Andrea Louise Campbell has a great article taking a comparative look at taxes in the United States.
The bottom line is that "the reality of U.S. fiscal policy: compared with its counterparts among
the advanced nations, the United States' tax system collects little
revenue, poorly redistributes that money across the population, and is
An example of this complexity is that "to get another sense of the difference between the United States and
other developed countries, consider the subsidization of the cost of
raising children. Many advanced-country governments calculate and send
allowances to families with children. In the United States, however,
households with children must navigate and administer a complex system
of tax breaks themselves, such the Child Tax Credit and the Earned
Income Tax Credit. And if they file their returns incorrectly, the IRS
may fine them."
Furthermore, for the tax system as a whole "the share of taxes paid by each income group essentially resembles the
share of income that it receives, which would not be the case in a more
progressive system. According to the Institute on Taxation and Economic
Policy, a fiscal think tank, in 2011, the lowest fifth of earners
received 3.4 percent of total income and paid 2.1 percent of total
taxes, the middle fifth received 11.4 percent of income and paid 10.3
percent of taxes, and the top one percent received 21 percent of income
and paid 21.6 percent of taxes. "
What do we get for it? "In Europe, regressive taxes are matched with highly redistributive
states. In the United States, mildly progressive taxes are matched with a
not very redistributive state. As a result, the United States
experiences greater inequality than most other advanced nations, with
the tax-and-transfer system doing little to alleviate it."
And what does the research say about the consequences? Generally, that the US fiscal state is inefficiently small. "Slemrod and Bakija found little correlation across the OECD countries
between taxes as a percentage of the economy and the size of the economy
itself, as measured by per capita GDP. Nor, according to their
research, is there a high correlation between taxes as a percentage of
GDP and the annual rate of economic growth." "There is little evidence that tax rates affect the participation of
either middle- or high-income individuals in the work force. And despite
higher taxes, higher earners ultimately did not spend much less during
the 1990s, since the total income of the top one percent during that
decade rose..." "past experience suggests that a tax hike today would not severely damage
the economy, and productivity might even rise with the security and
investments that government spending can provide."
We face some real decisions over the next few years in this country, and it would be best if we understood the consequences of these decisions. Unfortunately, it seems to me that mythology dominates the tax discussion at the expense of research and reality. I encourage you to read the whole article, it is sobering considering the state of US political debate.