The Holy Grail of Low Taxes

Low taxes is one of the sacred beliefs of conservatives. This belief fits closely with the idea that the unhindered market most efficiently allots money. It also suits the conservative preference for personal responsibility and minimal government, the four supportive legs of conservative belief. Altogether, these things sound reasonable, even to liberals. But there are problems in their application.

We know without doubt, for example, that corporations, unhindered by rules and regulations, can be relied on to satisfy capitalist imperatives, namely to maximize profit for owners, and that the result almost always degrades life in one way or another for the rest of us. It’s not as if capitalists are evil, it’s just the way capitalism works. This would seem to indicate that some level of regulation would be necessary. That is, what the market thinks are hindrances, real people feel as protections.

When I was in grade school I learned that taxes are what we pay so we can have all the things we can’t individually buy. Infrastructure, mostly. It’s still true in my retirement years. But many a conservative states flatly that all taxes are theft of their hard-earned money, illegally seized by the government. So far I’ve been unable to reconcile the two. I don’t understand how infrastructure would be paid for if not with taxes, nor how we could do business without public infrastructure.

Which bring me to the central question: Do we actually have excessive taxes, as conservatives claim? How do we compare to other countries of the modern world? I’m speaking here of individual income tax. Our corporate tax rates are nominally high, too high, but most of the biggest corporations pay no tax at all.

There are many ways to figure individual tax rates, including as a percentage of GDP, lowest income tax rate, the highest income tax rate, corporate tax rates, marginal tax rate thresholds, tax wedge, and so on. (The latter is tax paid as a percentage of overall labor costs.)

In most of the ways that countries are compared, the US comes out below the European countries, where the highest rates are also recorded, as well as below lots of other countries. Fifty-nine countries, including all European countries, pay higher taxes than the US as a percentage of GDP (Heritage Foundation). The US individual tax rate is a bit above half of the highest rate in OECD figures, and again, below all European nations. But there are many ways to look at it, so Ron Paul was able to find a way that suits his belief that the US is greatly overtaxed. This allows him to propose changes to reduce our taxes even further.

There is a certain irony in conservative efforts to reduce our tax rate further. This lies in the fact that for working people the economic situation has steadily deteriorated for years. So we now have an unacceptably high unemployment rate, and the unemployed have no income to tax. Those living at poverty level do not pay income tax, although they still have to pay a number of other taxes. The increasing numbers of people earning at near-poverty level pay less tax than they did. The sum of these categories of sources of diminished tax revenue comes to nearly half of our population. The overall effect is that, since 2008 in particular, tax revenue remains at an inadequate level. Common sense suggests we ought to raise it, especially since the Bush tax cuts have greatly increased our national debt and made a balanced budget all but impossible.

The question arises: Why are European taxes so high? The answer is simple: Europeans use taxes to pay for numerous benefits that we do not have. Health care and retirement are chief among those, but there are many others. The reason they pay for these things with taxes is that this is the most efficient way, and Europeans will tell you this. In these countries, health care and old age are protected far better than they are in the US, and the cost of health care is half what we pay.

Conservatives tend to get apoplectic about this, and begin fulminating about communism and the like, and the hell in which Europeans live. One wonders if there is a European travel ban for conservatives, because otherwise they would surely see that life for most Europeans is better than it is here. Perhaps there are fewer ultra-rich in Europe, but there are also far fewer destitute, and all of them can see a doctor when they need to.

The conservative desire to lower our taxes still further can only result in further degradation of our lives. Their belief that we are overburdened is simply false, unless you believe there should be no taxes at all. One really has to look hard to find evidence that US taxes are anything but moderate.

On the other hand, it seems clear that, barring a change of faith among conservatives, we are doomed to have health care that fails a large part of the population, and costs twice what Europeans pay. Nor are we likely to improve life for our old folks. None of this would matter greatly if Americans were paid adequately for their labor so they could afford to buy these things themselves, but we have no Living Wage laws to speak of, and wages have been stagnant or declining for decades, raising the count of the poor and near-poor to half the population. Thus we have neither adequate health care and retirement benefits from taxes nor sufficient income to pay for these things individually. This is hardly what one would hope to find in a great country.

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3 CommentsLeave a comment

  1. We know without doubt, for example, that corporations, unhindered by rules and regulations, can be relied on to satisfy capitalist imperatives, namely to maximize profit for owners, and that the result almost always degrades life in one way or another for the rest of us. It’s not as if capitalists are evil, it’s just the way capitalism works. This would seem to indicate that some level of regulation would be necessary. That is, what the market thinks are hindrances, real people feel as protections…..has nothing to do with taxes, unless you you are talking tax to pay the regulators to dream up and force compliance. I have no way of knowing what you are thinking, and you did not bother to make any connection.
    Real people? Are you not a ‘real people? I am.
    .European countries….Been to any lately? You like what freedom’s you have here, or would you give them all up to live there?
    Ron Paul is an idiot. Sure he has some good ideas, until you try to make them work.
    the cost of health care is half what we pay…yup, it’s Socialized, Ask them how they like it. Having to go to the ER to get anything, because the wait is too long to get an appointment. Then ask yourself why so many from other countries come to the USA for major medical. It is not because there system is better, is it?
    One wonders if there is a European travel ban for conservatives, because otherwise they would surely see that life for most Europeans is better than it is here. Only an idiot would think this. Obviously, you are not current with your facts. Nor have you been there.
    On the wage issue, I will agree with you. If you think taxes are high, blame the idiot in the White House. Makes no difference what, if any political party one belongs too. We could run on half the taxes we have, if idiots were not spending them on multi-million dollar studies to find out if cows fart. Ask any farmer. Let us not forget all the useless (for Americans) oversees spending. Think about it, get your facts straight. Make sure brain is engaged before opening mouth. Best advice I can give you.

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  2. Ah, my favorite fan. Welcome back, Everett.

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  3. Actually my cousins are Dr.s in Slovenia. I’ve been there and LOVE it there! I will probably have to retire there, since I’m not a wealthy American. We have much less freedom here the way I see it. Let’s see, we are free to risk our whole future by agreeing to be saddled with college debt before we even get a foot hold in life. We are free to die because we are too poor to have health insurance, or still too poor to live and pay our portion of the hospital bill and not be able to work for months on end. We are free to have shady mortgage lenders screw us out of our American Dream and get away with fraud. We are free to board an airplane after being molested by strangers. My cousins are free to live in a country that puts it’s people first, after all it is their money isn’t it????
    I have cousins who own businesses, work in finance, are teachers, doctors, researchers. All have college educations and don’t worry that they might get sick and lose everything they have worked for their whole lives. Yeah, Europe is evil, socialist, communist, and people have no freedom there, and if you believe that you must be a redneck republican.

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