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.