Low, low taxes come with a steep cost. In fact, a lower tax bill – especially for federal taxes — actually works against the economic interests of most Americans. Let me explain.
By Joshua Holland (BillMoyers.com). His original article* was entitled The Great American Rip-off: The High Cost of Low Taxes.
The American people pay a similar amount for social services – health care, retirement security, disability and unemployment insurance and the like – as citizens of European countries with supposedly lavish social safety nets – but there are two significant differences:
- we pay a hugely disproportionate share of the costs out-of-pocket, through the private sector and
- when things go badly – when misfortune hits — the safety net that we fall back on is truly pathetic in comparison.
Call it the great American rip-off.
Anti-tax demagoguery in the U.S. has resulted in Americans paying almost four times as much as the citizens of other wealthy countries for things such as retirement security and health care on the private market – 10.6% of our economic output versus an average of just 2.7% among Organization for Economic Cooperation and Development (OECD) member states. As the title of this article suggests low taxes in the U.S. come at a very high cost.
Delinking taxes from the services they pay for has arguably been the modern conservative movement’s greatest success. No politician has ever been booed off a stage for promising to cut taxes but decades of public opinion polling shows that, with a few exceptions, Americans are actually quite fond of the goods and services the public sector provides. They may be wary of the idea of “big government” in the abstract, but they like well-maintained infrastructure, safe food and clean water, efficient firefighting and policing, Medicare and Social Security and virtually every other government-provided service you can name. This paradox is well known to politicians and policymakers, and has caused a good deal of hand-wringing among those who favor a progressive tax system that raises enough funds to cover the services Americans expect.
Americans Enjoy Low Taxes BUT
Contrary to popular belief, American families and corporations enjoy relatively low taxes – in the OECD, we ranked third from the bottom in total tax burden in 2010 – but it’s almost a wash when you add back what we spend out-of-pocket.
- The 8 OECD countries with the highest tax burdens in 2010 (Denmark, Sweden, Norway, Belgium, Italy, France, Austria and Finland) paid out an average of just over 32% of their economic output for social services,
- the U.S. forked over just under 30%.
Public Spending On Services Is Low In the U.S.
The significant difference between the above two numbers is that we ranked near the bottom in the OECD (26th out of 34 countries) in terms of public spending on these services.
- Government-provided services in the U.S. accounted for around 19% of our gross domestic product (GDP) whereas
- in the 8 high-tax countries mentioned above government-provided services accounted for 29% of GDP.
Difference Made Up From Out-of-pocket Spending By U.S. Citizens
Consider some basic social safety net services and other OECD data:
- An American losing a job that paid an average wage will get 47% of his or her income replaced by unemployment over the short term compared to 55% across the OECD and 57% in those eight social democracies.
- A single American parent of two down on his or her luck will be eligible for cash and in-kind benefits (welfare, housing assistance, food stamps, etc.) equal to 24% of the median income compared to an average of 40% of the median across the OECD.
- Our public pension system – Social Security – replaces just over 39% of average earnings compared to almost 54% in the eight social democracies with the highest tax burdens.
- Only 7 of the 34 countries in the OECD had shorter average life expectancies than US citizens in 2008.
- Between 1983 and 2008, average life expectancy grew by 6 years across the OECD vs. only 3 in the U.S. and
- only 3 OECD countries – Chile, Mexico and Turkey – have higher rates of infant mortality than the U.S..
- During the Great Recession, the social safety nets in the eight social democracies kept poverty rates in those countries significantly lower than in the U.S..
- Only three OECD countries – Mexico, Chile and Israel – had a higher rate of poverty than the U.S..
The above data, however, doesn’t capture the simple truth that citizens of other wealthy countries enjoy benefits that Americans can only dream of – things like:
- publicly funded pre- and after-school programs,
- paid maternity and paternity leave, and
- wage replacement for people who suffer from extended illnesses.
Less Family Support
Perhaps the most dramatic differences in our priorities are reflected in public expenditures on family support.
- Only 2 OECD members devote less of their economic output to these benefits: South Korea and Mexico – and
- we spend dramatically less than the rest – 60% less than the OECD average.
That Americans pay through the teeth for social services isn’t an accident. It’s the result of decades of policymaking based on what’s been sold as an “ownership society”, Yale political scientist Jacob Hacker called it a “personal responsibility crusade”, that’s been firmly embraced by corporate America and conservative politicians…[whereby]
a huge share of the retirement security and health care burden has been shifted from employers and the government onto the backs of working people themselves…and their loss has left American families exposed and economically insecure…They are on their own and it turns out that it’s a pretty costly message.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and www.FinancialArticleSummariesToday.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*Original Source: http://billmoyers.com/2013/10/29/the-great-american-ripoff-the-high-cost-of-low-taxes/ (© 2015 Public Affairs Television, Inc. All rights reserved.)
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