As we approached Tax Day, April 15, there was increasing conservative rhetoric about the unfairness of US taxes. A typical lament came from conservative ideologue Grover Norquist, “The tax burden is too high. Americans should not (on average) work 3 plus months a year to pay taxes.” Knowing that conservatives habitually lie about important political issues, why should we believe what they say about taxes?
We shouldn’t. Tax rates have fallen. Fifty years ago, the top marginal tax rate was 91 percent and the bottom rate was 20 percent. In 1960 the median family income was $5600 and the average family paid $1232 in Federal taxes. Last year, the Obama Administration lowered taxes for 95 percent of Americans. Today, the top marginal rate is 35 percent and the bottom is 10 percent. In 2010 the median family income is approximately $50,000 and that would require roughly $7500 in Federal taxes. Over the past 50 years, while median family income has increased ninefold, their taxes are only six times greater.
Tax revenues as a percentage of GDP have also plummeted. A chart from the conservative Heritage Foundation indicates that since 1945, Federal tax receipts as a percentage of GDP have averaged 18.2 percent. In 1960 they were roughly 17 percent and in 2010 the Heritage Foundation expects them to be 14.8 percent – the lowest rate since 1950.
While our taxes are considerably lower than they were fifty years ago, conservatives such as Grover Norguist contend taxes are still too high because government is inefficient. But conservatives forget the US operates in a global economy. So another way to consider US taxes is to compare them to those of our competitors. Writing on his FiveThirtyEight web site, statistician Nate Silver compares US total tax revenues, as a percentage of GDP, to those of the other 29 members of the Organization for Economic Cooperation and Development (OECD), which includes Canada and Mexico, Australia, Japan, Korea, and New Zealand, and the members of the European Union. Mexico was the lowest with 20.6 percent and Sweden was the highest with 49.1 percent. The average was 35.9 percent. The US was the fifth lowest with 28 percent (which includes federal, state, and local taxes.)
When confronted with these facts, conservatives change their argument; they contend the richest Americans pay too much. Writing in USA TODAY, conservative analyst Jonah Goldberg asserts: “60% of American families already get more from the government than they pay in taxes (and the top 10% of earners pay more than 70% of taxes).” “Low-income families tend to benefit most from social services and welfare programs such as food stamps, subsidized housing, Medicaid, and unemployment insurance.”
But America’s tax/service distribution is similar to those in the OECD countries. Nate Silver observes: “The [before taxes and transfers] maldistribution of income here is about the same as for comparable nations… [But] after-tax-and-transfer income distribution [is considered], of the 26 OECD countries the United States has the most maldistributed income of all 26.” In America, the rich do less for the poor than do their counterparts in other developed countries; the US system is unfair, because the top 10% don’t pay enough taxes.
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When confronted with this evidence, conservatives play their trump card, the claim that taxing the rich hurts the economy. Jonah Goldberg contends: “There's also the simple fact that taxes impede growth, and low economic growth curtails the pursuit of happiness for everyone.” Goldberg cites a 2006 study by a conservative think tank. Their ideas were heavily influenced by the discredited Chicago School of Economics, whose notions about the proper relationship between government and the market produced 2008’s financial meltdown and The Great Recession.
In reality, there is no persuasive statistical evidence that tax increases have a negative economic impact. Moreover, there’s little evidence that tax cuts spur growth. The 2001 Bush Tax cuts – coupled with the wars in Afghanistan and Iraq – depressed the economy.
Conservative models of the economy fail because they assume that average consumers – many of whom belong to the “60% of American families [who] already get more from the government than they pay in taxes” – can borrow indefinitely to maintain a comfortable lifestyle. But 2008’s financial meltdown proved this to be false.
Economist Joseph Stiglitz contends that the debt-based consumption model of the US economy is broken. Writing in his most recent book,Freefall, Stiglitz observes: “For total American consumption to be restored on a sustainable basis, there would have to be a large redistribution of income, from those at the top who can afford to save, to those below who spend every penny the can get.”
Once again, conservatives are lying. The tax burden isn’t too high on the rich; it’s too low. Tax fairness requires the US to increase taxes on the richest 10 percent of Americans and cut taxes for working families.