According to the OECD taxes in the developed world have increased to record levels, 36% of GDP. Even in the US taxes have increase from 26 to 28% of GDP. What’s going on? Hasn’t Bush been cutting taxes?
Yes, he has. But even though tax rates are lower, so much more income is being reported by taxpayers in higher brackets (corporations and wealthy individuals) total tax receipts have gone up. In other words when Joe Sixpack took home the money he paid 15% on it; now that Mr. Megacorp takes home the money he pays tax at 30%.
Welcome to Bushworld.
Of course a headline like “taxes increase to record levels” will have conservatives howling. “Taxes will strangle the economy!!! ” But what does the OECD think? Are higher taxes good or bad for economic growth? Depends, says the OECD’s Mr. Healey,
“There is some evidence that countries with higher tax-to-G.D.P. ratios grow somewhat slower and have lower G.D.P. per head, controlling for other factors, but this is not a very clear relationship,” he said.
As an example, he cited Sweden, which “has the highest tax-to-G.D.P. ratio in the O.E.C.D., just over 50 percent, and yet it is one of the O.E.C.D. countries with the strongest economic performance over the past 20 years or so.”
That example, he said, showed that “a lot depends on how this money is spent.”
There’s a concept! Spending matters? So I’m guessing that if you spend money on mindless wars, bridges to nowhere, welfare payments to pharmaceutical companies….that’s not so good for economic growth. More spending on infrastructure, health, education would probably improve economic growth.
So, lets recap: taxes are relatively low in the US, but that’s irrelevant to economic growth. The US spends buckets of dollars on growth destroying crap, but that doesn’t seem to hurt the US economy.
Conclusion: there’s are a lot of things outside of government spending and taxing that determine economic growth. That’s why the US is at or near the top in that category each year, even though more rational government spending could improve things.
In addition, we can conclude that the anti-tax crusade of the GOP has almost nothing to do with a concern for economic dynamism, and everything to do with redistributing wealth to the wealthy.