Editorial: The Revenue Problem
Well, crusading Republicans in Congress have relented and provided additional money to keep federal meat inspectors on the job, largely because the secretary of agriculture and the powerful beef and poultry industries convinced lawmakers that not reversing that particular reduction would have an intolerable impact on meat processing. The extent to which other key services may be threatened by $85 billion in sequestration cuts insisted on by the deficit hawks will soon become clear.
But judging by the budget authored by House Budget Committee Chairman Paul Ryan, R-Wisc., and passed by the House, the sequestration cuts are just a warm-up. The Ryan plan calls for balancing the budget in 10 years by lowering federal spending by $5 trillion. That’s all spending cuts, no other adjustments.
“We want to restrain spending,” Ryan said. “They want to spend more. We think taxpayers give enough to Washington.”
Actually, the evidence suggests the opposite: Taxpayers aren’t sending enough to Washington. And we’re not talking only about the plutocrats, hedge-funders and the other 1 percenters, but about U.S. taxpayers in general. That wouldn’t be a problem, we suppose, if Americans actually demonstrated a smaller appetite for government services. But the one applause line that plays better on the campaign trail than the impassioned defense of the overburdened American taxpayer is the vow to defend just about any established government program from serious reductions.
Not long after Ryan intoned the “we’ve got a spending not a revenue problem” mantra, The Washington Post published an article about corporate taxes. The received wisdom is that the U.S. corporate tax rate is too high — the top rate is 35 percent, one of the highest in the developed world — and that it is placing this country at a competitive disadvantage. It turns out, however, that globalization has rendered that rate all but meaningless. Companies avoid taxes by shifting their income to low-tax countries such as the Cayman Islands. The Post reported that most of the 30 companies that make up the Dow Jones Industrial Average now pay a historically low percentage of their profits in taxes — at a time when profit margins and share prices indicate those companies are doing quite well.
But it’s not just corporate taxes. Personal tax rates have been pushed substantially and consistently lower since Ronald Reagan brought tax-cutting into vogue. According to the Tax Policy Center, a public policy research organization affiliated with the Brookings Institution, federal taxes last year equalled 14.4 percent of the gross domestic product, the lowest percentage in more than 60 years. The total tax burden — the amount that individuals pay to federal, state and municipal governments — is the lowest it has been in 40 years. And American exceptionalists will be pleased to learn that the country is pretty much on its own in this regard. U.S. taxes account for a smaller share of the overall economy than in just about any country in the developed world.
Yes, eliminating the annual deficit and reducing the federal debt pose multiple challenges, including bringing health care spending under control, re-examining the value of numerous tax credits and breaks, shrinking or jettisoning some federal programs, and further reversing the regressive elements of the Bush-era tax cuts. But unless the American people signal that they’re prepared to significantly scale back their expectations for federal government programs and services, figuring out how to get more tax money sent to Washington is also an essential component.