As I have often mentioned in this blog, it is a simple truth that U.S. taxes are lower than those in most other developed countries. One conclusion from that fact may be that it is somewhat foolish to speak of "overtaxation" if our taxes are relatively light compared to the benchmark of what our peer countries are doing. From that perspective, we might want to ask what we are missing out on by not paying higher taxes. The answer to that would likely range over a number of items, but surely would include universal health care , wider safety nets in general (for unemployment, education, and other concerns that important to human capital development), and infrastructure maintenance.
Bruce Bartlett made the point about comparative taxation in his Forbes blog last week, Tax Tea Party Time? April 10, 2009: "[t]he trut is that the U.S. is a relatively low-tax country no matter how you slice the data." In particular, the CBO figures show a rapid decline in federal taxes as a percent of GDP, from 20.9% in 2000 to 15.5% in 2009. Even considering all taxes (federal, state, local), the US even back in 2006 came out considerably less than other OECD countries (35.9%) or Europe (38%). This, by the way, represents a significant decline in government revenues at the same time that the Bush administration redoubled spending efforts, spending increasingly larger sums of money on the military and war-mongering activity. With taxation declining, the gap was made up with huge borrowing (which now has to be increased to deal with the tattered economy left after 8 years of wrong-headed Bush policies).
(Aside: Bartlett didn't note the irony that the original Boston Tea Party was not really an "anti-tax event," but instead it was an "anti-non-representation in the decisions about taxation event." It's rather odd, in other words, to use the Boston Tea Party as the rallying image for the mix of anti-government, anarcho-libertarian, anti-immigrant, anti-taxes and plain ol' anti-Obama (and anti-Dems) stuff that was evident at the "teabagging" parties--we have representation, and it is those representatives who pass the tax laws. So this isn't really a similar gig at all.)
Naturally, Bartlett got some pushback from the group that always complains about how highly taxed the US is. Any reader of my blog knows that this is a constant refrain from the anti-tax groups--oh, they moan, the US has a 35% corporate rate and a high rate of 35% on individual incomes, whereas other countries have lower statutory rates. As I have frequently pointed out, this is a fake distress call: the US statutory rate may look decently high, but in fact the corporate and individual effective rates are significantly lower, so that the US is considered a tax haven, even by corporations, compared to the vast majority of our peer countries.
So what does this anti-tax group-- that relies on statutory rates to compare US taxation to other countries as the basis for a complaint about the US being too highly taxed and therefore purportedly uncompetitive--do when someone like Bartlett (in Forbes, no less) calls them on the facts? They switch the argument. They change the argument. It doesn't matter, they say, that most other countries are much more highly taxed than the U.S., because the U.S. is still too highly taxed. Ah, now we see the real truth. The anti-tax group just wants to get taxes down--maybe to zero, ideally, especially for the corporations, managers and owners of most capital income. So if you defeat one of their arguments, they'll make another one. Anti-tax rants are the answer for every ill, and removal of one rant just brings another to the fore.
So Bartlett's second foray on this compared U.S. taxes today to those in the past, asking in Tax Tea Party Time, Part Two, Forbes.com, Apr. 17, 2009, whether we are more heavily taxed than we used to be and whether polls show greater dissatisfaction about taxes now than in former years. The answers, of course, are no and no. Taxes paid as a share of income for a family with the median income were only 5.91% in 2007, compared to 11.79% in 1981. In fact, taxes from for 2003 through 2007 are the lowest for any period since 1958 (chart in article). And a Gallup poll shows a minority of Americans think taxes are too high--"the lowest percentage since 1961."
So then Bartlett deals with the "but Obama has increased the deficits ridiculously, and our children will have to pay high taxes to pay it off, so that is what we are protesting" rant. Not so fast, he says, because there's no credibility if you didn't complain about the Bush tax cuts and spending policies, which moved us from surpluses under Clinton to record deficits under Bush. There were no tea parties then, so this cannot be your real concern.
Bartlett is generally a Reagan-style economist, and I've often disagreed with him. But he is right on here--the anti-tax rants can't have it every which way at once. Fact is, the US has low taxes, either when compared to our peer countries or compared to our own historical taxes. We probably should be raising them, especially on the wealthy, to pay for the heavy costs of making right an economy ditched by Bush policies of regulatory laxness, crony capitalism, and military spending gone wild.
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