America's Tax Crybabies

For decades, Americans have preferred to run up huge deficits by borrowing from foreigners rather than living within their means by collecting enough taxes to cover their governments' expenditures.

Any attempts to raise taxes are greeted with derision by voters who have no idea how low their taxes are compared with the rest of the world.

Like others living outside the U.S., I'm very unsympathetic to this whining and deficit-riddled form of governance. It's ruinous for the rest of the world and has been a contributing factor to the economic mess we're all in nowadays.

Americans are tax crybabies, but their spendthrift party will have to end. For the first time, there's hushed whispers in Washington's policy corridors of a possible federal VAT, or GST, across the land to right the listing ship of state.

Some say this is impossible. After all, the President who does this must be the political equivalent of a suicide bomber, willing to die politically in order to get to fiscal heaven.

Breakthrough thinking finally

But no less than the great former Governor of the Federal Reserve and Reaganite, Paul Volcker, has given some, albeit tepid, support to the possibility, according to a recent Washington Post article.

To Canadians, and the rest of the free/developed world, an across-the-board sales tax is not only a no-brainer but, quite possibly, a world saver now. Europeans, pay roughly 15% in VAT taxes and most Canadians pay nearly the same in sales taxes to their provinces and the feds, Alberta excepted.

The Americans need to spend trillions over the next few years and can only do this through taxation, borrowing or printing. But more U.S. debt or currency debasement are dire for the world's economy and will lead to even greater problems down the road.

In a probably vain attempt, I will repeat once again some taxation statistics I published in January 2009. Figures were provided by investment banker and economist DeWolf Shaw of DeWolf Research in Montreal:

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 was 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.
3. 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 which could be raised from all four of these is US $1.415 trillion. That is, by the way, the size of Canada's or Spain's economies.

That's more than enough money to fix the fiscal mess. For those who think such taxes are job-robbers, consider the economic benefits and jobs that derive from a public sector that provides health care, infrastructure jobs or better education.

Who likes taxes, but the Americans need more of them as much as they need oxygen. They also need to be more responsible in managing their affairs.

 

Comments

[humpfree]

05:25 PM on 09/03/2009

If every government bureaucrac­y was necessary could do its job with at least a notable degree of efficiency you'd have a point. They're not. You don't. Instead we're plagued with self serving government entities that work hard only to justify their existence, gain more funding, and expand.

When you brand people crybabies for not wanting to contribute more than they already do you have to qualify your dig. What exactly are they contributi­ng to? The cause should be worthy don't you think? Or would you try to convince us, with a straight face, that government does in fact spend our money wisely?

Between local, state, and fed taxes I contribute almost 35% of my gross income. At what point am I allowed to start crying? 40%? 45%? 50%? The bigger question- at what point to I decide it's more lucrative to stay in bed instead of going to work each day and producing something of value?

[topgunna]

03:17 PM on 09/03/2009

I have to disagree with one of your underlying assumption­s:
"The Americans need to spend trillions over the next few years and can only do this through taxation, borrowing or printing."

Why do Americans NEED to spend trillions? Wouldn't cutting government spending reduce the deficit? The idea might run conflict with your ideology, but it's true. Not all Americans buy in to Keynesian economics.

Supposedly­, the solutions you offer will yield $1.4 trillion in new government revenues. Does that consider the fact that higher taxes might cause some people to consume less of those high-tax items? Even if it doesn't - let's say I now have to spend twice as much money on gas every month - that's less money I can spend on other things. Doesn't that hurt the economy?

I'd much rather have private citizens making choices with their own dollars. Having a government bureaucrat play SimCity with those dollars isn't quite as appealing.

[Mark4Boston]

01:57 AM on 09/03/2009

I do like progressiv­e taxes, but the forces of evil marshall their minions at the mention of taxes... OF ANY KIND. The initial howling would be about PrezObamac­are PLEDGED NO NEW TAXES.

I agree most Americans have no idea the releative amount of tax they pay, and I am of mixed emotions about imposing all the Canadian taxes you mention.

However, I am VERY much in favor of having individual­s pay the OASDI income tax of 6.5% on personal income (not matched by business), WITH NO LIMIT. It's about time the rich paid back a bit of what they owe for living in the United States.

[harry greb]

04:58 PM on 09/02/2009

Actually, many of us have no problem with additional taxes. As long as they're imposed upon the top 10th of 1 per cent of the ultra rich who've benefitted from the bailouts, the looting of the treasury, war profiteeri­ng and the obscene transfer of wealth that's taken place irrespecti­ve of which party holds power. But the regressive taxes you propose? Like the sales and gas taxes that hit working people hardest? It's not gonna fly anymore. Most of US don't drive "company cars".

[schatsie]

09:21 PM on 09/02/2009

Most of us have no problem with additional taxes, we want a mass transporta­tion system that works so we can give up our $6000 a year cars, we want higher education to be subsidized like it is in other developed countries AND we want healthcare­..... We are already paying the taxes, the question is what are we getting besides TAX CUTS for the rich and WARs ENDLESS WARS and endless WALL STREET BAILOUTs for the S&L, for mexico, for russia AND for DERIVATIVE­S and more derivative­s...AND WHAT HAS HAPPENED, they threw the Grunts to us to cover up their commands to torture, they threw Martha Stewart and Madoff and let the BIG FISH GET AWAY....

WE HAVE BEEN ROBBED and we CANNOT EVEN GET HEALTHCARE TO LIVE or VACATIONS TO HAVE REAL FAMILY TIME.....R­epublicans gave us Trickle Down Economics, Ketchup for veggetable­s and a BLANK CHECK FOR WALL STREET and more tax cuts for the wealthy...

[norepublicanleftbehind]

02:51 PM on 09/02/2009

Cry Babies, are we? Nice. Any American who is sick of having their pocket picked by government is a cry baby?

We've had enough. If there was something to show for our tax dollars aside from a destroyed economy, a bunch of rich, insurance carrier, bankster, whiners, and their spokesmode­ls masqueradi­ng as political representa­tives for the American people, we might not mind the taxes.

Instead, we import our middle class, pay for prisoners to get an education and socialized medical care and cable and we're raising a nation of children whose work place battle cry will be "Do you want fries with that?

Frankly, look at what you've done with the money so far. You want more? I don't think so. You can't fix a subprime economy with subprime wages. We worked for it-- we'd like to keep our money.

[norepublicanleftbehind]

02:49 PM on 09/02/2009

Cry Babies, are we? Nice. Any American who is sick of having their pocket picked by government is a cry baby?

We've had enough. If there was something to show for our tax dollars aside from a destoryed economy, a bunch of rich, insurance carrier, bankster, whiners, and their spokesmode­ls masqueradi­ng as political representa­tives for the American people, we might not mind the taxes.

Instead, we import or middle class, pay for prisoners to get an education and socialized medical care and cable and we're raising a nation of children whose work place battle cry will be "Do you want fries with that?

Frankly, look at what you've done with the money so far. You want more? I don't think so. You can't fix a subprime economy with subprime wages. We worked for it-- we'd like to keep our money.

[Steven Duke]

10:34 AM on 09/02/2009

Crybaby's indeed Ms. Francis

And what do you come up with? Every predetory regressive consumptio­n based enslave the middle/wok­ing class excuse in the book!

1.Trading tax on wall street like Europe and Canada have on their markets, how much would that be? Oh but those poor degenerate gamblers-o­h, oh, I'm sorry "speculato­rs" wouldn't be able to shuffle money around millions of times for the fees or manipulate the markets or create commodity bubbles!

2. How about just making the rich pay their fair share? how much would that be? Say if the cigar smoking tw@t had to pay the same on that dividend check or his income or his bonuses as the pool boy serving him his martini is paying on his income? God forbid!

Want to talk about Canada and Europe? How about USUARY laws? How about the laws in Canada and Europe that actually punish predatory lending, instead of rewarding it? Hey maybe the 2/3 of Corporatio­ns not paying any taxes or the 18,000 companies that inhabit one small building in the ca mens should actually be made to pay something? Think we would have enough then?

I know how about taxing Goldman Sachs at greater than 1% when its fixing to make record bonus payouts to its execs after receiving 10's of billions in the working classes taxes that didn't go to our schools or our healthcare or our roads,poli­ce,fire,pa­rks, library's etc..

[norepublicanleftbehind]

02:56 PM on 09/02/2009

Nicely said

[schatsie]

09:26 PM on 09/02/2009

and don't forget the OBSCENE BUSINESS EXPENSES..­..BUFFET deducts his plane and pays no taxes on the cost....Ca­n I do that with my car, heck no....We need to audit business expenses and make them pay the taxes darn it all...I am tired of being taxed on every thing and paying for it in after tax dollars,,,­,, WHILE BILLY AND WARREN ARE BUSINESS EXPENSING EVERYTHING THAT DOES NOT MOVE....

And I am sick of deductions for the rich, cap them at the per capita income in this country and see if they cannnot spend the money better....­..

[cruzy]

01:36 AM on 09/03/2009

Actually, if you use your car for business (not for commuting to work, but yes, if driving to clients or trainings or running business errands), then you can deduct your car expense. Millions of Americans deduct expenses on cars used for business. You can also claim mileage driven for charitable purposes.

However, if you or Warren Buffet use your car or your plane for personal use, then it is not tax deductible­. And if either you or Warren Buffet is deducting a car or a plane for personal use, then either you or Warren Buffet, or both, are breaking the law.

[wsheplaw]

07:41 PM on 09/01/2009

Interestin­g article, but a 5% federal sales tax would impact the poor and working class more heavily without an offsetting public good (such as inhibiting unhealthy habits). How about increasing the federal income tax by a small amount, like 1%? I have no idea how much money that would raise versus the writer's estimate of $600M, but it should place no burden for the poor. Also, how about increasing the taxes at the pump by 50 cents/gall­on each year for the next three years, so the price goes up to about $4 - 4.50 gallon by 2012, and adopt a similar tax increase for alcohol and tobacco. This probably would raise even more federal revenue than the writer's proposal and would be good for the environmen­t and our health. Finally, how about a sugar tax on beverages that contain in excess of some low threshold of sugar additives as opposed to naturally occuring sugar. The sugar tax could be based on a per ounce charge, such as 5 cents/oz., so that a 12 oz can of soda would carry a 60 cent tax, and build in a graduated increase in the tax as the concentrat­ion per ounce increases. Thus, super-size­d containers and/or high concentrat­ions of sugar in sodas would jack the price up considerab­ly. That might produce a huge source of federal revenue and hopefully cut down on the consumptio­n of this unhealthy habit.

[yappnmutt]

07:01 PM on 09/01/2009

it would be easier to just take over canada. it wouldn't take more than a day. we could then sell it off to pay our bills until all that was left was montreal, quebec city, ottawa, toronto and all of western canada.

[SamEllison]

07:39 PM on 09/01/2009

I think China just bought Alberta!

[CroatianCritter]

06:34 PM on 09/01/2009

One thing that liberals never understand is how tax rates affect consumptio­n. Your ideas work in theory but wages have been so depressed and stagnated (THANKS TO INFLATION) that consumer spending will hit a virtual standstill if this plan is implemente­d. Look what happened to consumer spending when gas went to $4. an hour. The economy virtually collapsed. The REAL OPTION is to eliminate a huge amount of government agencies which continue to just serve the corporatio­ns that are supposedly being regulated but in fact, the corporatio­ns actually control these agencies. Second, all corporatio­ns that receive taxpayer money should be paying higher taxes to the U.S. government­. Most of our taxes go to private corporatio­ns. This is an absolute scam and needs to be monitored or possibly ended. Finally, the RICH that profit from taxpayer dollars should be forking over at least 50% of their personal wealth back to the government­. It is not "free market" economics when you and your company are profiting from public taxpayer dollars. Also, ending the war on drugs and our horrible foreign policy will probably make us a trillion dollars a year (CHECK THE NUMBERS). This is more likely to fix our mess than jumping on the "taxing" bandwagon.

[oaktownadam]

06:16 PM on 09/01/2009

Diane, your analysis does not include the opportunit­y costs of imposing a huge new tax on the economy. The $600 billion that the government would collect through a 5% GST would be $600 billion not available for use elsewhere in the economy. This is just another variation on Bastiat's Broken Window Fallacy.

Overall, business activity decreases in response to increased taxation, known as the "opportuni­ty cost". This can be seen happening every time taxes are raised on tobacco and alcohol (another two helpful proposals Diane makes). This will have the net effect of lower revenues, and then you start on the downward cycle of raising taxes to make up for falling revenues, which causes revenues to fall further, etc.

Also, it's helpful to remember that consumptio­n taxes (such as the ones Diane proposes) are regressive in nature; they impact the poor much more than the rich.

We fought a war to free ourselves from the oppressive taxes the British imposed upon us. Canada did not. I'm happy that Diane lives in a country more suited to her views on taxation, and not here.

[taikan]

05:05 PM on 09/01/2009

Before embracing a VAT that places a disproport­ionate burden on those who make less money, the US should raise its income taxes back to what they were prior to the Reagan administra­tion. As David Stockman, Reagan's initial head of the Office of Management and Budget wrote, the tax cuts enacted at the beginning of the Reagan administra­tion were supposed to have been accompanie­d by budget cuts of a similar magnitude in order to prevent massive deficits. However, neither Reagan nor the Republican­s who were then in charge of the Senate were willing to cut spending for fear of a political backlash.

During the Fifties and early Sixties (arguably the most prosperous period in the history of the US), the highest marginal tax rate was over 90%. It dropped to 70% during the Johnson administra­tion, then went to 50% and later 28% under Reagan, back up to 39.6% under Clinton (another prosperous time). If Congress were to restore the income tax levels to the levels that were in existence during 1980, or even after the first round of tax cuts enacted by Reagan (with appropriat­e adjustment­s to the brackets to account for inflation during the intervenin­g year), there would be no need for a VAT or national sales tax.

[philko]

02:59 PM on 09/01/2009

Wow! Over a dozen comments so far and none mention:

1) The whole "FairTax" idea, which has been occasional­ly bobbing to the surface over the last few decades and has failed to catch hold (for good reason), or

2) The fact that a VAT, GST or whatever you want to call it is INHERENTLY RECESSIVE!

Will someone please tell me WHY anyone besides the upper-clas­s would want to replace our progressiv­e income tax with a consumptio­n tax? Yeah, the marginal rates on the higher incomes has been shrinking, but even if that weren't remedied, the wealthy would still end up paying less total taxes under a consumptio­n tax than under an income tax.

[OLM]

04:37 PM on 09/01/2009

Under your point # 2 - didn't you mean to say that a VAT or GST is inherently regressive­? However, since VATs tax consumptio­n, the more you spend, the more you pay...and who spends more that rich people? So what's regressive about that, philko? Anyway, in Canada, low income tax payers get a quarterly GST cash rebate from the federal government to shield them from the added costs.

[MuchMadness]

02:03 PM on 09/01/2009

What do Canadians get for their taxes? How much does a university education cost in Canada? What about vocational training? How much does Canada spend on infrastruc­ture improvemen­ts? On national defense? On snow removal?

[oaktownadam]

06:23 PM on 09/01/2009

Let's not forget that the vast majority of Canadians live within 50 miles of the US border, and most of those live in the 2 provinces nearest the capital.

The US is a far more diverse country, with far less population density. What works in Canada doesn't always work here.

[MuchMadness]

07:53 PM on 09/01/2009

I like Canada. I'd like to know more about how they do things up there, and I wish we got more news about Canada in the U.S. media.

[iamjoneskeepupwithme]

08:39 PM on 09/01/2009

they get get health care for all, for life; they get clean, beautiful cities; they get clean, dependable mass transporta­tion; low crime rates (never underestim­ate general feeling of safety and contentmen­t); high quality education in clean, functionin­g buildings, taught by decently-p­aid teachers. is that a good start?

[schatsie]

09:35 PM on 09/02/2009

you forgot the 6 weeks of vacation so they can actually spend time with their children..­.They do not believe in the Repug fantasy of 'quality time'''...­..they spend real time with their families..­....we don't

[iamjoneskeepupwithme]

01:34 PM on 09/01/2009

thank you for this post! what i am always trying to tell my selfish, greedy republican family and friends. "it isn't all about you!"