The author writes that paying less to the IRS in taxes may not be the country's best option. | REUTERS Cut taxes? U.S. already levy-light

Would the tea party movement be happy with a 20 percent across-the-board tax cut? All taxes, all sources — state, local, excise, corporate, whatever. And real cuts, measured by real taxes that people actually pay — the actual share of taxes in gross domestic product — without being misled by the nominal rates that almost no one pays in reality.

Amazingly, we’ve already tried that. In 2000, perhaps our last truly prosperous year, U.S. all-source taxation was 29.5 percent of GDP. In 2009, by contrast, all-source taxation was only 24 percent of GDP — a nearly 20 percent cut.


Oddly, the intervening years haven’t exactly been wonderful for job creation, U.S. competitiveness, growth in savings and the other benefits that supposedly flow from reduced taxation.

If one listens to the din from new conservative governors, from the Pauls, père et fils, and from most Republicans in Congress, America is groaning under a unique burden of heartless taxation.

In truth, however, we live in one of the most lightly taxed advanced nations in the world.

Each year, with about a two-year lag, the Organization for Economic Cooperation and Development computes the GDP share consumed by all taxes in its 34 member nations. The United States is always at the low end.

In 2007, it was fifth from the bottom, and in 2008, fourth from the bottom. In the new 2009 data, it is trailed only by Chile and Mexico.

The median tax share of GDP for the countries in the table is about 34 percent — or 42 percent higher than in the U.S. That’s not surprising, for American taxes are somewhere around a post-World War II low.

Federal taxes, at about 15 percent of GDP, are the lowest since 1950. That’s the sweet spot — just after the all-out postwar demobilization and just before the big tax impact of the Korean War and the Cold War arms buildup. State and local taxes have been roughly flat as a share of GDP for almost 50 years.

Certainly, we need to maintain special vigilance over government spending. The “bridges to nowhere,” the subsidies to oil companies and big agriculture, all have a way of becoming permanent. We need to keep an eagle eye out for entitlement cheats and ping-ponging testing scams in Medicare mills. It’s worthwhile asking whether American safety requires spending more than the next 20 biggest military spenders combined.

The financial rescue since the 2008 economic collapse has led to an explosion of government debt. It’s depressing that so much of the rescue capital ended up in the financial barons’ pockets — but that’s the reality. And we do have to start working down the debt.

But even a casual look at the country’s needs suggests that increased revenues have to be part of the solution. Cutting-edge U.S. research, mostly funded by the government, created the Internet and much of the scientific matrix supporting the semiconductor and biotech industries. But now research funds are under severe budget pressures. Roads, bridgesand airports are in disgraceful condition after decades of scrimping on maintenance.

If we magically eliminated all waste in health care, the expanding technologies of “standard care” would still have far outrun middle-class paychecks. We have a terrible record in perinatal care, thereby incurring immense longer-term social and medical costs. Only in America do middle-class kids finish college with mountains of debt. And sad to say, it seems that economic mobility in America is now lower than in most European countries.

America’s low taxes, compared with any of its competitors, make it nonsense to claim that we need tax cuts for the sake of “competitiveness.” Germany’s businesses, judging by trade data, are out-competing America’s by leagues — though German taxes are more than 50 percent higher.

Sweden is another highly competitive country, with taxes almost twice as high as here. Some other high-tax countries, like Italy, are in terminal disarray. Taxes are clearly not the determining variable.

In the current budget “debate,” slogans have trumped truth, and cynicism rules. So House Budget Committee Chairman Paul Ryan proposes to let Medicare spending carry on for another decade before cracking down hard on today’s 40-year-olds. And many congressional colleagues, along with the media, call that “bold.”

There is a wide range of responsible solutions to America’s fiscal problems. But without honesty, they will remain out of our reach.

Charles R. Morris, a former banker and lawyer, is the author of “The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash.”

This article tagged under: Taxes

Opinion