Many in the United States deem their taxes too high and demand state and federal government do something about this. However, this is not the case and if anything, Americans are undertaxed.
Indeed, it has been written that the “top marginal rate is 35 per cent after all, and the marginal rate on a couple with $70,000 (€54,1710) in taxable income is 25 per cent. But the truth is that most households probably pay a lower rate than Romney”. He adds that “What is clear, though, is that a large majority of US households – about two out of three – pays less than 15 per cent of income to the federal government, through either income taxes or payroll taxes. This disconnect between what we pay and what we think we pay is one of the US’s biggest economic problems”.
Indeed, unless this perception is reversed, and quickly, the main problems that are leading to “American decline” will take hold and cause a real diminution of power due to ever rising levels of debt and deficit.
Crucially he writes that “Together, all federal taxes equalled 14.4 per cent of the nation’s economic output last year, the lowest level since 1950. Add state and local taxes, and the share nearly doubles, to about 27 per cent, according to the Tax Policy Center in Washington – still lower than at almost any other point in the past 40 years” he goes on to note that “Total taxes at current rates would still make up a smaller share of the economy than in virtually any other rich country – not just European nations but also Australia, Canada, Israel and New Zealand”.
As a result, tax increases are a must. There is not only an economic imperative for this but also a moral argument. This would not only aid those less well off but would curb the individualism and begin to restore the notion of the common good that has gone missing from so many nations.
In historical perspective “Taxes have fallen most for the very affluent. Romney and his father – George W Romney, the former automobile executive, Michigan governor and presidential candidate – do a nice job of illustrating the change. The elder Romney, who died in 1995, paid an average federal tax rate of 37 per cent in the 12 years for which he released his tax returns, according to an analysis in Tax Notes magazine. Mitt Romney’s tax rate has been far lower, thanks mostly to the decline in taxes on stocks and other investments. The top marginal tax rate on ordinary income has also fallen sharply”.
Any argument that productivity would fall by taxing the rich has been recently seen to be what it is, garbage. Tax rates could go to up to 83% without affecting growth according to one report.