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GRAY MATTERS: Taxes

SaulFriedman75x75 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.

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Comments

great post, Saul. I always enjoy reading you and I agree with everything here.

Same here.

Thanks, Saul. You always provide me with excellent ammunition to use in my arguments with the "Tea Party" crowd.

They always wonder how I got so smart!

You said it all. All i can add is an "AMEN!"

It's worth continually repeating a couple of things about taxes in our country because people really don't get it.

1) FICA, the Social Security and Medicare deductions from paychecks, are more insurance programs than taxes. No, we don't get dollar for dollar back for what we put into them. Some get more and some get less; but those "taxes" amount to promises of certain (limited) benefits when we get old.

Compared to those deductions, the amount of actual "income tax" most of us pay is pretty minimal as Saul says.

2) Our military expenditures are simply off the charts -- I just did a post asking why we are so threatened by Iran. If you look for just a minute, at our relative military power, they have nothing and we have the most expensive array of power ever known in history. The disproportionate scale of our military expenditures is almost as unmentionable as the need to raise (some) taxes.

Can somebody explain why so many Americans are so afraid of their own government. In comparison with most other western nations we have had a relatively benevolent government and it has operated, until just recently with the welfare of its citizens as a primary goal. The current climate of distrust, manipulation and deceit is the result of almost psychotic (self-destructive) partisanship but it is a very new development.
The distrust and paranoia concerning "Government" is deeply ingrained and has existed under the surface for a very long time.

Why?

I don't mind paying taxes, I just resent being demonized for having worked hard, saved and managed well, and catching a break or two along the way. Aaron Sorkin has Sam Seaborn say it well in West Wing: "I paid my fair share, and the fair share of twenty-six other people. And I'm happy to because that's the only way it's gonna work, and it's in my best interest that everybody be able to go to schools and drive on roads, but I don't get twenty-seven votes on Election Day. The fire department doesn't come to my house twenty-seven times faster and the water doesn't come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let's not call them names while they're doing it, is all I'm saying."
a/b

If the Tea Party 'no nothings' had to give up everything that their taxes pay for they would be screaming bloody murder.

Semantics are important. I am glad to see you point out that withholding for S.S. and Medicare is an insurance deduction instead of a tax. Words matter.

I always learn so much reading your posts, Saul. Thank you.

Saul, we are truly a country living in Denial. I believe this has been fueled by the Faux News/Conservative Set. These folks have managed the political and social dialogue so effectively that our voters (more than 50% of them at least) continue to vote against their own self interest election after election.

As I have grown older it has become more depressing and raised my level of cynicism to the extreme.

Keep writing and telling it like it is, please.

You're one of the very few voices worth listening to these days.

Rich

Absolutely great post, Saul! Danny Westneat, an excellent local columnist, wrote last week that a big part of the problem is that no one wants to go first. He proposed a new economic patriotism where better-off citizens stand up for cuts to programs that help THEM for the good of the country. He cited as examples the very popular home-mortgage deduction and deductions for having kids; how about no deduction for more than three?

Being an older American, I responded that many relatively well-off older people--those who can afford it--might be willing to step up to the plate and volunteer to take a temporary 10% or 15% reduction in their Social Security benefits. High income elders could do even more. Bill Gates, Sr., who has proposed a high-earners' income tax in my State to pay for education and health care is a prime example.

Like my husband and me, most older Americans aren't wealthy, but if enough of us participate, we might make a real dent in our country's fiscal problems. No one likes paying taxes, but I think most of us can agree that the budget cuts affecting public safety, education and human services now taking place throughout the U.S. at the local level are unconscionable and will do real harm for many years to come.

I propose a GO-FIRST campaign! I'm already in line and would enjoy some company. The great thing about GO-FIRST is that it's made up of individuals volunteering to help their country based on what they can afford. It's grass-roots and truly American. What's not to like about that?

Eek! blundered across this site by accident. Thought it was about aging, not politics.

In what world do you live? FICA, Medicare etc are all taxes, don't kid yourself. And Europeans don't pay the often-outrageous state, local and property taxes that we do. Of course they do have VAT, coming to an administration near you.

They do have a social safety net, which is gradually bankrupting them (see: Greece, Portugal, Italy) and leaves most citizens with relatively little disposable income.

We do spend money on defense. The Europeans don't, or not much. We pick up the tab for them.

You are welcome to pay more "voluntarily" in taxes. I suggest you send your first check with an earmark for the Department of Education. Federal involvement in education has accomplished so much!

I am not a troll, this is a one time post, sort of a "drive-by" libertarian comment.

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