Americans Worked Until July 16 to Pay for the Cost of Government

Published October 8, 2008

Each and every man, woman, and child in the U.S. had to toil until July 16 this year to pay for the costs imposed by federal, state, and local governments, according to the annual Cost of Government Day (COGD) report issued by the Americans for Tax Reform Foundation and its newly established Center for Fiscal Accountability (CFA).

“Cost of Government Day serves as a grim reminder that government has grown too big and eats up too much of taxpayers’ hard-earned money,” said Grover Norquist, president of Americans for Tax Reform (ATR). “Not only is this year’s date for Cost of Government Day four days later than in 2007, it’s also the fifth-latest this day has arrived in 32 years.”

ATR defines Cost of Government Day as the date, counting from January 1, on which the average American has earned enough in cumulative gross income to pay for his or her share of government spending (total federal, state, and local) and the cost of regulation.

State, Local Spending Surge

The late Cost of Government Day this year is due in large part to spending increases at the state and local levels. In the past five years the state and local spending burden has grown 12 percent faster than national income. It now accounts for one-third of the total cost of government.

The spike in state and local spending cost taxpayers 50.4 days of work this year, up from 42.4 days in 1999.

Peter Ferrara, author of this year’s report, fears the worst is yet to come.

“Between taxes, spending, and regulation, government at all levels is already consuming over half of national income,” Ferrara said. “But that is just a warm-up for the looming entitlement crisis, which threatens to almost double federal spending relative to the economy.”

Entitlement Costs Will Balloon

Although federal spending has remained fairly consistent at about 20 percent of GDP over the past 50 years, the looming explosion of entitlement costs could double federal spending to 40 percent of GDP within 30 years, according to the Congressional Budget Office.

If left unchecked, Medicare, Medicaid, and Social Security will consume more than 50 percent of government spending at that time.

Fleeing High-Tax States

The dates for the states’ individual Cost of Government Days vary greatly, with Alaska coming earliest at 172 days (June 21) and Connecticut arriving latest at 212 days (July 31).

Migration patterns between the states reflect these different tax and spending burdens.

The high-tax states are losing residents by the millions to low-tax states. From 1996 to 2006 the 10 states with the highest tax burdens lost 2.4 million residents to their lower-tax counterparts. Those people took $70 billion in income with them.

This trend is clear in New Jersey, which has had the highest cumulative tax burden increase in recent years and the second-latest Cost of Government Day in the country—July 30.

“New Jersey continues to lead all states overwhelmingly in tax increases, and all we get from the state capitol are more tax hikes,” said New Jersey Assemblyman Jay Webber (R-Morris), chairman of New Jersey’s Taxpayer Protection Caucus. “The crushing costs of government are forcing our families, friends, and neighbors to flee to low-cost states.”

Americans for Tax Reform introduced the state Taxpayer Protection Caucus program several years ago to provide support to state legislators who firmly believe in taxpayers’ rights and are committed to stopping tax increases.

Accountability Needed

Webber says he believes government needs to be more accountable to citizens, and he emphasizes the need to cut taxes and spending. He is sponsoring spending transparency and health care choice legislation in the New Jersey Assembly

“Our Garden State again should be a place where citizens want to live, not a place they need to leave,” Webber said. “We can do that by cutting taxes and wasteful spending and making government more accountable. In those ways we can keep our friends and neighbors in their homes, attract jobs, and make New Jersey affordable again.”

Crisis Looms

With the looming entitlement spending burden placing major budgetary pressures on all levels of government, this year’s COGD report focuses on reform options involving creative thinking by lawmakers.

Rep. Paul Ryan (R-WI) and Sen. John Sununu (R-NH) introduced legislation that serves as a comprehensive model of how to structure entitlement reform. Their bill introduces personal accounts for Social Security in a workable fashion. Reform concepts suggested by others include federal block grants to the states for the remaining federal welfare programs.

Ryan stressed the urgency of the situation in a recent guest column in the Milwaukee Journal Sentinel: “The looming fiscal and economic crisis—resulting from the explosion in entitlement spending—is no longer in doubt. … These problems are too big to grow our way out of, tax our way out of, or borrow our way out of.”

“The time to act is now,” agreed Norquist. “Because as much as it may be fitting to mark a scary event on a scary day—do we really want to work until Halloween to pay off the cost of government? I don’t think the American people can afford that.”

Sandra Fabry ([email protected]) is government affairs manager for Americans for Tax Reform and executive director of the Center for Fiscal Accountability, a new project at the organization. Ellen Dargie is an associate at Americans for Tax Reform.

For more information …

Americans for Tax Reform’s new Center for Fiscal Accountability ( works to shed light on government expenditures and promote the principles of fiscal accountability, spending restraint, and limited government. For more information, contact CFR Executive Director Sandra Fabry at [email protected].