Tomorrow is tax day, when millions upon millions of Americans find themselves saying, "Grumble grumble govmint taxes grumble grumble" as they stand in a slow-moving line at the post office to mail their returns off to the tyrants in Washington. Every year at this time, I feel it's my duty to remind everyone of a few important facts about taxes, the most important of which comes at the end, so you'll have to wait for the payoff. But here we go:
Taxes in the United States are extremely low by international standards. How low? Really low. We're near the bottom of comparable countries. The good folks at the Center for Tax Justice have put together some informative charts which I'll be using for the rest of this post; here's the first one, showing where we stand compared to the other countries in the Organisation for Economic Cooperation and Development:
Only Chile and Mexico have lower total taxes than we do, and over time we've been moving down that list. In 1979 we ranked 16th out of what was then 24 member countries; by 1995 we were 29th out of 34; and today we're 32nd out of 34.
The rich aren't paying more than their fair share. You might look at the above graph and say, it isn't so much the total tax amount, but the horrible burden we place on our job creators. With those confiscatory top rates, they're carrying all of us along! Actually, no. In fact, people at every income level pay a share of taxes remarkably close to their share of income:
The rich pay a little more, and the poor pay a little less, but that's what's supposed to happen in a progressive system. In fact, though, our system isn't all that progressive. That's because the one piece of it that is quite progressive—the federal income tax—has the greatest effect only on those in the middle. At the bottom, people don't pay much federal income tax, but they get hit hard by payroll taxes and sales taxes. At the top, people are more likely to get income from investments, where the rates aren't progressive and top out at 20 percent, than they are from wages. So that gives you something that looks a lot like a flat tax once you get toward the middle class:
And finally, taxes pay for things you want. Yes, you—no matter whether you're young or old, a liberal or a conservative. Oliver Wendell Holmes wrote that "Taxes are what we pay for a civilized society," but it isn't just that they create a government that enforces laws and keeps us from descending into a Hobbesian nightmare of all against all (though there are some people around these days who seem to have a strange thirst for just such an eventuality). Taxes also pay for schools and roads and parks. They pay for someone to plow your street when it snows and pick up your garbage and put out fires. They pay for kids going to college and people getting health care, and disaster relief and medical research and veterans benefits, and soldiers and astronauts and cops and teachers. Sure there are lots of ways you'd like to change what government spends its money on. That's true for all of us. But April 15th is a great time to remind yourself that paying taxes is, in a way, an honor. So congratulations on making your contribution—we all appreciate it.