James Pethokoukis

Politics and policy from inside Washington

Should America be more like Denmark?

Oct 8, 2009 16:37 UTC

Blogger Matthew Yglesias talks up Denmark and high taxes over at ThinkProgress:

The overwhelming fact about Danish public policy is that taxes in Denmark are really high. There’s a substantial VAT and also a substantial income tax. You pay taxes to buy a car, and you pay higher taxes for heavy cars. Gasoline taxes are high (gas costs almost $7.50 a gallon) as are taxes on electricity, which account for more than half the cost of electricity to consumers. In exchange for all this, the Danes have basically achieved all the stuff progressives say they want. The country is rich, clean, and highly egalitarian. The high taxes finance generous public services, and the high levels of expenditure allow the country to do without a lot of extraneous business regulation which helps keep the place economically dynamic. According to surveys, the people are all very happy, which is exactly what you would expect from a very rich, very egalitarian society. And as this trip has emphasized, they do it all while doing much less polluting than Americans do, despite a higher average material standard of living.

There’s more to that than taxes, of course, but the high taxes really are integral to the whole thing. And that includes the environmental piece. In part because there are directly pro-environment taxes. But also, I would say, in large part because it’s the egalitarian income distribution and robust redistributive state that makes the environmental policies tolerable. Cheap gas and electricity are, in part, what we do in the United States instead of real social policy.

All of which is just to emphasize a point I’ve been making a lot over the past few months: there’s no way to have a progressive renaissance in the United States unless progressives find some politically feasible way of directly making the case that higher taxes for better services can be a good trade. And it’s worth trying to be honest about this.

Me: Yes, that last point is a problem.  A recent poll shows Americans think half of all government spending is wasted, while data from Gallup shows Americans fear Big Government more than Big Business by 55-32. That is narrower than the late 1990s, but higher than the early 1980s when Reagan successfully campaigned against Big Government. (The Cold War was probably also a factor.)

How about a $1.4 trillion (a year!) tax increase?

Sep 1, 2009 14:34 UTC

It always amazes me when people act as if raising taxes has no impact on economic growth, like this article from a Financial Post columnist who advocates raising US taxes by $1.4 trillion a year:

1) Washington could raise US$600-billion per year or more if Americans paid a 5% federal sales tax on goods and services if it were identical to Canada’s 5% GST.

2) Another US$280-billion could be generated if Americans paid slightly more than double what they pay now, or US$3.75 a gallon, for gasoline, which is roughly what Canadians pay.

2) Another US$180-billion is available if Americans paid the same taxes on cigarettes as Canadians.

4) Then there’s another US$355-billion for government coffers if Americans had the same liquor taxes as Canadians. The total that could be raised from all four is US$1.415-trillion. That is, by the way, the size of Canada’s or Spain’s economies.

COMMENT

wow, some idiots actually *want* to pay taxes. Well you won’t mind picking up my tab then? No? What’s that? You don’t like me and you don’t want to pay for me? Well, ditto.

Posted by Andrew | Report as abusive

U.S. corporate tax rates vs. the world (OECD)

Aug 7, 2009 13:31 UTC

How does the US corporate tax rate stack up against other nations? Take a look (via the Tax Foundation):

corptaxrate_us_vs_oecd-larg

COMMENT

The nominal numbers charted are correct. However, you must account for the fact that many US Corporations have avoided paying tax through subsidies, subtractions from income, tax credits and transfer pricing (Delaware Intangible Holding Companies). Thus the US effective tax rate is much lower than many other OECD nations.

Posted by Josh | Report as abusive

America’s top 1 percent pay 40 percent of all taxes

Jul 30, 2009 14:17 UTC

The Tax Foundation review of new IRS data (through 2007) finds some remarkable things about America’s progressive tax system:

1) The top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government — the highest percentage in modern history — while the top 1 percent paid 24.8 percent of the income tax burden.

2) The share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.

3) To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.

4) Some in Washington say the tax system is still not progressive enough. However, the recent IRS data bolsters the findings of an OECD study released last year showing that the U.S.—not France or Sweden—has the most progressive income tax system among OECD nations. We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.

073009taxes

COMMENT

The last post is 45% off. The top 1% owns half the wealth in this country but that is a mute point. Income taxes are bases on INCOME for a specific year. The Estate Tax taxes accumulated wealth after it has been taxed many times in a lifetime. In 2005 the top one percent EARNED 18% of total income and PAID 38% of federal income taxes.

Also, why do we not analyze work habits when we talk about income disparity. Those in higher income brackets have more education, put in more hours at work and watch less television than those in the bottom income brackets. My husband works at least 70 hours a week in a very stressful job and has to travel and be away from his family. He has been doing this for 25 YEARS. He is a first generation college graduate not a trust fund baby. Only 2% of the top 1% are trust fund babies. The rest started out as the average American. You want to be in the top 1%, go for it but you will have to work for it.

Posted by sunseeking | Report as abusive

The healthcare surtax and US competitiveness

Jul 8, 2009 19:14 UTC

The Cato Institute put together a nice chart looking at global tax rates:

tax-rates

COMMENT

i wonder just how long before living here in the US is just not worth it any more and time to head over seas. I am not interested in working for the gov and having my wife and daughter working for the gov. And yes i believe that the IRS, Congress and President Obama wants everyone to work and die with nothing. Just kick back and see what happens when more and more Rich people head out of the country to escape taxes.

Posted by roger o. | Report as abusive

Why Europe wants America to raise taxes

Jun 30, 2009 16:24 UTC

When the G20 went after tax havens last April, I said it was just a first step toward a push for “tax harmonization,”  a fancy phrase that really means getting low-tax nations to raise their tax rates. Then I see what the prime minister of Finland is advocating:

We have to initiate discussions at the European Union level about how to prepare for the post-crisis period. Getting public finances in order is a must if we are to grow, create employment and provide the welfare services that we in Europe value so much. …  This will require tight control and, in many countries, painful cuts. However, it would be unrealistic to assume that all the balancing could be done on the spending side alone. … The overall tax rate will have to rise as well over the longer term. In some areas that can be done without much consultation between the countries. … However, raising such taxes can have detrimental effects on economic activity. This is especially so when a country acts on its own: capital and people can respond by migrating to jurisdictions with lower rates. … Parallel measures would help all of Europe: tax competition risk would be reduced and the public finances of individual countries would improve. Such co-ordinated tax changes could set also an important global example. In particular, it might encourage the US – with lower tax levels in most areas – to do what has to be done to address its spiralling budget deficit.

My spin:  Don’t raise the bridge, lower the river! Why countries don’t try to instead supercharge their economies is beyond me.

COMMENT

Europe is just jealous. They have been plowing so much money into their beloved welfare programs, that it just doesnt seem fair that the US should enjoy such low tax rates. Even though we obviously dont embrace a European style welfare state.

Comparatively, the US does have lower overall rates, and could it possibly be that these have spurred some growth whileas the European Union’s main growth driver is Eastern Europe. Now that source of growth is being reined in. So could this initiative really be a way to constrain US growth, so that future European growth doesn’t look so bad?

While US tax rates will likely go up in the not to distant future, US legislators and the IRS should avoid the European and Canadian VAT model. US tax revenues can be increased through creativity and fairness. We should not levy a high VAT on sales, which are already being taxed at the state level. Since the US economy is dominated by consumer spending, clearly it is unwise to reduce the volume of this spending through burdensome taxes. A more efficient tax model, when combined with more efficient government, should yield a significant improvement in tax revenues. A VAT, while deceptively simple, should be a last resort, since it will stifle any existing economic advantages the US currently enjoys over its European rivals.

Posted by Greg | Report as abusive
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