The U.S. Is One of the Least Taxed of the Developed Countries

[EricK]

Taxes as a % of GDP makes perfect sense and is a highly valid basis to judge whether a country is making those who profit off of public resources and infrastructure are paying their due back into those resources.

Every single dollar of GDP is dependent upon the use of public resources, and total GDP is highly correlated with population, and thus should be highly correlated to total spending since the more people, the more public resources that are needed to serve the population.

If this were the case you would expect GDP per capita to be approximately constant. And it is far from so.

Suppose a glut of enterepreneurship led to US employment increasing massively without any increase in population. GDP would significantly rise too, but there is no reason, as far as I can see, that total government spending would need to rise too - and certainly not in proportion to the increase in GDP.

 

[rousseau]

I wonder what would happen if we took a larger proportion of income from people who have an unreasonably large amount of money, and re-distributed it for social progress. Oh yea.. that's what's happening in all of those countries that are doing well.

 

[doubtingt]

If this were the case you would expect GDP per capita to be approximately constant. And it is far from so.

No, this doesn't follow at all. Do people make constant and maximum use of every public resource at all times? Do people use public resources to the exact same degree at all times. If not, then one would not expect per capita GDP to be constant. There is a publicly built road in front of my house. I could make no use of it this year to produce anything or I could use it constantly to produce and distribute goods from my home, thus increasing GDP per capita via the use of public resources.

 

[laughing dog]

No, this doesn't follow at all. Do people make constant and maximum use of every public resource at all times? Do people use public resources to the exact same degree at all times. If not, then one would not expect per capita GDP to be constant. There is a publicly built road in front of my house. I could make no use of it this year to produce anything or I could use it constantly to produce and distribute goods from my home, thus increasing GDP per capita via the use of public resources.

There is also the issue that purposes of some public expenditures and infrastructure is not to produce measurable output. National defense and medicare are good examples.

 

[EricK]

If this were the case you would expect GDP per capita to be approximately constant. And it is far from so.

No, this doesn't follow at all.

It what sense is GDP highly correlated with population then?

Do people make constant and maximum use of every public resource at all times? Do people use public resources to the exact same degree at all times. If not, then one would not expect per capita GDP to be constant. There is a publicly built road in front of my house. I could make no use of it this year to produce anything or I could use it constantly to produce and distribute goods from my home, thus increasing GDP per capita via the use of public resources.

This seems irrelevant when looking at whole populations, but maybe I am misunderstanding your point.

To maintain, say, the road system for a population of 300 million people would cost approximately the same if GDP doubled or halved wouldn't it? It is probably true that a more productive society would use roads more causing more wear and tear, and so need some extra maintenance, but would it really be proportional to GDP? Similarly for police, army, fire brigade etc (although with regards to the police, there is probably less crime in countries which are richer, so the costs would go down as GDP goes up; population remaining constant). Hence I still don't see why taxes as a percentage of GDP is a relevant measure. It would only make sense if, for example, it cost twice as much to look after the roads for a population which is twice as productive; twice as much to police and so on. And I just don't see why that would be the case.

 

[EricK]

No, this doesn't follow at all. Do people make constant and maximum use of every public resource at all times? Do people use public resources to the exact same degree at all times. If not, then one would not expect per capita GDP to be constant. There is a publicly built road in front of my house. I could make no use of it this year to produce anything or I could use it constantly to produce and distribute goods from my home, thus increasing GDP per capita via the use of public resources.

There is also the issue that purposes of some public expenditures and infrastructure is not to produce measurable output. National defense and medicare are good examples.

But consider, say, Medicare. If GDP increased, why should Medicare costs increase in lockstep too? If Medicare costs stayed the same (or just increased by a smaller percentage), then the taxes needed to fund Medicare, as a proportion of GDP, would go down.

 

[Alcoholic Actuary]

If this were the case you would expect GDP per capita to be approximately constant. And it is far from so.

No, this doesn't follow at all.

It what sense is GDP highly correlated with population then?

Do people make constant and maximum use of every public resource at all times? Do people use public resources to the exact same degree at all times. If not, then one would not expect per capita GDP to be constant. There is a publicly built road in front of my house. I could make no use of it this year to produce anything or I could use it constantly to produce and distribute goods from my home, thus increasing GDP per capita via the use of public resources.

This seems irrelevant when looking at whole populations, but maybe I am misunderstanding your point.

To maintain, say, the road system for a population of 300 million people would cost approximately the same if GDP doubled or halved wouldn't it? It is probably true that a more productive society would use roads more causing more wear and tear, and so need some extra maintenance, but would it really be proportional to GDP? Similarly for police, army, fire brigade etc (although with regards to the police, there is probably less crime in countries which are richer, so the costs would go down as GDP goes up; population remaining constant). Hence I still don't see why taxes as a percentage of GDP is a relevant measure. It would only make sense if, for example, it cost twice as much to look after the roads for a population which is twice as productive; twice as much to police and so on. And I just don't see why that would be the case.

You are probably right in maintaining a year over year comparison, but the study is meant to compare cost of living differences. The upkeep of roads may not increase linearly with GDP, but the cost of upkeep of roads in England may be more expensive than in the US. Dividing by GDP helps to normalize the relative amount of taxes spent by each country. Does England spend more of its tax money to maintain roads than the US because the general costs of repair (and in general, costs of living, and GDP) are more expensive in England, or is it really because the roads are in such disrepair.

GDP is a better denominator than population or even no denominator (flat dollar of taxes) when comparing across countries. It ties together more demographic data - population and cost of living combined.

aa

 

[doubtingt]

If this were the case you would expect GDP per capita to be approximately constant. And it is far from so.

No, this doesn't follow at all.

It what sense is GDP highly correlated with population then?

In both the empirical and the theoretical sense based upon the known causal dependence of GDP upon people producing more goods and services. In fact, the only reason that GDP per capita is so commonly used is precisely because national GDP is so strongly and directly dependent upon population size. The correlation and dependence is far from perfect, thus per capita GDP still varies. But that is no way a problem for my argument, because most of the other things that impact GDP besides mere population size are things that depend heavily upon the use of public resources and/or that negatively impact public resources or the public itself in ways that require government funds to protect the public's interests. Thus, government revenues need to be higher when GDP is higher in order to offset the use and negative impact upon public resources involved in the creation of that GDP.

Do people make constant and maximum use of every public resource at all times? Do people use public resources to the exact same degree at all times. If not, then one would not expect per capita GDP to be constant. There is a publicly built road in front of my house. I could make no use of it this year to produce anything or I could use it constantly to produce and distribute goods from my home, thus increasing GDP per capita via the use of public resources.

This seems irrelevant when looking at whole populations, but maybe I am misunderstanding your point.

To maintain, say, the road system for a population of 300 million people would cost approximately the same if GDP doubled or halved wouldn't it?

First, you cannot pick 1 isolated public resource and talk about how it is impacted by and/or used to enable an increase in GDP. How a resource is involved in any particular GDP increase would vary, but we know that public resources as a whole are central to all increases. The roads specifically could by minimally impacted or could the cost could skyrocket, if a doubling of GDP was due to activities that involved a massive increase in ground shipping of goods, machinery using roads during the production of goods (e.g., factory and house building) or because of a massive increase in population growth and more people using the roads. But if the roads are not impacted then something else is, so the net impact upon the public resources in general would be enormous. Also, the GDP couldn't double unless there was already an excess of public resources in place (including roads) to allow for such growth. So, much of the cost in roads (and countless other things) needs to be paid upfront to even allow for growth. Whether the gov expenditures come before (to allow for) or after (to replenish the impact of) GDP growth doesn't matter to the point that in the long run (year to year fluxuations are meaningless) GDP is tied to gov expenditures and if the gov revenues are low as a % of GDP is indicates that the current generation is using up resources built up over the past without putting the investment back in as prior generations did, and those most profiting off of the current GDP are doing so by externalizing their costs onto the rest of the public.

Similarly for police, army, fire brigade etc (although with regards to the police, there is probably less crime in countries which are richer,

No. There is no reliable relationship between overall economic health and crime. The idea that desperate people are more motivated to commit crime may be true in isolation, but too many other factors work in just the opposite direction. Property crimes can go up the more property their is to steal and vandalize. As this graph shows, states that suffered the most economic decline from 2007 to 2010 also saw the most reduction in property crime rates.

When someone smashes a window in Detroit, there is probably no need to send the cops because it is likely an abandoned building. Also, crime can spark economic growth, such as people buying security systems, buying a house in a better neighborhood, etc.. Not to mention some crimes (like white collar crimes) are almost entirely associated with economies that have a relatively high GDP. Then there are corporate crimes that are often the cause of the massive corporate profits that underlie a high GDP. I realize that the US doesn't spend any $ prosecuting white collar and corporate crime, but that is precisely the point. The US's lower taxes as a % of GDP is in part because other countries with high GDP's don't allow the rich to as easily abuse public resources externalize their costs.
And again, you cannot point to isolated costs. The nature of the costs can change and while some isolated costs can be less with a higher GDP, on the whole higher GDP will require higher require higher costs to both allow for that higher GDP and ensure that the higher GDP isn't the result of robbing public resources to benefit themselves.

 

[Bomb#20]

That would be a good argument for higher taxes, if we were to take for granted the intuitively obvious assumption that raising taxes lowers the debt burden we leave behind to future taxpayers.

You're right, the D's and the R's are horrible at long term financial budgeting. But frankly refusing to even try to address the problem by not raising taxes is simply not productive thinking.

I'm confident the American economy can bear new taxes on the rich. The the supply side is top heavy. The chances of restraint on expenditure are slim but by increasing revenue we at least give long term budget balance a chance.

So the productive way to think is to keep doing the same thing over and over while hoping for different results?

 

[maurile]

Somehow it's conisdered a good thing for Mr. Orvil Old Fart to drive around on roads and bridges now and insist that other people pay for them later after he's dead?

That would be a good argument for higher taxes, if we were to take for granted the intuitively obvious assumption that raising taxes lowers the debt burden we leave behind to future taxpayers.

Interesting. That link appears to contradict other articles I've seen.

In any case, I disagree that, to make zorq's argument persuasive, it'd be enough to show that raising current taxes would lower the debt burden of future taxpayers. We'd also have to show that raising current taxes would not lower the inherited wealth of future taxpayers by a similar amount.

 

[Bomb#20]

... According to the OP link, the U.S. being one of the least taxed of the developed countries "sharply contradicts the widely held view among many members of Congress that taxes are already high enough in the U.S.". ...

Or perhaps the point of the thread is that people who complain the tax rates in the US are excessively burdensome are simply wrong.

No doubt that is a point the linked authors intended to make, yes. But the argument they supplied shows no such thing.

There is a narrative coming from the right which consistently and forcefully promotes the demonstrably false notion <snip> This isn't an argument for more taxes, but rather an argument for people to stop lying about taxes.

So the proper response to the right lying about taxes is for the left to lie about taxes in the contrary direction? Other countries taxing their people more than the U.S. is equally consistent with the possibility that taxes are indeed high enough in the U.S., and the rest of the OECD is overtaxed. And this is a fact of elementary logic so painfully obvious that it stretches credulity to suppose the authors were unaware of it. They appear to have deliberately written a falsehood for the sake of its propaganda value.

 

[laughing dog]

That would be a good argument for higher taxes, if we were to take for granted the intuitively obvious assumption that raising taxes lowers the debt burden we leave behind to future taxpayers.

You're right, the D's and the R's are horrible at long term financial budgeting. But frankly refusing to even try to address the problem by not raising taxes is simply not productive thinking.

I'm confident the American economy can bear new taxes on the rich. The the supply side is top heavy. The chances of restraint on expenditure are slim but by increasing revenue we at least give long term budget balance a chance.

So the productive way to think is to keep doing the same thing over and over while hoping for different results?

Why not? That approach appeals to a people across a broad spectrum of political ideologies.