Government Jobs

Assume we have a percentage of the labor force in the Private sector and the rest in the Pulic sector. Assume we have balanced trade accounts, flat taxrates, and equal pay throughout no matter the reality. For our purposes the Public sector labor force includes things you wouldn't normally consider, such as anyone who derives their income from welfare programs of any nature. What then is the minimum tax rate necessary to pay for government without incurring a defecit?

The trick is that any income tax paid by the Public sector is the same as if they had not paid any at all, taking instead a salary reduction equal to that amount. Such that the tax rate times the percentage of the labor force in the Private sector need equal the percentage of the workforce in the Public sector less the tax that's 'reclaimed' from them. Sparing all the work it simply works out as being identical to the percentage of the labor force in Public employ. It's just a nice linear line. No government means no tax. Nothing but government yields nothing but tax. And a 50/50 split requires the same on tax. A nice linear line and what we should expect from things.

Taking some very rough ballparks to include contractors and Social Security -- though excluding unemployment bennies and the rest -- we would then expect a 35.2% total tax rate for the US in 2006, at all levels, as long as the rest remained otherwise the same. Though, to remind, This is a terribly loose ballpark and not terribly interesting. What is interesting is what happens when the average pay between the two sectors is not equal. There's no difference when looking at no governement and nothing but government; they're both 0% and 100% rates in every condition. But when Public sector pay exceeds that of the private sector you need a higher tax rate than otherwise. And lower rates for less pay.

Sure, that's a 'duh' moment.

We can either pay more or less, as a matter of taxation, for a given quantity of folks in the Public sector at a given wage. And because it's no longer linear there are going to be points of peak difference between our given curve and the linear relationship when payrolls are equal. As the wage for the Public sector increases so does the inefficiencies. But the peak inefficiency starts at a 50/50 Public/Private split and moves south, to lower percentages in Public employment, as the wage rates diverge in favor of the Public sector. It's entirely reversed in all manners when the Public wage is less than the Private wage. The peak efficiency begins at 50% Public employment and moves north towards total government as the wages diverge in favor of the Private sector. This is all first-order effect nonsense and has nothing to do with GDP or effects on the median household income, etc.

That said, we don't even consider paying welfare beneficiaries at anything near the average wage of proper government employees. And decent numbers to make a reasonable calculation here are tougher than stuff to come by. For 2006 we know that there were 7.2 million folks that received an average of, effectively, $5460 per year while there were some 33.94 million that received $14124. Excluding the 14.6 million contractors and the State and Local folks leaves us with an average of $68,294 per year (2008 numbers) for only those 2 million folks in the Executive branch. Sadly I haven't dug up Congress, the Judicial, Postal workers, or the rest. That leaves things shy by some 9.8 million folks included in the original ballpark. No Medicare, health care, or other bennies are included in this. Or an average of $15189 per year if we ignore all the missing heads not counted. If we assume all the missing heads are paid at the same average wage as the Executive then we instead get $34374 per year. No matter the case the ballpark averages here are less than the rouhgly $47,200 per year over all per capita income.

And that's a bit of a surprising outcome. To find that we have a pretty efficient and cheap government provided for by massive income inequalities produced by and for Congress; riding on the backs of the elderly and infirm.

Through if you take note of the average bennie packages it gets significantly different though, in 2008, the Private sector tally is $9,882 while the Public sector tally is $40,785. I don't have the foggiest how to fold in Medicaid/Medicare so I'm just going to leave this one hang for now mentioning only that this brings things up to $50316 on the Federal side against $57082 on the Private side. With Medicare/Medicaid folded in I imagine we'd get the numbers would get back close to the flatline with roughly equal per capita considerations. If the State and Local levels hold similarly then we're right back at considering life in the ballpark of 35% taxation on income across all levels of government. No government programs; just the bodies paid for by government.

The back of this envelope is too dirty for any good use; this is simply a quick, loose sketch and idle curiosity that cropped up what with all the doom of default flowing out of Tim Geithner's pie hole.