A Taxing Reality
Taxation is viewed quite differently by those who live in countries with a greater good focus
To start at the beginning, the Latin origin for the word tax is taxo, which is how governments fund public expenditures. The list of what governments spend tax revenues on is long and contentious. No one actually likes paying taxes but most understand why it’s necessary. The size of government and the amounts of money spent are central to the politics of many societies. Conservatives in the U.S. are outliers compared to conservatives elsewhere in their obsession with minimal taxes and government.
The kinds of taxes that governments impose are varied. A modest list includes income, capital gains, corporate, payroll, property, inheritance, sales, excise, tariffs and fees. The first known system of taxation was in Ancient Egypt somewhere between 3000 and 2800 BC. I’ll not bore you with the details of origins and variations of taxes because in the end the only thing that matters is how they fund what citizens expect or consider essential. The refinement and proliferation of taxation variations has a long and convoluted history of interest only when tax policies are being revised.
An important aspect of taxation to keep in mind is that while beneficial and necessary to society, it is by necessity compulsory and enforced by the legal system. Progressive taxation is meant to reduce tax liabilities for those earning modest amounts. Beyond that the degree of taxation is a political divide between conservative minimal taxation and social taxation for the greater good. And this is the crux of the issue regarding taxes: ever vague and ideological views regarding the purposes and incentives inherent in taxation philosophy.
The heart of the conflict is the tax rate, which represents the difference between effective and marginal tax rates. The effective rate is the total tax paid divided by the total amount the tax is paid on, whereas the marginal rate is the rate paid on the next dollar of income earned. The effective rate will result in a lower tax liability than the marginal rate, which rises for each tax bracket as income increases. Of course, with thousands of pages in a tax code, there are many ways to reduce the marginal rate total.
But I want to focus on the way in which a society regards the purpose of taxation. Beyond the essentials of governance, which represent a range of basic expectations and assumptions, there are the qualities of life that represent contentment versus self-reliance. These opposing viewpoints represent two very different assessments of what citizens should expect and deserve. Self-reliance says that you get what you earn, whereas contentment represents a range of quality of life amenities that government policy offers to citizens.
Realistically, there are limits to what any society can provide all citizens. After all, if taxes are too onerous, there would be little incentive in working beyond the satisfaction of one’s chosen profession. A critical difference among societies is what the level of commitment to the greater good is. Those with a strong dedication to the greater good will accept a higher percentage of taxes relative to income than those that consider self-reliance the fundamental basis for one’s economic status and thus quality of life. Although never acknowledged by conservatives in the U.S., Americans have greater anxiety and less contentment than citizens in more inclusive societies. Conservatives in other countries do not have the disdain for government that those in the U.S. do — a typical example of so-called American exceptionalism.
One might assume that taxpayers in nations with higher socialism would be less well off, but the opposite is actually true. This is a result of what is not spent trying to pay for higher education, health care, child care and retirement. For example, the absence of student debt represents a significant advantage despite the higher tax rates when employed. The most successful middle classes are in societies with both greater good priorities and higher taxes. In contrast, when the individual is given the highest priority, the odds of greater personal financial risk increase significantly. Ironically, the greater good shields individuals from these financial perturbations.
Taxation is viewed quite differently by those who live in countries with a greater good focus. The myth is that Americans live better lives than citizens of other nations in terms of contentment and quality of life. It’s a fiction that conservatives in the U.S. pretend is true because they want it to be so. It’s not. The flaw in American exceptionalism is that it only applies to some, not to all, and anxiety is markedly higher overall. The wealthiest country on the planet (for now), when measured by per capita gross domestic product, has levels of poverty, working poverty, homelessness and unaffordable health care that are disturbingly high. Those of us who are financially secure should not be too complacent given how easily that can change in the land of exceptionalism. Once homeless, returning to what once was is very rare indeed.
For a functioning pragmatist, the mystery is that so many conservatives in this country apply a set of prepared answers without regard to actual problems even when it’s demonstrably obvious their “solutions” can’t and won’t work. Thus, affordable and comprehensive health coverage via government involvement is unacceptable not because it doesn’t work but rather because it makes government larger, not smaller. Smaller is better because…well…just because. Mindless drivel about the nanny state and reduced freedom is thrown in to offer fabricated substance. In the pragmatic world, the right size for government is what works for a sustainable greater good.
Most conservatives insist that lower taxes are always preferable regardless of the effect on how well government serves the greater good. They’re even willing to accept deficit and debt increases as a consequence of insufficient tax revenues, which contradicts their own ideology — predictable when intellectual dishonesty is integral to one’s ideology and principles. Lower taxes do not ensure greater overall prosperity, and tax cuts rarely generate sufficient economic activity to pay for themselves. Taxes are the cost of having a modern society, and citizens who are not at the bottom of the economic pyramid should gladly pay them…and expect them to be used for the greater good — everything from infrastructure maintenance to helping the least fortunate.
The quality of life in any society is dependent on taxes. If citizens want better quality, they pay more and hold elected officials responsible for allocating revenues for public policies that are widely supported. The U.S. is consistently lower in multiple indices regarding quality of life issues for the greater good than its wealth would predict. I’ve noted before that as a percentage of gross domestic product, the U.S. is among the most inefficient when it comes to tax revenues. Discover how citizens in other developed countries live when tax policies are efficient. Better than in the land of exceptionalism.
