Today In American Exceptionalism

We're going to talk about rich people and government spending, but first, some context. At some point you may have wondered about parliamentary systems like they have in Great Britain, in which the party that gets the most seats in the legislature also installs its leader as chief executive. With complete control over government, why don't they go hog-wild and completely remake the entire country after every election? The simple answer is that they know they'll have to stand for another election before long. But the other key factor is that a transition from, say, Labour to the Conservatives isn't as jarring as a transition of total control from our Democrats to Republicans might be, because there isn't as much distance between the parties. In many of our peer countries in Europe and elsewhere, some things we fight bitterly over have basically been settled. For instance, everyone in the U.K. accepts that the National Health Service is a good thing, even if there might be some disagreements about how to keep it healthy.

We shouldn't overstate that (politics gets bitter almost everywhere, and there's always plenty to argue about), but America as a land of unusually large divides on fundamental political questions helps prepare us for this extraordinary graph, produced by Larry Bartels based on a survey taken before the Great Recession in 33 countries:

From our vantage point, the idea of a society without dramatic differences in opinion as a function of class seems incredible; isn't that just how things are? Apparently not—or at least, only here is the link between class and opinions about cutting government spending such a clear one. Here's Bartels' explanation of what produces this difference:

What accounts for the remarkable enthusiasm for government budget-cutting among affluent Americans? Presumably not the sheer magnitude of redistribution in the United States, which is modest by world standards. And presumably not a traditional aversion to government in American political culture, since less affluent Americans are exposed to the same political culture as those who are more prosperous. A more likely suspect is the entanglement of class and race in America, which magnifies aversion to redistribution among many affluent white Americans. Another is the “hidden” nature of the American welfare state, which funnels subsidies to affluent people indirectly through tax breaks on mortgages and health insurance rather than providing them with public housing and free clinics.

The U.S. tax system is also quite different from most affluent countries’ in its heavy reliance on progressive income taxes. The political implications of this difference are magnified by the remarkable salience of income taxes in Americans’ thinking about taxes and government.

I'd add that in recent years, Republicans have worked hard to generate anger among those with healthy incomes not so much at poor minorities (though they're happy to exploit that prejudice wherever it can be found), but at all poor people. I don't know enough about the politics of France or Sweden or Japan to say if their conservative radio hosts read from Atlas Shrugged on the air and their elites sneer at the shabby morals of the 47 percent, but I haven't heard much to suggest that's the case.

In addition, our conversation about taxes is as Bartels says, dominated by income taxes, and more specifically, federal income taxes, which are the most progressive part of the whole tax system. When rich people talk about that 47 percent who allegedly don't pay taxes, they're forgetting about sales taxes and property taxes, among other things, because all that's in their mind is federal income taxes. In contrast, in most other advanced countries they rely heavily on value added taxes (VATs), which function somewhat like hefty national sales taxes, for a good portion of their revenue (in some countries VATs make up as much as a quarter of total revenue). Those are paid by everyone, and so that may diffuse the kind of class effect we see in Bartels' graph. Keep in mind that the American wealthy's thirst for cuts in government spending is driven by both sides of the ledger: they're contemptuous of low-class "takers," and part of their contempt comes from the fact that they believe those moochers pay no taxes; and they're resentful about the taxes they have to pay.

When we think about those European countries, we may consider their comprehensive welfare states, but most Americans probably don't realize that most have tax systems that are much less progressive than ours, in large part due to VATs. But they also return a lot of that money back to people at lower incomes via those comprehensive welfare states, which produce societies that have much lower levels of inequality once that's all taken into account (Dylan Matthews explained that here).

This raises an interesting question for both liberals and conservatives in America: if you could wave a wand and change our system to one like those—a less progressive tax system (meaning higher taxes for people of lower incomes and lower taxes for people of higher incomes), combined with a much more comprehensive welfare state (better unemployment benefits, free health care, free day care, etc.), would you do it?

It would be one heck of a grand bargain. I suspect liberals would be more favorably inclined than conservatives, as much as conservatives dislike the progressivity of federal income taxes. Liberals would accept a tax system they saw as less fair, if what the system funded did much more to ease ordinary people's burdens and produced a more equal society. Conservatives, on the other hand, might like to complain about their high taxes, but would find the idea of a more robust welfare state absolutely horrifying.

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