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George H. Blackford, Ph.D.

 Economist at Large

 Email: george(at)rwEconomics.com

 

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An Open Letter to the Political Class

George H. Blackford
July 4, 2018

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On the Need to Raise Taxes

 

Grover Norquist founded Americans for Tax Reform (ATR) at Ronald Reagan’s request in 1985, a conservative advocacy group dedicated to the proposition that since the “government's power to control one's life derives from its power to tax” the power to tax should be minimized.  This group “opposes all tax increases as a matter of principle” with the stated goal, according to Norquist, of reducing “government to the size where we can drown it in a bathtub.”  In furtherance of this goal, ATR requires that any politician who seeks its support sign a pledge to “oppose and vote against any and all efforts to increase taxes.” The overwhelming majority of Republican politicians have signed this pledge since it was instituted 1986, and Democrats have refused to make this pledge a campaign issue.   

 

The failure of Democrats to make this pledge a campaign issue has made it possible for Republicans to argue that Americans are overtaxed and that all we have to do to provide the government we want is to lower taxes and eliminate government regulations and waste.  This argument has stood essentially unchallenged at the center of the American political zeitgeist for well over thirty years, and the extent to which politicians have come to embrace it is truly amazing.  This is particularly so when you stop and think about what Norquist is saying when he says he wants to drown the government in a bathtub.  He’s saying that he wants to destroy the American government.  The idea that we can save the country by destroying the government is utterly absurd on its face and totally out of touch with reality.  And, yet, Norquist and his conservative friends, with the acquiescence of liberal/progressive Democrats who refuse to make this pledge a campaign issue, are well on their way to accomplishing this end.

 

When we leave the delusional world of Reagan, Norquist, and their conservative supporters and look at the way governments actually contribute to the wellbeing of society in the real world we find that it is only those countries that devote a major portion of their economic resources to funding government services (e.g., the countries of Western Europe and North America) that are the most prosperous and civilized throughout the world: 

 

Tax Revenues of OECD Countries as a Percent of GDP, 20116.

Denmark

45.9

Greece

38.6

Czech Repub

34.0

Latvia

30.2

France

45.3

Norway

38.0

Poland

33.6

Australia

28.2

Belgium

44.2

Germany

37.6

Spain

33.5

Switzerland

27.8

Finland

44.1

Luxembourg

37.1

UK

33.2

Korea

26.3

Sweden

44.1

Slovenia

37.0

Slovak Repub.

32.7

USA

26.0

Italy

42.9

Iceland

36.4

New Zealand

32.1

Turkey

25.5

Austria

42.7

Estonia

34.7

Canada

31.7

Ireland

23.0

Hungary

39.4

Portugal

34.4

Israel

31.2

Chile

20.4

Netherlands

38.8

Mean OECD

34.3

Japan

30.7

Mexico

17.2

Source: OECD (Comparative Tables).

 

and those that fail to do this (e.g., those countries that devote a smaller proportion of their GDP to their central governments than the United States) are among the least prosperous and civilized:

 

National Government Taxes and Other Revenues as a Percent of GDP

USA

17.2

Uganda

15.2

Costa Rica

14.0

Korea, North

11.4

Guinea

17.0

Sri Lanka

15.1

Philippines

13.9

Timor-Leste

11.0

Cameroon

16.8

South Sudan

15.0

Burma

13.8

Bangladesh

10.8

Papua New Guinea

16.7

Suriname

14.9

Yemen

13.5

Turkmenistan

10.6

Curacao

16.6

Liechtenstein

14.9

West Bank

13.4

India

10.2

Malaysia

16.5

Pakistan

14.9

Indonesia

12.9

Afghanistan

9.5

Taiwan

16.3

Egypt

14.7

Madagascar

12.2

Puerto Rico

9.0

Bahrain

16.1

Monaco

14.6

Chad

12.1

Sudan

6.9

Tanzania

15.3

Benin

14.6

Brunei

12.0

Syria

4.2

Ethiopia

15.2

Isle of Man

14.6

Guatemala

11.8

Nigeria

3.5

Source:  CIA World Factbook (Country Comparison).

 

We also find that the countries that have higher life expectancies, healthier populations, lower crime and incarceration rates, better educated populations, higher standards of living, lower poverty rates, better public infrastructure, and, hence, actually promote the general Welfare better than the United States devote a larger portion of their economic resources to providing government services and pay higher taxes than we do.

 

We find similar results when we look at the economic history of the United States since the beginning of the 20th century. There was virtually no increase in the average real income of the bottom 90% of the population until the contribution of government to GDP increased from 9% in 1929 to 17% by 1950 and to 24% by 1970 as taxes were high throughout this period as the personal tax rate in the top bracket was 91% and the corporate tax rate was 52% from the end of World War II until 1966. 

 

We find similar results when we look at the economic history of the United States since the beginning of the 20th century. There was virtually no increase in the average real income of the bottom 90% of the population until the contribution of government to GDP increased from 9% in 1929 to 17% by 1950 and to 24% by 1970 as the average income of the bottom 90% of the income distribution increased dramatically from 1933 through 1970: 

 

Source: The World Top Incomes Database.and Bureau of Economic Analysis, Table 1.1.5

 

Taxes were high throughout this period as the personal tax rate in the top bracket was 91% and the corporate tax rate was 52% from the end of World War II until 1966. 

 

The simple fact is, Grover Norquist and his Republican allies, along with their Democratic enablers, are not simply destroying our government; they are destroying our country and everything our country used to stand for.  And they are doing this in the name of a warped sense of freedom and liberty—the freedom and liberty of the economically and politically powerful to prey on the economically and politically weak by way of fraud and corruption throughout the system. 

 

The ATR is absolutely correct when it says the “government's power to control one's life derives from its power to tax.”  Only a democratically elected government that is truly dedicated to establishing Justice, insuring domestic Tranquility, providing for the common defence, promoting the general Welfare, and securing the Blessings of Liberty to ourselves and our Posterity can control the lives of those who, through fraud and corruption, chose to prey on the less powerful among us.  And that government is not free!  It must be paid for, and the way we pay for government is by collecting taxes. 

 

The alternative to paying taxes is for the populous to arm as it splinters into tribal factions in the manner of third-world countries that fight over the spoils of what is left of society as their governments disintegrate.  This is, of course, what the Republican Party and its NRA supporters with its Russian backers are, wittingly or otherwise, advocating.  It is also what its Democratic enablers are allowing to happen as well.  And this is where we are headed if our political leaders continue to refuse to speak truth to power by explaining to the American People the actual fiscal choices that are available to us.  

 

The idea that we can eliminate a 16% deficit hole in the federal budget and, at the same time, provide the kind of functioning government that the American People expect and need to prosper without raising the taxes necessary to pay for that government is patently absurd: 

 

Source: Office of Manage and Budget (Historical Tables)

 

This must be made clear to the American People if we are to avoid the fate Norquist and his conservative allies and Democratic enablers are guiding us toward.  And the only way this choice can be made clear is if those political leaders who are capable of a modicum of common sense and human decency muster the courage to put country before donors, take a stand on this issue, and explain this choice to the American People in a way that allows the American People to choose at the polls which option they wish to follow: higher taxes or a failed government that continues to ignore the will and needs of the people and serves only the economically and politically powerful few.  

 

Not giving the American People this choice ensures the latter option and does not bode well for the future:

 

A Day in Your Life: How Government Improves Your Life

Test Your Government IQ

A Guide to Rebutting Right-Wing Criticisms of Government

Who Needs Big Government?  (Video)

Waste, Fraud, and Abuse in the Federal Budget

Why Democrats Lose Elections

 

 

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