Raise Our Taxes

Like most people, I hate paying taxes. I’d love to keep all the money I earn, and receive government services for free. But I nevertheless have argued that if anything Americans should be paying more taxes, not less.

Ezra Klein likes to call tax day “purchase the federal government for a year day” to emphasize the fact that taxes are not some arbitrary penalty we are forced to pay, but are actually the cost of financing our government for a year. As Paul Krugman reminds us—and as I have repeatedly pointed out—taxes in the U.S. are both historically low and low compared to the rest of the developed world.

It’s not a lot to pay, in other words, to finance the government of an advanced country, especially considering that we insist on maintaining by far the largest military establishment in the world. And in fact most of what we pay in taxes go to paying for things most of us want—like defense, social security and Medicare—while relatively little goes to pay for controversial expenses like foreign aid and funding NPR. As Krugman says, that doesn’t mean you have to think that raising taxes is a good idea, but it does suggest that we could raise taxes if we wanted to.

Of course, right now we’re not paying enough in taxes to finance the entire federal government, which is why we’re running a deficit and are accumulating so a large national debt. In order to pay for the government we have—and which most of us want—we’ll need to raise taxes. In fact, as Ezra Klein argues, letting the Bush tax cuts expire and letting tax rates return to what they were under President Clinton, would be enough to more or less balance the budget. And if we just paid as much taxes as other OECD countries do, we wouldn’t have a budget problem at all.

Taxes should probably rise for everyone. But they should rise the most for the rich. That’s not because the rich haven’t earned their money, but because they are the ones who can most easily afford to pay more taxes and because they are already getting a very good deal. As this great collection of charts from the Center on Budget and Policy Priorities shows, the Bush tax cuts were heavily slanted toward the rich and effective tax rates the wealthy pay have dropped dramatically since the mid-90s. Meanwhile the rich have taken home by far the largest share of America’s economic growth since Reagan was elected. In fact, as this simple chart shows, from 1992-2007 the income of the richest Americans rose almost 400%, while their tax rates fell nearly 40%. Compared to the rest of us, they’ve been doing better and better, and paying less and less.

Photo credit: Travis