CRAZY SPENDING: Uncle Sam: Show Me the Money!

Given the daily news about the billions of dollars being spent by the U.S. government to prop up our economy (auto manufacturers, banks, insurance companies, etc.), I can’t help but wonder, “Where is this money coming from?” Honestly, I don’t think Washington has a clue.

Let me explain:

It's very simple: Taxes are created from several sources, but the biggest source is from corporate and personal income taxes. (I will omit the discussion of sales taxes, property taxes, business taxes, and other taxes that specifically benefit state and local governments. I want to focus on our federal deficits with regard to their primary sources of revenue.)

Taxes are paid upon the profits of a company and the gross adjusted income of an individual. So, in order to generate taxes, one must make a profit or earn a living. It's that simple.

Let's start with business. Americans like to track the largest 500 or 1,000 companies by revenue and profit. I used the data published for the Fortune 500 for the calendar years 2000-2008 to create the graph below of the top Fortune 500 companies and their total revenue and profits for the 2000-2008 tax years.

Notice that for revenue (in the bottom line of the graph), the sum of all 500 companies continued to grow -- with the exception of a decline in 2002.

Profits tell a much different story! Although revenues continued to climb for every year except 2002, profit dropped 85 percent in 2008 (see bars in the graph). There simply isn't the tax base in 2008, and it certainly doesn't look any better for 2009.

Not all of the Fortune 500 companies earn a profit each year. In 2008, 128 companies reported a combined loss of $519.3 billion. It is staggering!

For 2008, the top six companies that reported a loss have been in the news and should be no surprise. Why does the federal government believe we must bail out these companies with taxpayer money? Who is going to repay it? Isn't American capitalism based upon competition and survival of the fittest?' Put another way, if they aren't fit, they shouldn't survive.

Since taxes come from company profits, tax revenue is obviously not coming fast enough to continue to offset in any way the staggering deficits projected by the Obama administration -- currently estimated at $1.84 trillion for 2009.

What has happened to the media -- which condemned the Bush administration for its nearly half-trillion-dollar 2008 federal deficit -- but have accepted these even higher deficits from Obama?

As reported by the Internal Revenue Service, the top 10 percent of American taxpayers (defined as those earning at least $108,904 in adjusted gross income in 2006) already pay 71 percent of the federal personal income taxes. The top 10 percent simply cannot pay enough to offset the projected deficits, no matter what the administration is saying.

April is the biggest month of the year for collection of personal income taxes, given the April 15 filing and payment deadline. Federal tax revenue plunged $138 billion (a 34 percent drop) in April 2009 compared with 2008. The same is true in Virginia, with a 42 percent drop in taxes collected in April 2009. Fortunately, Virginia has a balanced budget amendment requiring cuts in spending when taxes decline.

Finally, forget it when the Obama administration tells you it inherited a real mess. It is creating a bigger mess with increased deficit spending that will last for years -- and no one seems to care. It is time that you do care -- and vote accordingly.

Ben Bruno is founder and president of STR Software, based in Richmond. Contact him at .