March 1, 2009 Leave a comment
The Times' Dave Leondardt had an extraordinarily enlightening column this week on why pretty much all of us need to pay more taxes and the abstract and concrete reasons behind this. It as an amazing amount of information packed into a brief article– read the whole thing. In case you are too lazy, though, here's the gist:
Your taxes are going up.
They will probably go up in the coming decade, and the increase will be permanent. For a half-century, federal taxes have remained
fairly constant relative to the size of the American economy — equal to
about 18 percent of gross domestic product. But the 18 percent era has
to end soon.
It won’t end because President Obama is some radical tax and spender, either. It will end because of a basic economic reality.
Americans have made it clear that they want a certain kind of
government, one that can field a strong military and also maintain
popular programs like Medicare.
Yet we are not paying nearly enough taxes to maintain those programs.
Even major changes to the health care system — the single most
important step for closing the budget gap — will not close it entirely.
Taxes must rise, too…
“As people grew more affluent,” writes Mr. Miller, a journalist and a consultant for McKinsey
& Company, “they’d want more of what only government could provide
— a strong military, public order, good schools and assorted welfare
benefits, services that private citizens would have trouble arranging
for on their own.”
The tax increases to pay for these
activities do bring a cost: they reduce people’s incentive to work. But
history has shown that this cost isn’t enormous. Taxes rose sharply in
the first half of the 20th century, starting from just a few percentage
points of the G.D.P., and the country still prospered. So long as the
government spends the money well, the benefits from taxes — security,
education, health — can far outweigh the costs…
Think of it this way: A tax increase isn’t so much a barrier to a society becoming richer as it is a result of a society becoming richer.
To the extent that Mr. Obama has talked about raising taxes, he has
focused on households that make at least $250,000 a year. And their
taxes will certainly need to go up. In the last three decades, as the
pretax income of the top 1 percent of earners has soared, their total
federal tax rate has fallen to 31 percent, from 37 percent, according to the Congressional Budget Office.
But the problem can’t be solved just by taxing the rich. That top 1
percent pays only about one-quarter of federal taxes. Once the
recession ends, taxes on the not-so-rich will need to rise, too.
Just as rich people can afford to pay more in their taxes and feel less pain, so too, can rich societies (i.e. us). What is increasingly untenable is our desire as a society to live well beyond our means. As a country, we are financing a lifestyle richer than we deserve off of credit. If we want government to provide all the many things it does– and the evidence is overwhelming that as a society we do– we've simply got to pay for it instead of borrowing money from the Chinese to do so (and for an person reading this who thinks we just need to cut welfare, get an education).