The wealthiest households are paying tax at the lowest rate in 50 years, some paying just half of the Federal income tax that top earners paid in 1960. They are, of course, still complaining. Trump is very concerned for them. On the other end of the scale we were approached for help and advice some years ago by a poor immigrant lady whose income was $18,000 p.a and who had had a tax demand of $6000. Ouch! I am not suggesting that this is typical – I don’t know. But it helps to show how chaotic and unfair the US tax system is.
Only yesterday my wife was talking to a Latino lady who cleans houses for a living. She told us that Trump was great. He was going to reduce taxes for people like her. Halleluyah! “No”, my wife replied, “that isn’t correct. He has promised to reduce taxes for the very rich, in the expectation that they invest, create jobs and that the wealth trickles down to people like yourself.”
Of course, we have heard this canard many times before and people still fall for it. Actually, most of the tax breaks enjoyed by the super-rich go towards yachts and luxury items, or buying villas in exotic countries. There are some super-rich with hearts who do good things with their money, create foundations and fund good things in healthcare etc. But they are a minority. Most of them are represented by the sort of people in the Trump cabinet.
Why should the huge disparity in wealth between the rich and poor concern Epicureans? Because if you care about your fellow human beings, situations like this are bad for everyone’s peace of mind (except the greediest), and bad both for national morale and long-term political stability. Lobbyists have secured exceptions for the wealthy in national budgets, allowing them to use offshore tax havens and other scams dreamed up by the big accountancy firms. In return they fund the election expenses of politicians, who are effectively owned by them. This they call, tongue in cheek, “democracy”.
Sensible people believe in paying tax. Minimize it legally by all means, but if there is no tax system we have no roads , no schools, no police, no law courts, no food and drugs testing, no defense….I won’t go on. The anti-tax people are short-sighted, selfish freeloaders and their self-centered beliefs have nothing in common with Epicureanism, or Christianity if it comes to that.
Conservatives have a point when they decry the complexity of the US tax code. Taxes ought to be simple and easy to understand, not least because a simple tax code reduces tax avoidance, by reducing the number of loopholes and deductions available. Eliminating these deductions would be an obvious way to reduce the deficit, yet Republicans are unlikely to be on board if the wealthy end up paying more. I also think that if taxes were simpler and less time-consuming, people would be happier to pay them. I’ve mentioned before, the idea that the IRS could fill in people’s taxes for them, like in Sweden. It would save hours of valuable time. But Republicans are opposed for two reasons: it would make taxes more popular, and it would threaten the revenue of companies like TurboTax, who make campaign contributions.
I think taxes on America’s wealthiest ought to be raised. But my primary reason for doing so would not to reduce income or wealth inequality. The fact is, public services in America are pretty poorly funded. As long as tax revenues stay the same, and mandatory spending on entitlements increases, spending on services like infrastructure, housing and science must fall. This has been happening for some time now, and future generations will lose out from this lack of investment. I also agree with Republicans that the budget deficit is too high. But its simply not possible to eliminate it without raising some taxes, or decimating services and the military. In California, they balanced the budget through a combination of tax increases and spending cuts, and the economy is one of the fastest growing in the nation.
Where I am sceptical of socialism is that I believe it underestimates the cost of reducing inequality to levels socialists would like. Bernie Sanders and others love to point to the example of the Nordic countries, which have relatively low levels of inequality. But such as comparison is a bit inaccurate. The United States is a massive country with a massive population. It has very lucrative industries in financial services, energy and technology, on a scale simply not seen in the Nordics. Such industries, while highly beneficial, inevitably increase inequality because of the sheer wealth that they generate. On a smaller scale, the main reason why the UK is more unequal than most of continental Europe is because of the City of London; the country’s financial sector is unusually large. So getting to Nordic levels of equality is simply unrealistic.
My final point comes back to taxes. If America raised taxes on the rich by a moderate amount, it would certainly benefit from slightly lower inequality and a lower budget deficit. But to achieve Nordic equality levels, raising taxes on the rich alone would be insufficient. The middle class and even the poor would have to pay far higher taxes than they currently do. In the Nordics, sales taxes- which disproportionately hurt the poor- are much higher. Now Nordic culture demands a strong trust in government and public institutions, as well as a collectivist culture. Such a mentality is totally alien to the average American, who thinks in a very individualist way, and is sceptical of government. Even if such a culture changed, Americans would be highly critical of the higher cost of living and lower living standards that would result from paying higher taxes. While the Nordics may enjoy better public services, their disposable income is much lower, and the cost of entertainment- from restaurant meals to alcohol to cinema tickets- is much higher.