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The Obvious Reason Most Americans Pay Taxes – Tax Rates Are Low

The Atlantic runs a piece of that gee, whizz, what could possibly explain this stuff idiocy. The subject under discussion being why Americans seem to pay their taxes – voluntarily, and with a higher rate of acceptance – than other countries. The clear and obvious point to consider being, well, do Americans have to pay less in tax than the people of other places?

The answer is yes, considerably less. That people know we need government, that we need taxes to pay for gubmint, we’re working with adults here so yes, everyone knows that. But there’s a difference between that dang gubmint taking a whacking great bite out of everything because of its voracious hunger to fill its maw and the amount that is truly necessary to fulfill the functions of government.

Sure, the US is above that minarchist level too, but less so than other places. Thus people are happier paying that close to the correct level of taxation. It’s not hard, is it?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] If such a thing as American exceptionalism remains, maybe it can be found in this: Despite deep IRS budget cuts, an average audit rate that has plunged in recent years to just 0.6 percent, and a president who has bragged that dodging federal taxes is “smart,” most Americans still pay their income taxes every year. Even more remarkable, most of us feel obliged to pay. To quote the findings of a 2017 IRS survey: “The majority of Americans (88%) say it is not at all acceptable to cheat on taxes; this ethical attitude is not changing over time.” True, tax crooks might not confess their real feelings in an IRS survey. But other data confirm that the U.S. is among the world’s leaders when it comes to what economists call the voluntary compliance rate (VCR). In recent decades, America’s VCR has consistently hovered between 81 and 84 percent. Most countries don’t calculate their VCR regularly, but when they do, they lag behind the U.S. One paper that gathered what comparative data were available reported that Germany, the top European Union economy, had a VCR of 68 percent. Other countries score worse, among them Italy (62 percent), the site of a sprawling tax scandal in which about 1,000 citizens were charged last year with bilking the government out of 2.3 billion euros in tax revenue. [/perfectpullquote]

Blimey, gosh and even, pedicare* me.

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The explanation for this being really rather simple. Yet that simplicity means that it never even crosses the minds of the sophisticates at The Atlantic. Bit of a pity but there we are.

Here’s the tax burden in each country.

The United States government – all levels of government, city and county up to the Feds – swallows 27% of everything produced, earned and consumed by the populace. The German government – again all levels – 38%. The Italian 42%.

So, where do we think people will be more likely to voluntarily step up to the plate and pay their taxes?

OECD Chart: Tax revenue, Total, % of GDP, Annual, 2000 – 2017

It’s one of those really tough questions, isn’t it?


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2 years ago

It will be interesting to see what happens if the Democrats come into power for a long term as they are no longer just arguing that government should do more and hence needs to tax more, but they are now also saying that one of the purposes of taxation is to simply take from people so that they don’t have too much.

2 years ago

Not to be discounted is the ferociousness of the little buggers inhabiting all those civil servant slots in the Internal Revenue warrens.

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