Jesuit Fred Kammer Reveals Truth of Tax Policies

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U.S. Taxes Are Low by Comparison
Politics drive anti-tax movements and low-income families suffer

By Fred Kammer, S.J., Director, J.S.R.I. (Jesuit Social Research Institute) Loyola New Orleans

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Everyone seems to be worshiping at the “no new taxes” altar. This continues some 30 years of anti-tax propaganda whose most vociferous current harbinger is the Tea Party movement.
The actual results have included a widening of the gap between rich and poor to its current morally grotesque levels and the substantial deterioration of U.S. infrastructure.

Are we overtaxed as a nation? The facts don’t support the rhetoric of the tax cutters. In 2008, total U.S. taxes at the federal, state, and local level were 26.2 percent of our gross domestic product (GDP). The United States ranks 25th among the 27 nations in the Organization for Economic Cooperation and Development (OECD) for which data are available.

Only Turkey and Mexico had combined lower taxes at 23.5 percent and 20.4 percent of GDP. Many industrial countries have tax levels much higher; for example, 17 of the 24 OECD nations with higher taxes exceed the U.S. tax level by at least 25 percent. Nine of these have taxes
at least 50 percent higher as a percent of GDP.

Corporate Taxes
Are corporate taxes too high? In 1965, the taxes paid by U.S. corporations were 4.0 percent of our GDP, compared to 2.3-percent average of other OECD nations. The U.S. then ranked second among OECD nations in corporate income taxes as a percent of GDP. By 2008, U.S. corporate taxes had dropped to 2.5 percent of GDP, while other OECD nations had raised corporate income
taxes to 3.0 percent of GDP. The result was that in 2008—the latest available figures—U.S. corporate taxes were the fifth lowest as a percentage of GDP among developed countries. We ranked 21st among 25 OECD nations.

Anti-tax corporate lobbyists will point to the high U.S. marginal corporate tax rate of 35 percent, which actually is the top rate of a graduated corporate tax structure. President Obama even talked of lowering the corporate tax rate in his State of the Union message. But, because of the combination of corporate deductions, credits, and other tax breaks, U.S. corporations actually paid 13.4 percent of their profits in taxes on average from 2000 to 2005. In 2007, the Treasury Department estimated that various corporate tax breaks would cost the U.S. government more than $1.2 trillion over the 10-year period from 2008 to 2017.

And in the States...
Two recent reports have highlighted the acute disparities in taxation in the 50 states—namely, how it is the poor who carry the greatest tax burdens and how regressive are state and local tax systems. State taxes only reinforce the income distribution trends of the past several decades where—you guessed it—the rich are indeed getting richer, the poor poorer, and the middle class largely standing still (until the current recession knocked many of them down). The five states of the Gulf South, sadly, are among the most regressive.

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