Why We Loathe Taxes in the US- A Tale of Government, Welfare and Social Cohesion

Why We Loathe Taxes in the US- A Tale of Government, Welfare and Social Cohesion

In contrast with European advanced nation peers, the US is the only advanced nation with so much crime, inequality, under-provision of quality healthcare and education.. Even Canada to the North manages to do a much better job! In the US, the words “crime”, “drugs”, “Chicago”, “inner cities”, “community policing” have become a lingua franca (bread and butter) of the debate on inequality and lack of opportunity. Symbolically, the word “billionaire” has become the pejorative word of English language in the US. This is not surprising, since money and finance are at the heart of the American social divide. The rich are getting richer, while the poor are getting poorer- a vicious cycle of despair for the less-endowed. For the first time ever, the American Dream is in danger. Why we loathe taxes in the US- A tale of government, welfare and social cohesion.

The solution? Taxes! The US has one of the lowest tax rates among the club of developed countries. And taxes collected as a share of national income is small relative to most developed countries. Despite various hurdles and opposition lobbying, the Biden administration is now serious about reforming the tax system to bring in more Dollars from the corporations that have taken so much without paying their “fair share” of taxes in return.

While Americans are largely supportive of the idea of “Tax the Rich”, they nonetheless are very wary when it comes to paying taxes themselves. After all, nothing unites Americans like their collective disdain for taxes. Therefore, it is about time people in the US adapt their perceptions of taxation to reflect pressing social needs and the priority to rebuild the fabric that made America great. Doing so necessitates reconciling our love for Capitalism with our need to bridge the gap between the rich and poor.

A Collective Disdain for Taxes

Nobody wants to give their hard-earned cash to the state. Why would you, if you could put your money to “better” use- fine dining once a week, grocery shopping at Whole Foods, an Amazon Prime express account, an Apple brand-new iPhone, a superior apartment, branded clothing.. But there’s much more to the debate than just that. There are many reasons why people dislike taxes.

First, there’s a lasting impression that government can’t get things done efficiently, with taxpayer money going to waste due to corruption, red tape, mismanagement, and outright incompetence. Second, people are unable to audit government transactions and make sure public money properly. In the absence of accountability mechanisms in this regard, it’s easy to push the narrative that bad government service provision is due to mismanagement of funds and incompetence. Another reason people loathe taxes is ideological. Republicans are skeptical of big government, and are in favor of tax cuts and deregulation. Democrats, on the other hand, are in favor of big government generally, with emphasis on role of the state in providing services and shaping society. Nonetheless, nothing unites Americans like their collective dislike for taxes.

Taxpayer Money Always Goes to Waste. Really?

It’s easy to accuse government of not doing nearly enough with taxpayer money. There’s a lot that needs fixing. Let’s start with the bad roads we take on the way to work. Infrastructure, schools, hospitals, airports, bridges.. America needs a makeover, a grand renovation.

While much work is needed, however, there are plenty of areas where government efforts go unnoticed. From food safety, fighting terrorism, to investing in systems to detect natural disasters, and preventing airplane collisions.. It’s really hard to appreciate all the work being done, especially when efforts go invisible to the naked eye. After all, most work being done is preventative, such as to prevent the next pandemic, the next water contamination scandal, the next “catastrophe”.. So no, taxpayer money actually goes to functions that only the state performs, serving the public and promoting collective utility and shared prosperity. While a lot needs fixing, there’s a lot that is worthy of our praise.

How Are European and Advanced Nation Counterparts Faring?

In terms of healthcare, take the US and Japan. In the US, we pay double as much on health care relative to Japan- and this is both on a per capita basis and as a percent of gross domestic product. And Americans are opting to pay astronomically high deductibles so as to keep premiums affordable. The Japanese, on the other hand, offer everybody health care for a modest fee. Health metrics demonstrate superior quality and outcome. The US, in comparison, charges more and provides less. Not to mention that around 45 million Americans remain without health care coverage.

In terms of college education, American graduates leave college with a huge debt obligation towards their banks. In Germany or most European countries, tuition is symbolic; education is practically for free. As for child care, Americans pay a fortune relative to European nations, where child care is totally free in many countries. The same story applies to retirement replacement wages in America versus Europe. The average retirement replacement wage for member countries in the Organization for Economic Cooperation and Development (OECD) is 57%, and 62% in the European Union. In the US it is about 33-40% of a person’s final salary, and thus seniors likely suffer a drop in the quality of their livelihoods. The contrasts are striking, including for senior care, as well as paid sick leave and paid parental leave. The question that remains is, “How can the Europeans, Japanese and Canadians all do it better?”

Here we can offer You another interesting article about the geopolitical situation of Europe.

A Society without welfare state, social democracy and services

Imagine a community absent a government to provide welfare services and carry on re-distributive policies. Do you really want to live in such a place? Even if you’re wealthy or well-off, can you enjoy a tram ride, while having to constantly look over your shoulder? Can you walk your kid to school without feeling unsafe? Yes, you can buy your private healthcare, your private everything, and escape the troubles of “commoners” on the street. But can you, really? Money can only buy you so much comfort in a community struggling with crime, violence, discord and dissension. Imagine being served a Starbucks cappuccino by a Barista who can barely afford it themselves, or struggle to pay their rent each month.

Soon you realize that much of your happiness is a derivative of the harmony you feel when you are pleasantly served your coffee from the local coffee shop in the morning. You exchange smiles with fellow citizens as walk towards your car or public transport. You arrive at work, where the janitor is as content with their lives as those on the managerial end of the company hierarchy.. What goes around, comes around. Happiness can be a form of public good; it doesn’t have to be a product of zero-sum behavior, enjoyed by the few at the expense of the many.

Taxation- Provision of Necessary “Public Goods” and Collective, Shared Prosperity

Times are changing. For the first time since a century ago, the advanced world is undergoing a policy shift. Yes, for the first time, government is serious about serving and investing in labor rather than capital. And this is not a shift towards European-style Social Democracy. Rather, it is a reaction to the “Great Resignation” of 2021. The fact is that work conditions have deteriorated so much; providing labor in return for an abysmal hourly minimum wage has become unjustifiable.

Thus the need to address the widening gap between rich and poor, and to reinvest in labor, which is the heart of the American economy. Capitalism is here to stay; but capitalism, in all its glory, needs to be protected from itself. It’s about time that people in the US begin to accept that taxes are a means to providing valuable “public goods” that the private sector would otherwise not deliver. Taxation is the first step towards community building, with people investing in common prosperity and understanding that society is as healthy as the least-prosperous elements within it.