Taxes As A Share of Gross Domestic Product
Here is an interesting article from the NY Times about taxation levels among first world countries (http://www.nytimes.com/interactive/2012/08/15/business/fewer-government-...):
Every developed country aspires to provide a better life for its people. The United States, among the richest of all, fails in important ways. It has the highest poverty and the highest infant mortality among developed nations. We provide among the least generous unemployment benefits in the industrial world. Not long ago one of the most educated countries in the world, the United States is slipping behind.
The reason is not difficult to figure out: rich though we are, we can’t afford the policies needed to improve our record. The politicians in Washington all know that we face a long-term fiscal crisis. By 2020, 70 million Americans are expected to be on Social Security, up from 45 million in 2000. The ranks on Medicare will swell to 64 million, up from 40 million in 2000. Virtually every economist knows that just maintaining Medicare and Medicaid benefits will require raising taxes on the middle class.
But though the nation’s fiscal challenge has taken center stage in the presidential election campaign, raising more taxes from American families remains stubbornly off the table.
President Obama is willing to accept higher taxes on families earning over $250,000 a year. But he is going nowhere near higher taxes on the middle class. And Mitt Romney and his vice-presidential pick, Paul Ryan, are moving decidedly in the opposite direction. Not only do they want to extend indefinitely the tax cuts passed by President George W. Bush, but they are also calling for a piñata of additional ones, and would cut social spending in return.
Citizens of most industrial countries have demanded more public services as they have become richer. And they have been by and large willing to pay more taxes to finance them. Since 1965, tax revenue raised by governments in the developed world have risen to 34 percent of their gross domestic product from 25 percent, on average.
The big exception has been the United States. In 1965, taxes collected by federal, state and municipal governments amounted to 24.7 percent of the nation’s output. In 2010, they amounted to 24.8 percent. Excluding Chile and Mexico, the United States raises less tax revenue, as a share of the economy, than every other industrial country.
No wonder we can’t afford to keep more children alive. In 2007, the most recent year for which figures are available, the United States government spent about 16 percent of its output on social programs — things like public health, food and housing for the poor. In Italy, that figure was 25 percent.
What is not made clear in the article, but is none-the-less a fact, is that the US spends more per capita tax money on health care than does any other country in the world. We have a total tax burden of about $4 trillion in the US, which is far less (as the NY Times documents) on a per capita basis than is true elsewhere in the developed world. However, $1.5 trillion goes to publicly funded health care programs (this figure includes tax money paid for public employee health benefits and tax credits given to private employers for employee health benefits). Were we to simply use the $1.5 trillion efficiently for high quality health care, we could easily finance medically necessary health services for every US citizen. But instead, we allow an inefficient, poor quality health care system to cost us an additional $1 trillion per year while we fail to provide for universal health care financing. It's plain stupid. We don't need to raise taxes in order to accomplish the social goals enumerated by the NY Times. We need to spend the health care tax dollars wisely (meaning without corporate welfare), thus freeing other resources for improving education and other public services.
Dr. Joe Jarvis