The United States has broken the bank by spending and not taxing enough
Americans prefer 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.
As a Canadian resident, I'm used to higher taxes. I don't like them, but I realize that if the money is wisely spent then it results in social and economic benefits alike. I also happen to believe, because I'm a dual citizen, that Canadians and Americans aren't really that different. The relatively higher tolerance for taxes north of the border could work south of the border as long as leaders explained the benefits. For instance, the U.S. could easily pay for its bailout to date and balance the budget on an ongoing basis if Americans paid the same sales taxes (not income taxes) as Canadians do. That's all.
Here are the numbers that Washington could raise overnight in four sales tax areas. Figures were provided by investment banker and economist DeWolf Shaw of Montreal:
$600 billion could be raised if Americans paid a 5% federal sales tax on goods and services like Canadians
This 5% sales tax, called the GST in Canada, raises roughly C$35 billion per year. Given the fact that the U.S. economy is 14 times' larger and the currency more valuable this means Washington could raise between US$500 billion and US$600 billion from such a tax. These taxes, also called VAT, are imposed in all developed nations.
$280 billion more if Americans paid $3.75 a gallon for gasoline like Canadians
Americans consume about 390 million gallons per day of fuel. Times 365 days per year that amounts to 140 billion gallons annually. If Americans paid US$2 a gallon more than the US$1.75 per gallon they pay, Washington could raise another US$280 billion a year in taxes.
Another $180 billion if Americans paid the same taxes on cigarettes as Canadians
US cigarette consumption in 2007 was 360 billion. New York State's tax represent 40% of the cost of the pack. Canada's is 80%. The difference is about $5 a pack which means Canadian tax rates on U.S. cigarettes could yield another US$180 billion a year to government.
Plus $355 billion if Americans had the same liquor taxes
Americans consume about 2.2 gallons per capita per year or 704 million gallons annually. This is 29.6 billion liters. The tax differential per liter is $12 or US$355 billion in taxes.
So the bottom line is Americans suck it up like Canadians and get your house in order. The total which could be raised from all four of these is US$1.415 trillion. That is, by the way, the size of the entire Canadian or Spanish economies.
That's enough money to bring in universal health care and go a long way toward balancing the budget. 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. Also think about the fact that borrowing abroad is not sustainable because the merry-go-round is coming to an end.