FREE NEWSLETTER
Go to main Forum page »
My perception is Americans have become obsessed with taxes. They complain loudly about high taxes. Some vocal seniors don’t think they should pay property taxes or income taxes on Social Security or extra premiums for Medicare (not actually taxes).
There seems a general lack of understanding of what taxes provide. The tax collector has been vilified throughout history. Our Country was founded as the result of taxation.
Paul in Romans 13:1-7, explicitly mentions paying taxes: “This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing. Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.”
Making the connection between taxes and what they provide is often misunderstood. Take schools and teacher pay as an example. I’m not criticizing teachers, but I have been criticized because I say teachers are not underpaid all things considered.
Teachers typically receive community support for higher pay and benefits, but no connection is made that typically 50% of the property tax bill goes to schools and 50% of that is pay and benefits. Nor is it mentioned that the retirement benefits teachers typically receive are far better than any received by the taxpayers footing the bill. 90% of teachers have pensions. We simply don’t make such connections.
Taxes come in many forms, some income, some consumption or use based. For my money the most egregious tax is state lotteries because they target the lower income and less educated and thus are very regressive.
Many Europeans, particularly in Northern and Western Europe, tend to accept higher tax rates in exchange for comprehensive public services. These services often include universal healthcare, extensive social security, affordable education, robust public transportation, and generous parental leave.
The concept of a “social contract” is strong, where citizens pay taxes as a contribution to the community, expecting a fair return in public goods and services.
Surveys indicate that while a majority in some European countries (e.g., France, Germany) feel taxes are too high, this sentiment often changes when linked to cuts in government spending or increased public debt.
Do Americans see it that way? Not the most vocal ones anyway. I doubt Americans ever look at their real effective federal income tax rate.
Divide your taxes by your total income from all sources, taxable or not and multiply by 100 to see your real effective tax rate.
Americans complain loudly about their health insurance premiums. In 2024, the average annual health insurance premium for family coverage was around $25,572. Millions of Americans receive subsidies to help pay those premiums- from taxes or deficits. In other countries it’s all or mostly a community cost via taxes, but it’s still a cost.
Given federal spending is $2 trillion a year more than its income, I find it hard to conclude taxes are too high.
And before jumping on the unnecessary spending train, that ain’t the problem. It’s more like households with a desired lifestyle supported by credit cards.
I don’t think that the taxes are necessarily too high, but I do think that the tax system is inefficient, complicated and, in many cases, unfair and implemented to serve special interests or to promote political agendas.
Taxes are intrinsically not the fundamental problems. IMO, the real problem is the taxpayer’s value attitude, or “what do I get for this tax payment?” This self-centered preoccupation is rooted in the culture of pioneer ethics or individual for himself or herself, instead of the idea that “it takes a village”. In peace time the rich pays for tax avoidance, the poor pays what they must, and all want the government to keep their hands off our pockets. In time of disaster, we all cry out “where is the government?” Does it really take a disaster or war to change our attitude to shared destiny above individual profit motive?
Well, yes it does – sadly😢
The sense of community is and has been declining. People don’t understand how things are connected.
I read people complaining about an increase in their health insurance premium when they didn’t use the insurance.
About a large premium increase in homeowners insurance when they never had a claim. They ignore the fact on the other side of the country their insurer paid billions in claims.
I read people complaining their taxes are used to pay for food stamps. First, they are not paying any significant amount and second, I wonder if they would trade their lifestyle for that of those needing SNAP.
My taxes pay for a number of programs and services I pray I will never need, but they are needed by others.
I’ve always found it amusing that Americans complain about our tax burden while using internet and cellular technologies launched by federal tax dollars and powered by an electrical grid supported by federal tax dollars… or while driving over highways and bridges funded by federal tax dollars, perhaps past a local hospital supported by federal tax dollars to an airport funded with federal tax dollars and protected from terrorism by federal tax dollars, perhaps to vacation at a national park… and on and on and on.
Not to mention all the federal dollars that make up at least 10% of every state budget (and more like 15-20% for most states).
I lived in Europe until age 27. It is important to remember that access to a waiting list is not access to affordable health care.
In my original country about 40% buy private health insurance to avoid interminable waiting times.
Living in the US doesn’t preclude wait lists. Four months for a specialist is standard in my area – and we have two university medical centers, plus public hospitals. I was once quoted over a year for a hematologist. A friend just waited several months for a needed ablation.
You’re right. Americans don’t want to admit it, but some waits do exist and it’s getting worse.
Let’s pause the helplessness to celebrate some high-quality, cost efficient healthcare systems in the US: Geisinger, Kaiser Permanente, Mayo Clinic, Cleveland Clinic. During my service at the Northern California Kaiser, it took 2 days (not weeks) from breast lump detection in OB/GYN clinic to mamogram, biopsy, pathology report and oncology appointment, all with standard co-pays and no preauthorization. Most markets compete on price (the race to the bottom), but in a few geographic locations, healthcare systems competed on quality (the race to the top).
There’s nothing more American than a long wait-list AND a large hospital bill 😂
This is really one of your best, Dick. I agree with you. I’m proud of the two teachers in my family. One is in a particularly good situation. She works very, very hard and is often stressed, but she is also able to afford a comfortable lifestyle. She was proud to tell me about what she’s saved for retirement and it made me happy (Second-hand HD was definitely a factor). Regarding state lotteries, I wrote a paper about them more than 20 years ago. My research, as you described the facts, made me sick. I learned that for winnings at the amount where a social security number is required to cash them, all public benefits used in the past by the winner are deducted. Including the health insurance available at the time to low-income pregnant women. Fair? Yes, the benefits were paid out of tax dollars. But just? I didn’t think so. It made me sad.
I’m ok with the federal taxes I pay, but I think a flat tax would be a better way to pay the piper. The code being used to control our behavior seems like some movie about the future without freedoms we agreed to give up. It will never happen as the bureaucrats will not give up that power to control the way we live. A flat tax would require me to pay more, but I’m ok with that.
I could never foresee that our effective tax rates would now be this low. Twenty-five years ago, with just enough total income to no longer qualify fully for an IRA deduction, my effective tax rate was 19.4%. Last year, retired and with twice the (inflation adjusted) total income, my effective tax rate was 12.4%. How times change.
I agree with you on this one, Richard.
My sense of the problem is different than yours. What I see are people who have lost confidence in the govts capacity to function properly.
When people lose confidence it’s easy to stop trusting them to spend the money. Restore confidence and it all gets better.
I live with immigrants from a dictatorship who are absolutely astonished that Americans could so easily lose confidence — or be deliberately caused to lose confidence — in their government.
I think for many people it’s been a 50 year process. It started in mid 70s during Stagflation and got worse in the post Reagan years as we’ve seen political realignment.
It can seem recent, like it’s all Trump or some such thing, but really that doesn’t make sense. People generally turn to something like Trumpism after a decades long process of losing confidence in the parties.
I believe I could expand on why that is, but not here on HD.
It’s been a long process, Reagan won in 1980 saying I’m going to DC to shake things up and reflect America. Trump has been recycling those themes thru his personality.
Given that we’re a nation founded on the idea that gov’t was too intrusive and couldn’t be trusted (thru the failed Articles of Confederation) maybe we shouldn’t be surprised?
i think the analysis of this issue has to get
into more detail. My indications as follows.
Federal Income Taxes –
Tax rates on families seem reasonable,
Especially families with children
Tax rates on individuals seem too high.
the 22 Pct marginal rate starts below 50 K
And when you add state and FICA taxes
can easily reach 35 Pct marginal rate at
Moderate income levels
There are a lot of issues with investment
Taxes and the Corporate Tax but maybe
It gets too complicated to discuss here.
State Taxes –
Numerous blue states have ludicrous
taxes, driven by very high demands of
politically powerful public employee
unions.
On the other hand, numerous red states
seem undertaxed. Florida , as an example,
ranks 49 th in teacher salaries, even though
it is a growing and prosperous state.
We should all bear in mind that the
United States is unique in that it
has high defense spending and high
health care costs. If we tried to emulate,
a Scandinavian type welfare state model,
we would raise tax rates to a level that
would likely suppress economic growth.
Really, the 22% bracket kicks in a bit after $60k, because of the standard deduction. State taxes are a choice of where you live, and most aren’t that bad, but yeah California and Massachusetts exist. I could further nitpick the FICA taxes, because you’re sort of paying for a future benefit (yes, I know that’s not actually true) so you can recoup a lot of that money in the future.
As for welfare state model, I know I’d happily sacrifice high economic growth for a more stable and cohesive society. It just seems like the mature thing for a society to do. There’s more to life than more money.
But no matter how you slice it, you have to pay for what you need and want. We can slice it up in different ways, but in the end the bill must be paid. Right now we are not doing that.
I’m not sure something like the Scandinavian model would have the result you anticipate- not that I suggest that – but while the taxes are high paying for many things Americans struggle with would then be included in taxes. It’s not a net loss for individuals.
I don’t think taxes are too high, at least in our situation. I do wish our property taxes were lower now that we are retired and have a lower income, but we choose to live where we do. Personally, I think everyone should have to pay something. Even our son paid a little bit when he was in grad school, he was not exempt. Spouse and I were so grateful for the education credits that lowered our taxes when our kids were in college. We all benefit from so many things that taxes pay for in our communities and the country, too. Paying taxes, to me, is a patriotic duty (but that doesn’t mean you forego any tax benefits you qualify for). I know I am naïve. Chris
Considering I could get my tax rate legitimately down to 0% if I wanted, yeah I’m not gonna argue that taxes are too high. When the time comes to pay the piper I’ll be ready.
Just speaking for me Richard. When I add it all up, including the non-taxable stuff, we arrive at a very low 6 figure income. Our total income tax percentage of that number is approximately 3%. You won’t hear me complaining about my federal tax burden.
The problem with all taxes is that they are highly visible and used too much as political tools. Hence tinkering, pandering to special interests, giveaways, complexities and carve outs. And that’s before we get to state economic competition through arbitrage. Net result is a lack of stability and hence public certainty.
This is a global problem. Most people will think they are over-taxed because they can always find someone paying less than them in % terms.
You’re starting in a bad place in the US because of the population aversion to anything that smells remotely like “socialism”. Despite lots of people being supporters of strong police, fire, military services etc and the societal benefits of having a broadly educated, healthy working population.
I am not going to opine about taxes. I will state my opinion on the debt and deficits. We wouldn’t be in this position if the world wasn’t willing to lend us money at these low rates. if say Japan said I want 15% for that 10 year note, see how quickly we balance the budget.
I have a feeling that at some percentage, your theory may be tested.
Since we as a society have decided (via our elected representatives) to fund various governmental functions at certain levels then by definition while there are budget deficient’s then taxes are not high enough. At least this is my position as a true fiscal conservative.
False: The idea that governmental functions and spending are non-productive.
False: The idea that there are enormous amounts of waste and corruption that if only eliminated would result in a balanced budget and reduced taxes.
False: The idea that regulations (for business, environmental protection…) only result in inefficiencies and costs. The reality is that most business regulations (such as setting national standards for products and processes) promote economic growth and were actively lobbied for by business. And there are orders of magnitude of savings resulting from environmental protection regulations.
As a side note I find it interesting that servicing the national debt results in a “tax” that disproportionately transfers wealth from the younger to the older, and from the poor to the rich, due to the demographics of who invests in “safe” government bonds (looking at you typical Humble Dollar reader).
Do those tax rates include state, local and sales taxes?
Not that I in any way disagree with your basic point.
Just federal income taxes.