With Tax Day just behind us, we are especially sensitive to how much we pay in state and federal income taxes. It simply is human nature to resist paying taxes. And the question inevitably comes up: Why do we pay so much?
The answer lies in what we Americans expect our federal, state and local governments to provide. Listed below are only some of the services that citizens believe our governments should provide with our tax dollars:
• police, firemen, and other emergency responders to ensure the safety of ourselves and our property;
• an outstanding public education system for our children;
• excellent highways and roads to support commerce and personal travel;
• medical research to combat disease to enhance the quality of life, and extend its length;
• a robust, professional military to protect us from threats beyond our shores;
• financially stable Social Security and Medicare programs to provide security for older citizens;
• monitoring and inspection of the food supply, water and air quality, pharmaceuticals, airlines, automobiles, trains, utilities, etc. to ensure safety;
• reasonable assistance for the less fortunate, providing food, shelter, and medical care;
• an elected government that is responsive to the needs and desires of citizens, that operates openly and fairly, and acts as responsible stewards of our tax dollars.
DO WE PAY TOO much for these government services? Too little? Should we reduce their cost and quality?
The Organization for Economic Cooperation and Development provides an important metric for comparison. With the exceptions of nonmembers China, Russia and India, the OECD consists of the 34 countries that are America’s major trading partners. The OECD annually determines the taxes member countries collect as percentage of their gross domestic products.
In 2011, the United States federal, state and local governments collected 24 percent of GDP in taxes. How does that compare to the other OECD countries?
Sweden, Denmark, Norway, Italy, France and three others tax the most, more than 40 percent of GDP. Fortunately for U.S. taxpayers, we are not among those eight countries.
WE’RE ALSO NOT in the same category as the United Kingdom, Germany, Canada or New Zealand. They are among the 16 OECD countries that tax between 30 and 40 percent of GDP.
The United States is among the ten countries who tax between 20 and 30 percent of GDP. South Korea, Turkey, Slovakia and four others tax more than the U.S.
And the U.S. position? We are 32nd of the 34 OECD countries. Only Chile (21 percent) and Mexico (20 percent) tax less.
Perhaps the most important message in these numbers is that we are not heavily burdened by taxes when compared to other economically comparable countries. In fact, we tax far less than Germany, the United Kingdom or Japan.
But the services we demand are expensive. How do we provide them with lower GDP taxation than comparable countries? Is it because our government is so efficient that we can deliver better services with a smaller fraction of GDP? No. There is another answer.
We can do it because we borrow. Because we thoughtlessly, and endlessly, borrow.
Washington politicians are afraid to propose achievable plans to halt our borrowing binge because that would require compromise and unpopular choices. Frozen in partisan positions not to reduce government services or not increase taxes, too many citizens believe we can have it all.
In this political standoff, what is the fiscal endgame?
Let our kids pay the IOUs.
CONGRATULATIONS TO my generation of Americans who may not be around when the federal debt bomb explodes. Condolences those younger than age 50 or so who will have to live with, and clean up, the financial wreckage.
(The writer is a retired U.S. Navy officer. He lives and writes in Savannah.)