U.S. Taxes Not Too High!

Financial FAQs

No, our taxes are not too high, and Americans suffer for it. In fact, the non-partisan Tax Policy Center says U.S. taxes at all levels of government represented 26 percent of GDP, compared with an average of 34 percent of GDP for the 34 member countries of the Organisation for Economic Co-operation and Development (OECD) in 2015.

Graph: TPC

Then why do Americans complain so much about high taxes? It’s because we have to pay for services out-of-pocket that other developed countries’ governments provide—including universal health care, tuition free colleges; services that developed countries consider to be their citizens’ rights.

“In many European countries, taxes exceeded 40 percent of GDP. But those countries generally provide more extensive government services than the United States does,” says the TPC report. “Among OECD countries, only Korea, Chile, Mexico, and Ireland collected less than the United States as a percentage of GDP.”

Actually, the ‘other’ developed countries provide public services as well, including such mass transit conveniences as high-speed trains (in Europe, Japan, and China), and worker-friendly laws—including decent minimum wages, paid maternity leave, and at least 4 weeks paid vacations—the list goes on and on.

The best way to look at this is what typical American households pay. A 2016 PEW Charitable Trust analysis showed how financially stretched we are.

“After declining during and after the Great Recession, expenditures increased between 2013 and 2014 in particular,” said the study. “…In 2014, the typical American household spent $36,800, but median household income continued to contract. By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent.”

Graph: PEW

In other words, declining American household incomes mean Americans are spending more out of pocket for the essential services, such as education and healthcare than other developed countries. About two-thirds of families’ spending goes to core needs: housing, food, and transportation, said PEW.

Alas, it will take an American electorate that finally wakes up to these facts to call for the benefits others enjoy. Why should we deserve less? One reason that hasn’t happened yet is our huge federal deficit—due to the fact that 60 percent of the federal budget goes to the military and defense spending.

Harlan Green © 2017

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