Opinion

It is a revenue problem

MARTY MOORE
Published: January 24, 2013

Senate Minority Leader Mitch McConnell made the rounds of the Sunday morning news shows last week invoking the GOP mantra: "We don't have a revenue problem, we have a spending problem." On the three shows I watched the Republican from Kentucky must have uttered that lines or variations at least 20 times as if constant repetition would make it so.

This is surely the Republicans' greatest con job of the last four years. Even many Democrats and independents have been taken in by this ruse.

In reality, taxes as a percentage of GDP are at historic lows. During the last several years they accounted for little more than 16 percent of national economic output, the lowest rates since 1950. Until 2004 they averaged around 19 percent. In 1960 the top marginal tax rate was 90 percent. Prior to the New Years' Day tax deal it was 35 percent.

Other notable stats – taxes on investment gains, the lowest since 1933; percent of estates subject to taxation; 2.14 in 2001; 0.14 in 2012; for households earning more than $1 million, 33 percent of their income paid in taxes in the mid-90s, 22.8 percent in 2012; lost revenue in the form of tax loopholes, $526 billion in 1982, more than $1.24 trillion today; corporate income taxes, about 5 percent of GDP during the 1950s, 1.2 percent now.

What's more the U.S. has some of the lowest taxes among developed nations. The Organization for Economic Cooperation and Development reports that of its 30 member countries the U.S. ranks fifth from the bottom in total taxes paid to all levels of government; actually about 25 percent lower than the average OECD country. Also, the average effective corporate tax rate among OECD countries is about 16 percent. In the U.S. it's 13 percent making it fifth lowest.

According to BusinessPundit.com, the U.S. is among the five best countries in the world to do business: "By any objective measure, the United States and its relatively low tax rates offer the best of both worlds – reasonable social safety nets and extraordinary economic capacity stemming from essentially free market policies."

Now if lower top tax rates really resulted in more growth that could be a legitimate argument for cutting them. But growth was actually greater when they were higher such as in the 1990s. In fact lower top rates may suppress growth because the rich have less reason to shield income through capital investments.

The reason we're jammed up is because Republicans spent like drunken sailors during the aughts while carving $800 billion a year out of tax revenue. Reasonable changes to entitlements but also reasonable increases in revenue are the only way out.

"Not a revenue problem" my derriere.

Marty Moore is a freelance writer in Port Richey.