Recently I was listening to a speaker admit that he was going to support a small property tax increase even though he gagged on the words. He hated taxes, he said, but this one was different. This tax would maintain services he so much enjoyed and would benefit the city where he lived. Nevertheless, he needed to make clear that he did not like paying taxes.
His apparent schizophrenia over taxes is not surprising. The anti-tax rhetoric has become a mantra in public debate. Politicians hear that rhetoric and repeat it back to citizens. Anti-tax sentiment becomes so rampant that policymakers find it difficult to consider raising taxes even when it is necessary.
What is lost in the discussion is the connection between taxes and the services provided by them. For example, a candidate recently told me that a voter complained to her because she supported a small local tax increase. After the voter ranted on about high taxes, he then asked her if she could do something about the broken exercise machines in the city’s recreation center.
Tax is not a four-letter word. Rather, it is the price we pay for a civilized society. And we all want that civilized society. We may complain about how much government spends and how much it costs, but at the local level we still want that neighborhood-patrolling police car, the fire truck to douse household fires, and a city park for our child to play in. At the national level, we would be upset if our Social Security check didn’t arrive on time, we could not visit a national park on vacation, or foreign soldiers walked blithely across our nation’s borders.
Here are some myths and truths about taxes:
Taxes are spent on government waste. One person’s waste is another’s vital program. A Pell grant for education might seem a waste until our child can’t afford a college education he or she desperately needs to get ahead. Medicaid is a waste unless our aging parent’s medical bills exceed family income. Unemployment compensation seems extravagant until we lose our job and live off it until we can get a new one.
Taxes are too high. “Too high” is a relative term. But relative to other industrialized nations, the taxes we pay are quite low. Germany, France, Britain, Spain, Italy, and Japan all tax personal income at significantly higher rates than the United States.
Taxes just keep going up and up. The top federal income tax rate is half what it was 40 years ago. In the 1970s, the top federal income tax rate was 70 percent. Today it is 35 percent. The top federal income tax rate today is nearly as low as it was during the Great Depression. That is remarkable because the federal government does much more than it did then. Social Security, Medicare, Medicaid, the Earned Income Tax Credit, and grants to states did not exist then.
That discrepancy between the federal government’s programs and the declining income tax rate helps explain why our deficit has ballooned over the past 30 years since the top income tax rates were halved. Frankly, more services are provided, but we are not willing to give the federal government the money to pay for them. The result is predictable – deficit and debt.
If we tax the rich more, the economy will go south. History suggests that isn’t the case. The economy boomed in the 1950s when the tax rate was double what it was today. It boomed again throughout the 1990s even though tax rates went up early in that decade.
As the nation faces annual deficits for years to come, as well as a large debt to pay down, many will look only at spending cuts as the solution to this national crisis. But the facts about tax policy suggest revenue increases, particularly on the wealthy, should be on the table as well. In the 1940s, our great-grandparents faced the task of funding the government’s war effort. How did they solve it? They raised taxes temporarily on the wealthiest Americans. Maybe we should consider their example.
Richard Davis is a professor of political science at Brigham Young University. His opinions do not necessarily reflect those of BYU.