Paul Krugman has been pounding away on the need to increase taxes. What Paul really wants is big government. To do that you need big taxes. Today PK used the following chart to make his point. He uses it as proof that US citizens pay a low tax rate. Krugman wants us to believe that because we rank so low on this list we should be more than willing to accept higher taxes to support that big government “we” all want.
It’s hard to argue with this list and the conclusions that PK draws from it. Let me try. This is the raw data that the chart Krugman used was based on:
(click to enlarge)
First let me point out that the 2009 data for the USA (30.1%) was the lowest in the 13 years of information presented. This is because the US was in a recession in 08 and that always means lower tax receipts. To make a statement, Krugman uses the most opportune data to support his position. When you look at the past and projected numbers you see that the US average of ~34% is right in line with Japan, Korea, Australia and Switzerland.
For me, the most significant error by Mr. Krugman and his chart is that he deliberately chooses to exclude exactly how high those tax rates are in the countries he holds up as shining examples. Yes it is true, Norway Sweden, Denmark, Finland, and France have higher taxes than does America. But look what they are paying to get to the top of the list. Respectively 56%, 56%, 54%, 53% and 49% of GDP. Who wants to be on the top of that list? I doubt the folks in Sweden or Denmark are so proud to have made it to the top.
What Mr. Krugman shows up as an example of “what we should do” is actually a disaster. Mr. Krugman should get his head out of, well, academia and start talking to Americans of all stripes. Liberals, conservatives and all the folks in between. He won’t find one that will stand up and support 50+% taxes on GDP. What may be acceptable in Sweden is simply not going to sell in America.
If he bothered to ask a few economists what they thought 50%/GDP taxes would do for America he would also get an earful. That is just stupid bad policy.
It shouldn’t surprise us a bit when politicians like Ryan and Obama talk about numbers and budgets and spin every chart to suit their agenda. It quite another matter when Nobel economists do it.