Saturday, 24 April 2010
GRAY MATTERS: Taxes
Pulitzer Prize-winning journalist Saul Friedman (bio) writes the weekly Gray Matters column which appears here each Saturday. Links to past Gray Matters columns can be found here. Saul's Reflections column, in which he comments on news, politics and social issues from his perspective as one of the younger members of the greatest generation, also appears at Time Goes By twice each month.
Justice Oliver Wendell Holmes said it elegantly: “Taxes are the price we pay for civilized society.” I’d put it less nobly: “You get what you pay for.”
Picking up from last week, despite the bitching and moaning from all of us from time to time, Americans pay fewer taxes than the citizens of most advanced and civilized countries, which may explain why we get bubkas – next to nothing - in social, human benefits. Rather, we get bailouts for the biggest thieves, assaults on what social insurance we have and endless, pointless wars.
The trouble with the duped crazies of the so-called tea party, they don’t recognize their real enemy. I wish one of them would tell me which rights and freedoms have been taken away. They like Medicare, Social Security and their public services. Even Ronald Reagan came to understand when he saved Social Security, raised taxes and made peace with the Soviet Union that the problem is not government, but the lack of it.
As I mentioned last time, in most of the civilized world, the 30 advanced nations of the Organization for Co-operation and Economic Development (OECD), people enjoy the benefits of universal (and mostly free) health care, inexpensive public transportation, cheap and sufficient inter-city rail travel, public education, paid vacations and leave for new mothers and fathers, strong unions, unemployment insurance, pensions and long term care for the elderly.
The most important reason? They pay for it. Despite the recession and financial troubles in most of these countries, their governments can afford these benefits and it will be more affordable as the recession fades because their taxes collected from individuals and corporations are relatively high.
The United States has the fourth lowest tax collection rate after Japan (which has not yet emerged from its depression), Korea, Turkey and Mexico.
The OECD has a uniform measure for each nation’s taxes: “total tax revenues as a share of the economy,” the Gross Domestic Product. The United States, the richest of all the nations, is 26th out of 30 with the lowest share of its GDP, except for Japan (which is still struggling with recession, in part because of its low spending), Korea, Turkey and Mexico.
The average of total tax revenues among all the nations is 36.6 percent of GDP. For the U.S. it’s at 28.3 percent. And that low figure reflects the deep tax cuts in 2001 for the wealthiest Americans and corporations.
During most of the years from 1996 through 2007, the U.S. cut the rate of spending on social benefits while reducing taxes and fighting two wars. You might say an exception was the Medicare Part D drug benefit, but it privatized a public program and was not paid for.
While the U.S. was seeking ways to cut public programs and taxes, the richest and most beneficent of the OECD reported their tax revenues were more than 40 percent of their GDPs: Denmark (48.7), Sweden (48.3), Belgium (43.9), Norway (43.6) and, France (43.5) and thus were able to offer their people generous public benefits – which we don’t get, or pay for out of pocket one way or the other.
Now, as a result of the Obama administration’s cuts in the taxes of 95 percent of mostly working and middle class Americans, William Gale, co-director of the Brookings Institution Tax Policy Center, says that federal taxes are at the lowest level in 60 years. A middle income family will pay only 4.6 percent of its income in federal taxes. (They pay more than that in payroll taxes for Social Security and Medicare, both of which are in danger from the deficit hawks.)
Perhaps a few of you will remember when the marginal tax rate for top incomes, now at about 30 percent was 90 percent during the years of the New Deal and World War II. Indeed, according to Moshe Adler writing for Truthdig, between 1913, when the income tax was instituted with the passage of the 16th Amendment, and 1981, the highest marginal tax rate averaged 68 percent. Yet it was during those years, when the wealthy paid their way in a progressive tax system, that the U.S. experienced its greatest prosperity and growth in social benefits and public works while fighting four wars.
Despite the average tax cut this year of $1,158 for nearly all American families and individuals, many are not aware of money they don’t have to pay partly because they’ve been dribbled out in reduced withholding from wages. Yet, we Americans are so attuned to those who cry “tax cut” that a CBS News/New York Times poll earlier this month found that 53 percent said Obama had kept taxes the same, 24 percent believed he had raised taxes and only 12 percent believed he had cut taxes.
Some polls have found that Americans may be willing to pay higher taxes for more and better public services and benefits, but the poll didn’t ask about raising taxes as if it were a sin to even think of that.
So consider the American dilemma: We are in love with low taxes but we fight two wars, spend more than any nation on the military and now with a Democratic administration that has increased social insurance benefits, we have record-high and unsustainable deficits.
And still the tea party goers, big business, Republicans and assorted deficit hawks would further slash benefits and taxes. No one dares to seek the tax increases we need for civilized society.
Combine this uninform no-new taxes attitude with an ignorant, unthinking antipathy towards the federal government that does not exist in most of the OECD counties and no wonder that our screwy priorities give us a deeper poverty and homeless rates than exist elsewhere in the civilized world. No wonder the U.S. has more people without health insurance and more children living in poverty than virtually any OECD country.
Social Security provides $13,300 a year for a single elderly woman in New York City. Medicare provides some basic health care. But out-of-pocket medical costs, housing and other expenses for basic daily living have put thousands of older persons in the country’s richest city living on the edge.
Cities throughout the nation are cutting Medicaid, firing thousands of teachers, closing schools and slashing the services of government. That prompted Matt Ryan, the mayor of Binghamton to advertise with an electronic sign at city hall demonstrating the costs of wars to cities like his:
“I wonder if we’re ever going to get our priorities straight...I can see so clearly what increased federal spending could do for the people of my city.”
We’re about to hit the $300 billion mark in the cost of Afghanistan according to the National Priorities Project. That would pay for health care for 131,780,734 children for a year. The total cost of two wars since 2001 is $980,000,000,000 – or $7,334 for each American taxpayer. You can see what your low taxes are not getting at the National Priorities Project.
It’s not something for a great nation to be proud of.