What's at Stake? The US Government’s Financial Statements and the Country's Fiscal Health Gregory J. Anton, CPA, CGMA Anton Collins Mitchell LLP, Chairman and CEO AICPA, Chairman ( ), Board of Directors ( , )

Just How Much is a Trillion?  One trillion is $1,000,000,000,000  A million seconds is 11 ½ days, a billion seconds is 32 years, a trillion seconds is 32 thousand years Source: “Numb and number: Is trillion the new billion?” by Christine Romans CNN’s American Morning, 2009

Cash Budget Compared to Financial Statement Loss Source: A Citizen’s Guide to the 2014 Financial Report of the U.S. Government

Congressional Budget Office “CBO” Budget Deficit 2015 Budget Deficit Actual  $439 billion 2016 Budget Deficit Estimate  $544 billion 2017 to 2026 Cumulative Budget Deficit Estimate  $9.4 trillion Source: CBO Budget Deficit Estimate

Revenue = $3.0 trillion Expenses = $3.8 trillion 2014 Financial Statements Expenses exceeded revenue by $0.8 trillion

2014 Revenues Source: A Citizen’s Guide to the 2014 Financial Report of the U.S. Government

2014 Expenses Source: A Citizen’s Guide to the 2014 Financial Report of the U.S. Government

2014 Financial Statements Assets= $3.1 trillion Liabilities= $20.1 trillion Accumulated deficit= $17.0 trillion

U.S. financial statements differ from other organizations Most financial statements show obligations or liabilities on balance sheet US government’s balance sheet does not include obligations for Social Security and Medicare  Footnote disclosures  Not reflected as liabilities New Reporting Entity Standard, is effective for periods after September 30, 2017  Will require consolidation of Government Sponsored Enterprises (“GSE’s”) like the Federal Reserve, Fannie Mae and Freddie Mac

Social Security and Medicare Future Expenditures in Excess of Future Revenues (Closed Group) (9/30) Dollars - Trillions

U.S. Government Accountability Office Independent Auditor’s Report Source: U.S. Government Accountability Office 2014 Independent Auditor’s Report

U.S. Liabilities and Obligations Compared to U.S. Household Net Worth (as of September 30, 2014) Closed group social insurance obligations ($57 trillion) U.S. Liabilities ($20 trillion) Household Net Worth ($81 trillion) Dollars in Trillions Sources: 1) 2014 Financial Report of the U.S. Government; 2) Federal Reserve, Flow of Funds Accounts of the United States $ Liabilities & Social Insurance (1) Household Net Worth (2)

We are at a tipping point! It starts with balancing the budget  Increase Revenue  Decrease Spending Then create a surplus for decades to pay for what has not been paid for in the past It’s a balance act or you inhibit economic growth

Information and Considerations

Source: Urban-Brookings Tax Policy Center Microsimulation Model (Version ) (2013) Taxes: Who Pays?

Taxpayers with the Top 400 Adjusted Gross Income, 2013 Source: Tax Policy Center and IRS, statistics of Income Division, Top 400 Individual Tax Returns with the Largest Adjusted Gross Income Number of taxpayers 241

Corporate Income Tax Rates around the World, 2015 Key Findings  The United States has the third highest general top marginal corporate income tax rate in the world at 39 percent, which is the same as Puerto Rico and is exceeded only by Chad and the United Arab Emirates.  The worldwide average top corporate income tax rate (accounting for 173 countries and tax jurisdictions) is 22.9 percent.  The worldwide average corporate tax rate has declined since 2003 from 30 percent to 22.9 percent. Source: Tax Foundation

U.S. Markets are Diminishing in Relative Size The Globalization of Capital Markets: Domestic Market Capitalization Source: World Federation of Exchanges Source: World Federation of Exchanges and Bloomberg LP

Bureau of Labor Statistics Source: Bureau of Labor Statistics Month/Year % Unemployment Rate

Bureau of Labor Statistics Labor Force Participation Rate (% of working age population employed or unemployed but actively seeking work) 1/31/16 Source: Bureau of Labor Statistics Year %

Revenue Considerations  Flatten the tax base (more citizens pay)  Increase effective tax rate on individual high income earners  Reduce corporate income tax rates to stay competitive and attract and retain businesses in the U.S.  Tax gap (unreported, under-reported taxable income)

Spending Considerations  Raise social security age and index for life expectancy, need based  Cap Medicare and Medicaid on total benefits, need based  Pay down debt before interest rates increase  All government programs should have a mandated sunset review every 5 to 10 years

Gregory J. Anton, CPA, CGMA (303) LinkedIn: Twitter: gregantoncpa