Tuesday, April 19, 2011

US Taxes Among Lowest In World

And They're Starving The Budget

According to a new report by the Organization for Economic Cooperation and Development (OECD), the burden on U.S. taxpayers is just about the lowest in the developed world.

The Paris-based group, which tracks the economies of 34 developed countries, found that though America's top rate is 35 percent, a typical married couple with two kids pays just 13.7 percent of total income in taxes, down from about 20 percent in 2000.

Meanwhile, the average rate among the 34 OECD nations for similar households was 26 percent.

The OECD has been compiling data on government taxes among member countries since 1965. All figures were for 2009.

However, many European countries also impose a Value Added Tax — a kind of sales tax on a wide variety of goods and services. Denmark's 25 percent VAT is the highest in Europe.

Though many Americans think their taxes are too high, federal revenues are now well below the 18 percent historical average.

Revenues plunged from their peak of $2.57 trillion in 2007 to reach $2.1 trillion, or 14.8 percent of economic output in 2009 — the lowest level since the 1950s — and taxes remain that low today, according to the Congressional Budget Office (CBO).

Those revenues are not sufficient to support a federal government that is waging two wars and funding the healthcare costs of the retired and disabled.

Including federal, state and local taxes, the total U.S. tax burden is 24 percent of GDP.

For comparison's sake, the total tax burden in Demark consumes some 48 percent of that country's GDP; Swedes pay 46 percent of GDP in taxes; in France, 42 percent goes to the tax man and Germans pay 37 percent. Canadians (31 percent), Japanese (28 percent) and Australians (27 percent) also have a higher tax burden than Americans.

The OECD says the total weight of taxes on the U.S. economy is at the lowest levels since the 1960s.

In fact, only two OECD countries devote a lower share of GDP to taxes than the United States — Chile (18.2 percent) and Mexico (17.5 percent).

This is worrisome since, as the OECD notes, the U.S. is the only major developed nation that has allowed tax levels to fall so low despite creating dangerous and potentially destabilizing deficits and debt burdens.

Just yesterday, Standard & Poor's cut its ratings outlook on the U.S. to negative from stable, effectively giving Washington a two-year deadline to enact meaningful change.

Phasing out the Bush tax cuts would bring revenues back in line with historical norms.

However, the CBO estimates that extending all the cuts set to expire at the end of 2012 — primarily the Bush-era tax cuts — will add another $4.6 trillion to the national debt in the next decade.

The House Republican budget would add to the problem by cutting taxes another $4.2 trillion over the next 10 years.

Conservative icon David Stockman, who was White House Budget Director for President Reagan, says the Republicans are "totally out to lunch."

“I think the biggest problem is revenues. It is simply unrealistic to say that raising revenue isn’t part of the solution. It’s a measure of how far off the deep end Republicans have gone with this religious catechism about taxes.”

Famous deficit hawk and fiscal conservative Pete Peterson concurs.

“Any viable plan must include both spending cuts and revenue increases,” he said.

That's a choice that lawmakers now have to make. The nation has a burgeoning crisis on its hands and any adherence to a strictly anti-tax doctrine will ultimately be self-defeating and ruinous.

1 comment:

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