Democrats lack backbone in their tax policies
Are your taxes too high? When Gallup asked that question in April, tax month in the United States, 46 per cent said they were. An additional 47 per cent said their taxes were about right. Just 3 per cent said their taxes were too low.
This campaign season reflects that result. Mitt Romney, the Republican candidate, is offering a 20-per-cent tax cut for everyone. Given the mood of the conservatives in the United States today, that may not surprise you. But even President Barack Obama, who is routinely described as a socialist by his opponents, is peddling a plan under which 99 per cent of Americans would pay less than they did under the last Democrat in the White House, Bill Clinton.
This bipartisan agreement that the overwhelming majority of Americans should pay lower taxes than they did in the 1990s is remarkable for many reasons. For one thing, we are constantly hearing and it is true that U.S. politics is more polarized than ever. But unless you are a member of the 1 per cent, on this core issue there is a lot more consensus than you might think. Political strategists on both sides, it turns out, know how to read poll data.
But the really surprising thing about the no-more-tax consensus is how much of an outlier it makes the United States compared both with the rest of the world and with itself in recent history. When it comes to foreign policy or to global economic dominance, American exceptionalism may indeed be in jeopardy. But when it comes to taxes, the United States is quite different from most other Western industrialized economies.
According to the International Monetary Fund, in 2011, among the worlds 30 leading Western economies (plus Japan), only in New Zealand and in Japan was government revenue a lower share of gross domestic product than in the United States. Countries like Australia, Estonia, Ireland and Switzerland, which tend to favour low taxes and a small state, have government revenue that accounts for more of GDP than does the United States.
The Internal Revenue Service is relatively restrained, too, compared with recent history. In 1945, at the close of the Second World War, federal tax receipts were 20.4 per cent of GDP (expenditures, by the way, were 41.9 per cent, putting the federal budget deficit at 21.5 per cent, compared with 8.7 per cent in 2011). In 1952, the year the Republican Dwight Eisenhower was elected president, federal government revenue was 19 per cent of GDP. In 1988, the last year of Ronald Reagans transformational conservative presidency, the federal tax take was 18.2 per cent.
Compare those figures with that of today, when a Democrat is in the White House, nearly half of Americans think their taxes are too high, and both parties are promising to keep taxes low for all, or, in the case of the Democrats, 99 per cent of Americans. In 2011, government revenue was 15.4 per cent of GDP, lower than it was at any time during the Eisenhower or Reagan eras. Like anorexics, who think they are grossly fat when they are very thin, the American body politic is suffering from a national version of body dysmorphia, with nearly half the country believing taxes are high, when they are comparatively and historically low.
Thomas Mann, the Brookings Institution scholar and co-author of an influential new book on the polarization of U.S. politics, traces American thinking about taxes to the success of conservatives, particularly of the anti-tax crusader Grover Norquist, in steering the national conversation.
This is more of an elite phenomenon, Mr. Mann said. Its ideological. Its tribal now because of the Grover Norquist taxpayer pledge. Its as if Republicans, even if they think in more pragmatic terms, are not allowed to even consider raising taxes and certainly should be pushing at all times to cut taxes further Its become Scripture.
One cant talk rationally or on any evidence-based discussion of tax policy, he said. Its assumed cutting taxes always does good.