and Statistics, estimated the excess burden of federal taxes to be $3 for each additional dollar of revenue. The late William A. Niskanen, in an article published by the Federal Reserve Bank of Dallas, put the figure at $2.65.

The hidden costs plus excess burdens amount to roughly $3 per additional tax dollar collected. Therefore, to determine the real cost of the big-government proposals put forward by President Biden in his first 100 days in office, we must multiply their $5.7 trillion sticker price by 3. That yields a true cost of $17.1 trillion, or 80% of last year’s gross domestic product. And all this after less than 100 days in office."