Our elected representatives hear a cacophony of conflicting demands to provide us with more services and tax us less. Some say that we should help the Syrians, place armed guards in each of our 40,000 schools and repair our crumbling infrastructure. Others want further tax cuts. Many want both.
Perhaps we’re the problem. It seems that there is a fundamental mismatch between what we want from government and what we are willing to pay for. The crisis-like atmosphere in Washington, D.C., might be little more than a reflection of us.
My parents were part of the Greatest Generation. Married during the Great Depression, my dad, like so many others who went down to the sea in ships, served in the Pacific Theater.
World War II was financed through taxes (40 percent) and borrowing (60 percent). But members of the Greatest Generation borrowed from themselves through the purchase of Liberty Bonds. And after the war, they paid it back by taxing themselves.
During the Vietnam War, there was a 10 percent surcharge levied to help pay for the war. But that was then.
There are those who wonder if our obsession about cutting taxes, even in a time of war, is a serious affliction. Twice during our decade-long wars in Asia, in 2001 and 2003, we passed large tax cuts.
Are there any other examples in history of a nation cutting taxes during a time of war?
We have paid for our wars largely by borrowing. But unlike the Greatest Generation, we have borrowed in ways that will weaken the country in the future.
About half of our borrowing comes from domestic sources. The other half comes from foreign sources, like the oil-exporting countries, Europe and China.
With an all-volunteer military, our servicemen and servicewomen and their
immediate friends and families have carried the burden of our wars. We’re not even paying for them.
Has our obsession about cutting taxes over the past several decades gone too far?
Taxes don’t feel good. Nobody likes to pay taxes. But we have to be adults.
Whether we feel that we pay enough in taxes is ultimately a subjective judgment. But objective comparisons can be made between our tax burden today and what is paid by citizens in other countries and by Americans in the past.
The Organization of Economic Cooperation and Development is a group of 33 free-market democracies.
In 2007, the last normal year before the Great Recession, the United States ranked 30 out of 33 OECD members in the size of our government relative to our Gross Domestic Product. Only three members — Mexico, South Korea and Turkey — spent less of their incomes on government than we did. This is particularly surprising when you realize that we spend more on our military than all of the other
32 OECD nations combined.
From an international perspective, Americans pay very low taxes. But what about comparing our tax burden to Americans in the past?
Tax rates, particularly on the wealthy, have fallen precipitously over the past 30 years.
For decades after World War II, the top marginal tax rate ranged between 70 percent and 94 percent. Over the past 25 years, the top marginal tax rate has ranged between 28 percent and 39.6 percent. A median-income family of four paid 12 percent income tax in 1980, but 5.6 percent in 2011.
Many people think that the federal government continues to grow in size and spending relative to the rest of the economy. Truthfully, the share of the nation’s revenue absorbed by the federal government today is roughly where it was in 1950.
The federal government’s size relative to the Gross Domestic Product has moved within a fairly narrow band, averaging around 18 percent of GDP for the past 60 years.
The government’s share of the nation’s GDP rises during wartime, because we spend more. The government also spends more for unemployment and safety net programs when the economy slows. When you have both wars and falling GDP, the government’s share of the GDP grows, as do deficits and debt.
We need to balance our demands for military and social spending with our willingness to tax ourselves. The Greatest Generation did.
• Mickey McGuire is a retired high school social studies teacher.
He is one of several local residents who writes for the Town Crier
column. Comments can be sent to firstname.lastname@example.org.