Kemp and his mentor, Ronald Reagan, were very much alike. Both had achieved great success in fields completely removed from politics long before launching a political career--Kemp in sports and Reagan as an actor. And although neither had much in the way of formal education--both graduated from second-tier colleges and had no post-graduate degrees--they were both extremely well read and profoundly interested in ideas.
Reagan always said that he was able to cope with the pressures of the presidency more easily than some of his predecessors because he never viewed it as the pinnacle of his professional life; he was proud of his career in Hollywood and was accustomed to the glare of publicity. Kemp felt the same way about his years as a member of the Buffalo Bills. He always said that, when you have been booed simultaneously by every person in a stadium filled to capacity, the sorts of slings and arrows politicians face were pretty tame.I remember that Kemp used to have a huge picture right next to his desk in his congressional office. It showed him in his football days with some really, really big lineman--Ernie Ladd, I believe--getting ready to plaster him to the ground. I think that picture always reminded him of how quickly one can go from being the star to being flat on your back. It kept him grounded--no pun intended....
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On the basis of this history, it is reasonable to say that between 1976 and 1986 no individual had more impact on U.S. tax policy than Kemp. Amazingly, during this whole period, he was never even a member of the tax-writing Ways and Means Committee. And to this day, Kemp's ideas form the foundation of Republican economic policy--quite an accomplishment for a self-professed "dumb jock" with a college degree in physical education.
Also if you missed earlier Bartlett (he's been good of late) read
Next week is April 15, the day when most Americans have to file their federal income tax returns. To protest the allegedly high level of taxation in the United States, various right-wing groups are organizing tea parties around the country in the spirit of the Boston Tea Party of 1773.
The irony of these protests is that federal revenues as a share of the gross domestic product will be lower this year than any year since 1950. According to the Congressional Budget Office, the federal government will take only 15.5% of GDP in taxes this year, compared to 17.7% last year, 18.8% in 2007 and 20.9% in 2000.
The truth is that the U.S. is a relatively low-tax country no matter how you slice the data. The following tables illustrate this fact by comparing the U.S. to other members of the Organization for Economic Cooperation and Development, a Paris-based research organization.
There's a stronger case for the U.S. being a high tax country when looking at the top statutory tax rate on labor income. The OECD calculated the U.S. rate at 41.4% in 2007. As Table 2 shows, this put America right in the middle of the distribution despite a reduction in the top rate from 46.7% in 2000. The reason is that 19 OECD countries have reduced their top rate since 2000; only 3 have increased it.
Of course, the top rate applies only to those with very high incomes. According to the OECD, one would need to make almost 9 times the average worker's wage to pay the top rate in the U.S. In most OECD countries one hits the top rate at an income barely above that of the average worker, which puts workers in other countries in much higher tax brackets than those in the U.S.
Another way that workers in other countries benefit is in having almost all of their basic health care expenses covered by the government. According to the OECD, 19 of its 30 member countries cover 100% of health care costs, and another eight cover more than 89% of costs. Of the three remaining countries, Turkey covers two-thirds of health expenses, and Mexico pays for half.
In the U.S., however, the government covered only 27.4% of health costs in 2006. And almost all of that went either to the elderly in the form of Medicare or the poor in the form of Medicaid. The American average worker either had to pay for his own insurance in the form of deductions from his pay or go without.
In 2008, employer-provided health insurance reduced the cash wages of American workers by 7.9%, according to the Bureau of Labor Statistics. If businesses didn't have to pay for health insurance, they could afford to pay their workers 7.9% more and be no worse off. If workers paid 7.9% more of their income in taxes to pay for national health insurance, they would also be no worse off.
To a large extent, this is exactly what happens in other countries. Workers see the higher taxes they pay the same way Americans view the deduction from their pay for health insurance--not as money down a rat hole, but as the payment for a tangible benefit.
This isn't necessarily an argument for national health insurance. There are lots of reasons why it may be preferable to maintain the largely private health system we have in America. No one thinks it would be a good idea to pay higher taxes in return for having the federal government provide us with food. Variety and quality would undoubtedly suffer a great deal. The same would be true if the federal government took over the provision of health care.
The point is that one can't look just at the taxes people pay here or elsewhere without looking at what they get in return. It doesn't automatically follow that the places with the lowest taxes are the best places to live and work. This is obvious when we think about where to buy a house. We always look at the quality of local schools as a major factor and are willing to pay higher property taxes in return for good schools. The same is true at the national level as well. Higher taxes may pay for services that people value and thus are not as burdensome as they might appear at first glance.
Some may wonder about marginal rates--the tax on each additional dollar earned. This year, the median family will face exactly the same marginal tax rate it has faced since 1987: 15%. This is down substantially from the 1970s, when the median family paid as much as 25% on the marginal dollar of income.
Thus, it is hard to find evidence that taxes are rising or unusually high. This is confirmed by poll data. According to Gallup, only 46% of Americans think their federal income taxes are too high--the lowest percentage recorded since 1961. In 2000, 65% of people thought their taxes were too high; last year the figure was 52%.
It is even more revealing to compare the percentage of Americans who think their taxes are too high to those who think they are about right. Ten years ago, there was a wide gap--65% thought their taxes were too high and only 29% thought they were about right. This year, 48% of people think their federal income taxes are about right. In only one other year since 1956 have more Americans said their taxes were about right than said they were too high.
In response to these facts, some critics say that it is not today's taxes that concern them, but those that will have to be paid in coming years as a result of the large spending and deficits being projected. There is some logic to this. According to an economic doctrine called "Ricardian equivalence," people see taxes and deficits as more or less interchangeable.
I have problems with this argument as a justification for the sudden appearance of tea parties to protest taxes. First, many protesters implicitly assume that that the deficit has increased solely as a result of Barack Obama's policies. But in fact, the Congressional Budget Office was projecting a deficit of more than $1 trillion this year back in January, before any of Obama's policies had been enacted, and a cumulative deficit of $4.3 trillion through 2019. (CBO made no assumptions about what his policies might be in making its projection.)
It's true that projected deficits have gotten larger since January. But much of this resulted from deteriorating economic conditions that would have occurred even if John McCain were president. Moreover, it is absurd to assume that McCain would not have enacted any stimulus programs had he been elected.
More than likely, McCain would have proposed a stimulus plan of roughly the same size as that proposed by Obama. No doubt, it would have had a different composition--heavier on tax cuts, different kinds of tax cuts, less spending, different spending--but it wouldn't have been all that different from Obama's package given large Democratic majorities in the House and Senate and the pressure to act quickly.
I strongly suspect that many of those that loudly denounced the Obama stimulus package for its impact on the deficit would have cheered the McCain stimulus package even though it would have increased the deficit by about the same amount.
Proof of this proposition is that there were no tea parties during the years when George W. Bush was turning the surpluses of the Clinton years into massive deficits. Indeed, if concerns about deficits are the primary motivation for this week's tax protests, then these same people should have been holding demonstrations of support for Bill Clinton in 2000 when the federal government ran a budget surplus of 2.4% of the gross domestic product--equivalent to a surplus of $336 billion this year.
The truth is that the greatest addition to national indebtedness occurred in 2003 when Bush rammed through the Republican Congress a massive expansion of Medicare to provide drug benefits even though the system was already broke. According to the latest report from Medicare's trustees, the drug benefit added $7.9 trillion to the nation's indebtedness. This should have led to massive tax protests on April 15, 2004. But, of course, there weren't any. Those protesting this week were only protesting because it is a Democrat who has increased the deficit. When a Republican did worse, it's like Emily Litella used to say, "Never mind."
Of course, people are free to protest whatever they want whenever they want, and are also free to change their minds. Maybe this week's tax protesters would have been out protesting even if McCain were president, but I don't think so. I believe this was largely a partisan exercise designed to improve the fortunes of the Republican Party, not an expression of genuine concern about taxes or our nation's fiscal future.
People should remember that while they have the right to their opinion, they are not entitled to be taken seriously. That only comes from having credibility gained by the correct presentation of facts and analysis and a willingness to be even-handed--criticizing one's own side when it is wrong and not only speaking up when the other party does the same thing.
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