Taxes are Good

Most conservative criticisms about the ill-effects of taxes are exaggerated or untrue. Taxes are in fact good they are dues we pay to enjoy the numerous vital benefits that government provides for our society.

Are taxes bad? If you've been listening to conservatives for the last several decades, you would certainly think so. Virtually every Republican candidate for office in recent memory has run on an anti-tax platform – arguing that Americans are overtaxed, that taxes hurt economic growth, etc. And it is this hatred of taxes that helped propel the passage of hundreds of billions of dollars of tax cuts during the administration of George W. Bush.

This anti-tax campaign strikes a real emotional chord in some Americans and it has been one of the most effective rallying cries of anti-government conservatives. It taps into a taxophobia that is deeply ingrained in American political culture and that manifests itself in the activities of over 800 local and state anti-tax groups. These tax-haters have also been playing a large part in organizing the grassroots Tea Party movement.

But conservatives are dead wrong about taxes. Taxes are not bad.

Taxes are good.

The argument for taxes is a very straightforward one: if government is on balance a very positive force in society, then taxes are good. If what we have seen in other articles on this website is true – that government programs help us all in myriad ways every day, that most government programs are working effectively to solve our social problems, and that government is the only way to promote important values like justice and economic security – then the taxes needed to support these government activities should be seen as a positive good. To put it another way, you can’t support the things the government does – like caring for the elderly, establishing justice, providing public education, fighting terrorism, and protecting the environment – and still maintain that the taxes that support those things are bad. Taxes are the lifeblood of government and so if government is basically good, then so are taxes.

So instead of seeing paying taxes as analogous to being mugged by the government, we ought to think of these payments more like the tithing that many people do in their churches and synagogues. Most people see these regular donations as a charitable contribution to the good works being done by these religious organizations – and they certainly don’t resent these contributions. But if the government is also an institution dedicated in large part to doing good works – to promoting the public interest – then we should not resent our taxes contributing to those governmental activities. In fact, we should feel good about all the good our tax dollars are doing – just as we feel good about all the good our religious donations do. Of course it could be argued that there is a big difference here – that giving money to churches is voluntary and we are required to pay taxes. But in practice, many religious organizations require members who can afford it to contribute regularly – payments that are really more like mandatory dues than purely voluntary donations. In any case, the point is that contributing toward an organization that is promoting the public good should not be seen as a bad thing.

But of course anti-government conservatives have been very successful at “framing” taxes in a negative way. As linguist George Lakoff has explained, part of their strategy has involved a careful choice of the words they use to talk about taxes.

Conservatives have worked for decades to establish the metaphors of taxation as a burden, an affliction, and an unfair punishment – all of which require "relief." … And on the day that George W. Bush took office, the words tax relief started appearing in White House communiqués to the press and in official speeches and reports by conservatives. …The word relief evokes a frame in which there is a blameless Afflicted Person who we identify with and who has some Affliction, some pain or harm that is imposed by some external Cause-of-pain. Relief is the taking away of the pain or harm, and it is brought about by some Reliever-of-pain. … The term tax relief evokes all of this and more. Taxes, in this phrase, are the Affliction (the Crime), proponents of taxes are the Causes-of Affliction (the Villains), the taxpayer is the Afflicted Victim, and the proponents of "tax relief" are the Heroes who deserve the taxpayers' gratitude. Every time the phrase tax relief is used and heard or read by millions of people, the more this view of taxation as an affliction and conservatives as heroes gets reinforced.1

 

As Lakoff explains, the Democrats have inadvertently played into this process of demonizing taxes whenever they supported tax cuts and used the term “tax relief.” In 2004, for example, in John Kerry’s campaign for president, he talked often about enacting tax relief for the middle class, instead of for the rich. In his 2008 campaign, Barak Obama also thought it was necessary to offer tax cuts to the lower and middle classes, and he then went on to include billions of dollars of this kind of "tax relief" in his first budget. And while Kerry and Obama probably thought their proposals were progressive, they ended up reinforcing a very regressive conservative message that taxes are an unfair burden on most Americans.

Lakoff argues that we need to promote a very different view of taxes—one that uses a very different kind of metaphor. The metaphor he suggests is that of taxes as “dues”.

Taxes are our dues — we pay our dues to be Americans and enjoy the benefits of American society. Taxes are what we pay to live in a civilized society that is democratic, offers opportunity, and has a huge infrastructure available to all citizens. This incredible infrastructure has been paid for by previous taxpayers. Roads and highways, the Internet, the broadcast airwaves, our public education system, our power grid — every day we all use this vast infrastructure. Our dues maintain it.2

It is about being a member, a part of the community. People pay a membership fee to join a gym, the local YMCA, or a club for which they get to use the basketball courts, the swimming pool, and the golf course. They did not pay for these facilities with their own memberships. They were built and paid for by other members, and all the current members maintain them with their dues. It is the same thing with our country — being a member in good standing of a remarkable nation. Americans pay their dues.

This idea of taxes as dues is not original to Lakoff. It is an idea that has often been expressed, but has not been promoted with the same ferocity or persistence of the taxes-as-affliction metaphor. Franklin Delano Roosevelt once remarked that “Taxes, after all, are dues that we pay for the privileges of membership in an organized society.” And Oliver Wendell Holmes, Jr. expressed a similar sentiment when he said that “I like to pay taxes. With them I buy civilization."

Photo: Sign of the times.

The Disconnect Between Taxes and Programs

One of the reasons that some Americans do not have this more positive view of taxes is that they seem to ignore the basic connection between taxes and the beneficial programs they fund. What else could explain the fact that polls repeatedly reveal that many people support tax cuts while at the same time they support increasing government spending in many areas? Naturally, anti-government and anti-tax advocates like to encourage this sense of disconnection between taxes and programs. That is why, for example, when conservatives talk about tax cuts, they rarely talk about the programs cuts that must necessarily follow. They focus on how money will be returned to tax payers, not how money will be taken away from needed government programs. To listen to them, tax cuts are all gains and no pain.

This sense of disconnection is also helped along greatly by the political illusion that was discussed in the article “A Day in Your Life:” that the benefits of many government programs are elusive and are often easy to ignore or take for granted. Unlike marketplace transactions, where what we get for our money is immediate and tangible – what we get for our taxes is often delayed and less tangible. When we draw clean water from our taps, we rarely stop to make the connection between this and the taxes we pay to ensure the purity of this vital resource. Also, many of the benefits that come to us from our taxes take the form of things that do not happen to us – like not getting mugged or not breathing dirty air – and these we hardly notice at all.

Anti-government conservatives and libertarians are very good at taking advantage of the fact that while what government does for us often seems elusive, the taxes we pay to government are all too real to most people. Consider, for example, the strategy employed by Arnold Schwarzenegger when he was running for governor of California. In his campaign, he complained loudly about how overtaxed Californians were: “From the time they get up in the morning and flush the toilet, they are taxed. When they go get a coffee, they are taxed. When they get in their car, they are taxed. When they go to the gas station they are taxed. When they go to lunch, they are taxed. This goes on all day long. Tax. Tax. Tax. Tax. Tax.”3 This is true – and it helped Schwarzenegger get elected – but it is a misleading half-truth. He leaves out the rest of the story: that we are also constantly benefiting from government programs throughout our day. He deliberately ignores the connection between taxes and the programs they fund. We may be taxed when we flush the toilet, but what we get is the efficient and easy way to dispose of our waste in a manner that does not poison our water or spread disease. We may be taxed when we buy a cup of coffee, but our taxes help pay for inspections of coffee houses and restaurants that ensure that their food and drinks are fit for human consumption. We may be taxed when we pay for gas, but what we get is the interstate highway system that many of us so frequently use. So the reality is really this: Tax. Benefit. Tax. Benefit. Tax. Benefit. Tax. Benefit. While government may be constantly taking from us in the form of taxes, it is also constantly giving back to us in the form of the various programs that improve our daily lives.

Government bashers like Schwarzenegger can only succeed in making taxes seem onerous and unfair by completely ignoring what we get in return. This tactic may be bogus, but it has been a raging success. Conservatives have been winning this ideological fight in the United States in part because they have convinced most Americans to see themselves primarily as “taxpayers” not “beneficiaries.” In their rhetoric, they make sure to constantly refer to people as “taxpayers.” This is another attempt to frame the issue in a way that encourages us to think of government as bad – as a burden on us. “Taxpayers” is not a neutral term at all, but one loaded with powerful political meaning. It unconsciously reinforces a view of citizen/government relations being one-way – from our wallets to its coffers. A recent poll revealed that 28% of Americans agreed with the statement: “I don’t like paying taxes because the government doesn’t do anything for people like me.”4 And as long as people continue to see themselves only as taxpayers and not beneficiaries, as long as they ignore the connection between our taxes and what they get back from government, they will be ripe for the picking by those who want to weaken government.

Why Highly Taxed Europeans are Not in Revolt

Here’s a questions that has vexed conservatives for decades: Why isn’t there a huge tax revolt in Europe? Citizens in most European countries pay much higher taxes than we do in the United States, but virtually no substantial tax revolt movements exist in these countries. They should be marching in the streets by the millions demanding large tax cuts – but they aren’t. Why is that the case? The answer probably has much to do with the fact that people in Europe can recognize more easily the inherent connection between the taxes they pay and the benefits they receive. The benefits of government programs in these countries are much more obvious than they are in the United States – and so the taxes that pay for them are not resented as much. The European social welfare state is so much more extensive than what we have in the U.S. that it is impossible for citizens to not notice all the valuable things they are getting for their taxes.

T.R. Reid, in his book The United States of Europe, tells a story which illustrates this point very well. He lived in Great Britain for years, and at first he was stunned by the 17.5% tax that was added to virtually every purchase he made. “I kept wondering: Why do the Brits put up with a tax that high?” He came to understand the answer to this question when his youngest daughter had to go to the emergency room with a severely infected ear. After a wait of fifteen minutes, his daughter was seen and given effective treatment. Grateful, he went to pay the bill only to have the nurse proudly announce to him that “There won’t be a bill to pay. We do it a bit differently here. In the National Health Service, we don’t charge for medical treatment.” And suddenly he “got it” about the taxes:

Had the same minor medical crisis occurred in American, we would surely have received the same level of professional treatment. But we would have received something else along with it: a wad of bills. Having had a similar experience in emergency wards in the United States, I would expect that treatment like we got at St. Mary’s in London would have brought bills of about $200 from the hospital, another $150 or so from the doctor, and another $100 from some lab technician. And I would likely have faced a three-month battle with an insurance company trying to get the bills paid. In Britain, there was no need to argue with the insurance company over the bill, because there was no bill (and consequently, no insurance company). As we left the hospital, my wife said quietly, “Now I see why we pay that 17.5 percent."5

And beside universal health care, the typical European also gets a lot more for their taxes – including a free university education, paid maternity and paternity leaves for everyone, clean and efficient public transportation, retirement security for all, and so on. So ironically, the reason many people in the U.S. hate taxes more than Europeans may be because we pay so little in them and get comparatively so little for them in return. If we paid more taxes like the Europeans do, and then got many more important and obvious social and economic benefits, we would probably see the connections between taxes and government benefits more clearly – and so resent our taxes less. Strange but true.

Addressing Criticisms of Taxes

In the battle over Americans’ hearts and minds concerning taxes, only one side is really fighting. Virtually no one is promoting the more positive and constructive view of taxes. Many Democratic politicians wouldn’t be caught dead advocating tax increases. So the political effort is all on the other side, with a continual and vociferous conservative assault on taxes – one that typically goes unanswered. But we need to take a more careful look at how this assault is mounted. We need to look more critically at the main reasons the anti-government forces offer for why taxes are bad and tax cuts are good.

In a nutshell, these are the main conservative complaints:

  • Americans are greatly overtaxed and their tax burden is continually rising.
  • Most of our taxes don’t go to programs that help average Americans, but to foreign aid and welfare.
  • Taxes are bad for the economy because they hinder productivity and economic growth.
  • We would all be better off if we could keep more of the money we now pay in taxes.

There is nothing surprising here. In fact, these points are repeated so often by tax critics that most of us are very familiar with them and we often readily accept them as fact. And if they did happen to be true, they would be a pretty damning indictment of taxes and a powerful rationale for cutting them. But in reality these typically conservative criticisms about taxes are at best confused and misleading, and in most cases simply not true at all.

American’s Are Not Overtaxed

Saying that taxes are good does not necessarily mean that all levels of taxation are good. Taxes could certainly be too high and prove to be too much of a burden on taxpayers. And this is exactly what anti-government crusaders like to argue. They maintain that Americans are horribly overtaxed and it is getting worse all the time. For example, when the Republicans took over Congress in the 1990s, David Keating of the National Taxpayers Union described our taxes problems this way: “If we don’t seize on this revolutionary moment to rein in taxes and rein in entitlements, we could be looking at a government headed for financial oblivion…and a populace that is so over-taxed and so desperate that we could be talking about real revolutions.”6 This kind of anti-tax rhetoric is used to fan the fires of resentment against government – particularly the federal government and its income tax. And there is resentment aplenty, with many Americans feeling fed up with being “sucked dry” by the government tax collectors.

But many people greatly exaggerate the tax burden in this country. Here is a quick quiz:  Guess what percentage of Americans pay over 20% of their household income in federal income taxes? Polls show that most Americans put that figure at 38%.  But the real figure is shockingly lower:  less than 1%. According to the Congressional Joint Committee on Taxation, over 85% of us pay less than 10% of our income in federal income taxes. The average middle-class family now pays less than 5% of their income in federal income taxes – a historical low. How is this possible? Because many people are too poor to pay income tax, and many of the rest of us have deductions and credits that reduce our effective tax rate to much less than the official tax rate for our income group. In any case, the point is most of us tend to wildly overestimate how much everyone is paying in taxes.

Also, even a cursory examination of the facts shows that Americans are taxed relatively lightly compared to most other Western countries, and that our tax burden has not been skyrocketing at all. Table 1 makes it clear that Americans carry much less of a tax burden than the citizens in virtually every comparable Western European country. We pay the lowest taxes as a portion of Gross Domestic Product than any of these nations – usually by a very large amount. For example, we would have to increase tax revenues by almost 60 percent to match those of France, and by 40 percent to catch up with the Dutch. So it makes little sense to maintain that we are overtaxed in this country.

 

Table 1: Total Tax Revenue as a Percentage of GDP: 2009

 

Country

Taxes as % of GDP

Denmark

48.2

Sweden

46.4

Italy

43.5

Belgium

43.2

Austria

42.8

France

41.9

Iceland

41.4

Netherlands

39.1

Germany

37.0

United Kingdom

34.3

Canada

31.1

Spain

30.7

Switzerland

30.3

United States

24.0

 

Source: Revenue Statistics 1965-2009, OECD 2010.

 

Nor is it true that our taxes have been increasing at a precipitous rate. To see this we merely need to consider how tax revenues as a percentage of GDP have changed over the last several decades. This is a good measure because it takes into account economic growth and inflation, and so it gives us a much broader and more accurate picture of how much government is receiving in taxes. These figures, as shown in Table 2, indicate that the government take has changed relatively little in the last 40 years – either on the federal or the state and local level. In fact, we’ve had a remarkably stable rate of taxation. In 1970, total government receipts were 28.3% of the GDP while in 2007 they still only amount to 29.2%. In contrast, many other Western nations had substantial increases in their taxes during this same period. Between 1975 and 2003, Austria went from 37.4% to 43% and Italy from 26.1% to 43.4%, for instance.7 In any case, the figures for the U.S. show that conservative claims of an increasingly greedy government taking more and more money out of our pockets in taxes are simply false. Given these facts – that we are not overtaxed and our taxes are not mushrooming – the so-called “Tax Revolt” movement begins to make less and less sense

 

Table 2: Government Receipts as a Percentage of GDP: 1970-2007

 

 

1970

1980

1990

2007

State & Local Govt. Receipts

9.3

8.8

9.7

10.4

Federal Government Receipts

19.0

19.0

18.0

18.8

Total Government Receipts

28.3

27.8

27.7

29.2

 

Source: U.S. Government, Budget for the Fiscal Year 2009, Historical Tables, 2008.

 

Most of Your Tax Money Doesn’t Go to Others

Anti-government conservatives build up a lot of public resentment about taxes by suggesting that most of our tax money goes to help people other than ourselves – that it is redistributed to programs like welfare and food stamps that primarily help the poor and minorities. According to them, the government takes your money and then spends it on other people while you are left to struggle to make ends meet, pay your medical bills, send your kids to college, and so on. This argument is sometimes a thinly veiled attempt to mobilize opposition to government by fanning people’s racial and class resentments. But more importantly, it is simply not true. Most people have wildly exaggerated ideas about how much of their tax money is going to “others” in the form of welfare or foreign aid. When the public was asked to name the two largest parts of the federal budget, the leading responses were foreign aid (41%) and welfare (40%) – ahead of other choices like Social Security, defense, and health.8 This is highly delusional. Spending on foreign aid and welfare actually amounts to less than 3% of the federal budget.

What we have here, then, is another common negative stereotype about government perpetuated by the right. The idea that the government spends most of our tax dollars on “them” rather than on “us” is simply not rooted in reality. Studies have also shown that the vast majority of government dollars, which come from taxes on the middle and upper classes, are spent on benefits for the middle and upper classes, not the poor. Consider, for example, the federal money handed out in social welfare spending. In a typical year, the government spends over three times the amount of money for programs that everybody benefits from – like Social Security and Medicare – than it spends for programs aimed at the poor, such as Medicaid, welfare, and food stamps.9

Here is another quick quiz: What is the dollar value of the benefits from federal programs that the average middle-class wage earner receives? $1,000? $5,000?  A 2007 study by the Tax Foundation found that it was over $10,000.10  And that figure does not include any benefits from such so-called “public goods” programs as environmental protection and public-health efforts.  Include those and the value of federal programs rises to over $16,000 a year. And if we add in the benefits from state and local programs, the total amounts to over $27,000. So there is no question that we are all getting back a great deal in government benefits for the taxes we pay.

Taxes Are Not Hurting the Economy

Another very common criticism of taxes by conservatives is that taxes hurt the economy and that cutting them will increase economic growth. This was the argument used repeatedly by Republicans in Congress and the Bush administration as they passed a number of massive tax cuts. Conservatives are certainly correct that in principle taxation could be so high – say a 75% income tax on everyone – that it would stifle economic growth and any incentive that people have to work harder. But our current taxes are nowhere near this extreme, so the question is not whether taxes could hurt the economy, but whether our current taxes are hurting the economy.

The conservative case for our taxes hurting the economy is very straightforward. The argument is that taxes on various forms of income are a drag on worker productivity and consumer savings, and thus ultimately on economic growth. So the higher these taxes are, the more it slows the economy down. Conversely, if we cut these taxes, then people would have more incentive to work hard and save, and this would give a long term boost to the economy. Sounds logical enough. But it is wrong. There is little evidence to support this contention and plenty that contradicts it. Consider for example, the effect of tax changes on worker productivity. From 1950 to 1963, when the top individual income tax rate averaged 91.1%, productivity growth was 3.5%. From 1964 to 1980, when taxes were cut and the top income rate fell to 71.2 %, productivity did not go up as conservatives predicted, but actually went down a bit to 2.2%. And in fact, as shown in Table 3, the long-term statistics concerning tax rates and productivity show that as tax rates have fallen from the 1950s to the early 1990s, productivity fell as well. And when the tax rate went up in the later 1990s, productivity actually rose. This does not mean, of course, that tax cuts discourage worker productivity or that tax rises encourage it; but only that productivity depends on a large number of factors besides taxes. As we have seen in recent years, for example, technological changes like increases in computer use have a much more significant impact on productivity than tax rates do. But in any case, the point is that the tax-bashers are simply wrong about how tax cuts will boost worker productivity. Strike one for their side.

 

Table 3: Top Income Tax Rate and Productivity Growth in the United States 1950-2002.

 

 

Top Average

Income

Tax Rate

Average Annual

Productivity

Growth Rate

1950-1963

91.1%

3.5%

1964-1980

71.2%

2.2%

1981-1986

53.2%

2.1%

1987-1992

30.8%

1.7%

1993-2002

39.5%

2.1%


Source: U.S. Bureau of Labor Statistics (2003).

 

Conservatives are also wrong about the effects of tax cuts on investment and savings. The boost to investment predicted by conservatives after the tax cuts during the Reagan administration never took place. Between 1979 and 1989, the average rate of investment was 2.5%. From 1989 to 2000, it rose significantly to an average of 5.9%. But this was after George H. W. Bush and Bill Clinton both raised federal taxes. There is also little evidence that the Reagan tax cuts boosted savings either. Savings rates fell from 8.8% of personal disposable income in 1981 to 6.0 percent in 1986.11 Moreover, two economists who did a comprehensive survey in 1996 of the economic literature on the effects of tax cuts on savings concluded: “Virtually no empirical study suggests a large saving response by households to changes in after-tax return.”12 Strike two for tax cutters.

But what about the over-all beneficial effects of tax cuts on economic growth? Again, history is a good guide. From 1981 to 1985, after the tax cuts of the Reagan administration, the economy did grow at a good rate – averaging 2.6% a year. But between 1976 and 1980, when the tax rates were higher, it grew even faster – averaging 3.2%. Similarly, after taxes were raised by Bush and Clinton, economic growth actually picked up and averaged 3.2% between 1989 and 2000.13 So there is clearly not a strong relationship between tax rates and growth in this country. Strike three – they’re out.

Comparing the U.S. to other countries brings little solace to tax cutters either. They like to think that our growing economy outpaces those of other advanced democracies in large part because of our lower tax burden. But the research doesn’t bear any of this out. Consider the results of a study that compared tax levels and economic growth rates between 1970 and 2000 for a large number of countries.14 It did find that Denmark and Sweden, which had much higher taxes than the U.S., also did worse in terms of average growth – about 1.6% versus about 2.3% for the U.S. But how do anti-tax advocates explain Finland and Norway, which had taxes almost 50% greater than we did, but actually enjoyed higher rates of growth? In fact, the overall results of the study indicated very little correlation between taxes and economic growth – with the U.S., Italy, Canada, the United Kingdom, Germany, Belgium, France and the Netherlands having relatively similar rates of growth, but widely varying tax levels – from 27% to 42% of GDP. International comparisons, then, contradict rather than support the conservative contentions that we need to cut taxes to ensure economic growth or that high taxes hurt the economy. Clearly a country can have high taxes and strong economic growth as well. Strike four.

One economic analyst, Anna Bernasek of The New York Times, examined a wide variety of academic studies on the relationships between tax rates on productivity, savings, and growth. She concluded that the “notion that taxes are bad for the economy is just that: a notion not backed by strong evidence. And the costs of ignoring experience in favor of hope can be high: mounting deficits, decaying infrastructure, inadequate investment in public education and research. So the next time some proponent of tax reform promises king-size economic benefits, there is reason to be skeptical."15

Are We Better Off Paying Less Taxes?

There is another common anti-tax argument offered by conservatives. It is a reliable old standby: Tax cuts are good because they put more money in your pocket. It is an appeal based on pure greed and selfishness. This argument is not based on any sense of what is in the public interest, only what is in your own private interest. But it can very seductive to some Americans. And anti-tax advocates do not hesitate to play this selfishness card. Consider, for example, the way Grover Norquist of Americans for Tax Reform explains the benefits of tax cuts: “When the government doesn't take as much of your money next year as it did last year, we have more money. The government has a lower tax rate, and depending on economic growth, may have more or less money, but we, the people, have more money. So it is a good thing for us to have lower taxes."16

But here is the question: are we really better off as individuals in the long run if we were to pay much lower taxes? Naturally, most people would feel better off with a few more thousand dollars to spend. But what Norquist leaves out, and hopes Americans don’t notice either, is the essential connection between tax dollars and government programs. When the government returns tax money to individuals, it must also necessarily begin to curtail important government programs that benefit us all. Tax cuts on the scale envisioned by small government advocates can’t help but cut deeply into the dozens of vital government service and benefits detailed in other articles on this website. Loss of these collective benefits means that we would probably not be better off at all. Do you really believe that you would be better off if you had 27 more dollars in your pocket – the amount the average American spends to fund the Environmental Protection Agency – and had to forego all those agency’s programs to ensure clean air and clean water and to deal with environmental threats like toxic waste, oil spills, mercury and lead contamination, radioactive waste, pesticide poisoning, ozone depletion, and global warming?

The reality is that in modern societies, we simply face too many serious problems and risks that we cannot deal with effectively as individuals. Having a few more thousand dollars in our pockets will not help us to deal effectively with a deteriorating public school system, police and fire department layoffs, unclean air or polluted water, unsafe food, being laid off from our jobs, threats from terrorist organizations, and so on. These kinds of problems can only be addressed collectively – through collective institutions like government that allow us to pool our resources and efforts to most effectively address these threats to our well-being.

Let’s focus for a moment on one particular problem: the economic insecurity felt by a growing number of Americans. We have increasing trouble paying for health care and health insurance. Many of us are unsure whether and how we can pay for our kids to go to college. Being laid off means economic disaster for most families. Personal bankruptcies have been growing dramatically. Many Americans are also very uncertain about whether they will have enough money to live a decent life in retirement, and wonder who will take care of them in their old age. And many of these problems are greatly intensified when we have a severe recession -- like the one that began in 2008. But the point is that even in "good times," life for many Americans is full of persistent and serious economic worries.

Conservatives realize this situation all too well and have been relentless in their efforts to exploit these economic insecurities to support their campaign to reduce taxes and government. Their message is very seductive: Couldn’t we all use more money in our paychecks to meet our pressing economic needs? They also like to suggest that high taxes are much of the reason for our economic insecurities. As Rep. Dick Armey has argued, the reason that “education and health care are difficult to afford is because the government itself makes us poorer through high taxes.”17

But here again the government bashers have it exactly wrong. The cause of people’s economic insecurities is not government taxes. Virtually all of these insecurities are coming from changes in the economy. Globalization contributes to stagnating wages. Mergers and downsizing threaten many people’s job security. Many corporations can no longer afford to provide health care benefits or retirement plans for their employees. And so on. Not only are taxes not causing these insecurities, they can actually be a large part of the solutions to many of these problems. The most viable approach to many of these economic worries is again not to try to go it alone, but to support an expansion of government programs to address them directly. As we’ve seen, one of the main functions of modern government is to pool collective resources (taxes) to provide social insurance against many of the economic risks we all face – such as losing our job, or retiring, or facing a major illness. The better – and better funded – these programs are, the less economic worries we have.

Again, looking at Europe is instructive here. Europeans are more secure economically because they have more extensive programs to protect them from the many economic risks of modern life. They have universal health care, extensive unemployment insurance programs, generous government pensions, and free or very low-cost higher education. So instead of leaving everyone on their own to face these economic difficulties – they pool their tax resources and solve these problems for all citizens. Certainly this costs more in taxes, but the economic security that is enjoyed by everyone is priceless.

This is another reason why Europeans are not revolting against their high taxes. In Europe, taxes are not seen as a threat to people’s economic security – they are seen as providing that security. Europeans do not feel like they cannot afford to pay those high taxes, rather they feel that they cannot afford to not pay them – and thus risk losing the crucial economic safety net that their social programs give them. To over-simplify only a bit: for Europeans, more taxes mean more economic security. It is a very different attitude toward taxes than we have here – but it is one we might learn a great deal from.

Seeing Government as “Them,” Not “Us”

The anti-tax arguments of conservatives and libertarians also rely heavily on denying the connection between the people and their government. They do not want us to see public money as “our” money being spent for “our” benefit. Grover Norquist, for instance, rankles when people refer to the government as “we.” When the interviewer Terry Gross pointed out to him that “The Bush tax cuts would cost us about $1.1 trillion over the next 10 years, and we're going to be hundreds of billions of dollars in debt.” He responded by saying: “Well, there's a very interesting use of the word 'we.' Every time you use the word 'we,' you meant the government, and I tend to use the word 'we' to mean the American people and to speak of the government as the government.” 18

For anti-government advocates this is a crucial distinction. They don’t want people seeing government as “we.” In terms of taxes, they want people to see the government as “them” taking money from “us.” It is this same rhetorical point that President George W. Bush expressed when he was pushing for one of his tax refunds: "It is not the government's money,” he said. “It is your money.” But isn’t the government’s money in a very real sense “our” money too? Aren’t government programs “our” programs? Al Gore, when he was running for president, certainly thought so. Responding to Bush’s tax cut proposals, he argued: “Their theory is that’s going to be good for the country, and they say it’s your money. Well, it is your money. But it’s your Medicare, it’s your Social Security, it’s your environment, it’s your school system, it’s your country.”19

In a working democracy, government is supposed to be “us,” and its spending policies are supposed to generally reflect “our” collective will. Granted this process works imperfectly and sometimes special interests win out over the public interest in budget battles. But the basic idea underlying democratic government is that it is a reflection and representation of us. This gives us a very different perspective on taxes. As Benjamin Barber has explained:

The money does not belong to the government, it belongs to us. But the government belongs to us too. ‘It’ does not steal from “us,” we pool resources so we can act on behalf of the commonweal – the weal (well-being) common to us. … Taxes are not tithes imposed by tyrants; they are self-imposed duties that permit our government to discharge our common purposes. … To cry “Give Americans back their hard-earned tax dollars!” is a disingenuous way of saying “To hell with establishing justice, promoting welfare and securing liberty!” It is nothing more than a cynical bribe to get people to give up on one another and to go it alone.20

The Real Problems with Taxes

All of this has been a defense of taxation and an argument that taxes play a very positive and beneficial role in our society. But this is not to say that there are no problems with taxes in this country. Of course there are – but they are not the problems that conservatives usually cite, like that we are overtaxed or that taxes are strangling the economy. In fact, if you ask the American people, their main complaint about taxes is something quite different. Pollsters have found that “What most bothers the public about taxes is the feeling that some in America are not paying their fair share. They believe that middle and lower income people pay too much while the wealthy and corporations pay too little.”21 So some of the real questions surrounding taxes involve how fair they are, and how much of the tax burden should be shouldered by various economic classes. There are other issues as well: Are there better and worse ways to collect taxes? Should we be relying more on regressive taxes like sales taxes and less on more progressive approaches like income taxes? Should we continue the substantial tax breaks given to the middle and upper classes, such as the home mortgage interest deduction? All of these are valid and ongoing controversies about taxes in our society. But the important point here is that while these questions of what makes for a fair and effective tax system are valid issues for debate, the legitimacy of taxes themselves is not.

Reasons for Hope

Americans need to come to their senses about taxes. We need to reject taxophobia and stop falling for conservative arguments about how taxes are bad. We need to recognize that taxes are necessary and beneficial – that they are indeed the dues that we pay to live in a modern, functioning society with all the government benefits to which we have become accustomed. We need to appreciate that there is a very real connection between the taxes we pay and the vital services and programs offered by our state, local, and federal governments – and that cutting taxes the way many conservatives propose will inevitably undermine the viability of these programs and harm the public interest.

Embracing a more realistic view of the value of taxes is especially important if we want to make progress on a number of important fronts. If we want to make health care more accessible, improve education, combat global warming, etc., we need more money to do so – which means tax increases. The trillions of dollars that were spent on the Iraq War and the economic bailout have produced record budget deficits that cannot be sustained. So there is no more free lunch. If citizens want more out of their government, they must be willing to pay for it.

Fortunately, there are reasons to hope that Americans are coming around to a more positive view of taxes. Polls show that the number of Americans who believe that taxes are too high has been dropping over the last several years and is now at its lowest level since the 1960s.22  Much more importantly, they also see taxes as an important part of their contribution to a democratic society. 81% of Americans agree with the statement: “I don’t mind paying taxes because my taxes are part of my contribution to society as a citizen of the United States.” Another 84% also say “I don’t mind paying taxes because my taxes contribute to making sure we have public schools, clean streets, public safety, national defense, and a cleaner environment.” And even 74% say that that “I don’t mind paying taxes because I want government to play a strong role in helping people when in need.”23 We need to actively promote and build on these kinds of pro-tax sentiments. We need to go on the political offensive on the issue of taxes and make it clearer that in many cases paying more taxes makes us better off, not worse off.

Thankfully, a number of Americans have already begun to fight tax cuts and even support tax increases. In my own town, a majority of residents have voted several times in the last decade to raise their own taxes to pay for such things as a new fire station and a badly needed renovation of our high school. Many Americans are also now saying that they are willing to have their taxes increased – if the money goes to important programs like education and environmental protection. It is also encouraging that during the ongoing fiscal crisis in the states, thirty-three state legislatures have made the brave choice to raise taxes to ensure the continuation of vital services. And in a few of these states, even some Republican politicians have acknowledged the necessity of boosting revenues and have gone along with these tax increases – a testimony to the fact that common sense can triumph over blind political ideology. All of these things suggest that while anti-government crusaders may still be able to fool some of the people all of the time with their rhetoric about the evil of taxes, they are not able to fool all of the people all of the time.

 

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For more on what we get for all the taxes we pay, see A Day in Your Life with Government and The Forgotten Achievements of Government.

 

 


1. George Lakeoff, “Simple Framing,” Rockridge Institute, August 25, 2006, http://www.rockridgeinstitute.org/projects/strategic/simple_framing

2. George Lakeoff, “Progressive Frame for Taxes,” Rockridge Institute, August 25, 2006,

http://www.rockridgeinstitute.org/research/rockridge/taxation

3. Larry Kudrow, “Terminating Any Doubt,” National Review Online, http://www.nationalreview.com/kudlow/kudlow082103.asp

4. Meg Bostrum, By, or for, the People: A Meta-Analysis of Public Opinion of Government (New York: Demos, March 1, 2005) p. 27.

5. T. R. Reid, The United States of Europe (New York: Penguin Press, 2004) p. 145.

6. People for the American Way, “National Taxpayers Union, August 25, 2006. http://www.pfaw.org/pfaw/general/default.aspx?oid=10235

7. Revenue Statistics 1965-2003, OECD 2004, p. 18.

8. Kaiser Family Foundation, “National Survey of Public Knowledge of Welfare Reform and the Federal Budget,” http://www.kff.org/kaiserpolls/1001-welftbl.cfm. June 23, 2006

9. Mimi Abramovitz, “Everyone is Still on Welfare: The Role of Redistribution in Social Policy,” Social Work, Volume 46, No. 4, p. 299.

10. Andrew Chamberlain and Gerald Prante, “Who Pays Taxes and Who Receives Government Spending?  An Analysis of Federal State and Local Tax and Spending Distributions, 1991-2004.”  http://www.taxfoundation.org/files/wp1.pdf

11. All of these figures are from John O. Fox, If Americans Really Understood the Income Tax (Boulder Colorado:Westview Press, 2001) p. 170.

12. Fox, p. 169.

13. Fox, p. 166.

14. Joel Slemrod and Jon Bakija, Taxing Ourselves, 3rd Edition: A Citizen's Guide to the Debate over Taxes (Cambridge, MA: MIT Press, 2004), p. 119.

15. Anna Bernasek, “Do Taxes Thwart Growth? Prove it,” The New York Times, April 3, 2005, p.6, Business section.

16. Terry Gross, “Grover Norquist” Fresh Air, http://www.npr.org/templates/story/story.php?storyId=1452983

17. Dick Armey, The Freedom Revolution, Washington, D.C.: Regnery Publishing, 1995, p. 292.

18. Terry Gross, “Grover Norquist” Fresh Air, http://www.npr.org/templates/story/story.php?storyId=1452983

19. NY Times, Aug 31, 2000.

20. Benjamin Barber, “A Civics Lesson,” The Nation, November 4, 1996, p. 21.

21. Bostrum, p. 17.

22. “Americans’ View on Taxes,” National Public Radio, April, 2003. www.npr.org/news/specials/polls/taxes2003/index.html

23. Bostrum, p. 27.