The Truth About Taxes in America

Taxes are a contentious thing in America, seemingly more so than in any other western country. Despite the advice of Oliver Wendell Holmes, who famously described them as the cost of civilization, Americans detest all forms of taxation – especially on income. And the idea that President Obama has raised income taxes seems to be well-entrenched on the right. After all, it fits nicely with the their understanding of Obama as a socialist (a conclusion reached long ago in Tea Party circles).

It’s a testament to the epistemic closure of the current political climate that this notion has gone unchallenged for so long. Because the truth is that Obama has in fact lowered income taxes. According to an article published yesterday on the New York Times website, since 2008, Democrats have cut taxes “by up to $400 a year for individuals and $800 for married couples.”

But no one seems to have noticed:

In a New York Times/CBS News Poll last month, fewer than one in 10 respondents knew that the Obama administration had lowered taxes for most Americans. Half of those polled said they thought that their taxes had stayed the same, a third thought that their taxes had gone up, and about a tenth said they did not know. As Thom Tillis, a Republican state representative, put it as the dinner wound down here, “This was the tax cut that fell in the woods — nobody heard it.

The article offers several reasons for why Americans may be unaware of the cuts, including rising state taxes.

And yet the Obama administration remains unfazed by the confusion. In fact, it may have designed the cuts specifically to go unnoticed (!):

Faced with evidence that people were more likely to save than spend the tax rebate checks they received during the Bush administration, the Obama administration decided to take a different tack: it arranged for less tax money to be withheld from people’s paychecks.They reasoned that people would be more likely to spend a small, recurring extra bit of money that they might not even notice, and that the quicker the money was spent, the faster it would cycle through the economy.

(Ignoring economics for a second, it’s remarkable to consider that an American president would forgo an opportunity for political gain in order to implement the correct fiscal policy.)

It’s also worth considering that income taxes remain low by historical standards. Taxes for the top income bracket are the lowest they’ve been since 1990, and are nearly three times lower than 1953 (the supposed halcyon days of unfettered capitalism and American values that Tea Partiers yearn for). Moreover, income taxes in the U.S. are lower than in most other developed economies, including Germany and the United Kingdom.

Considering this, it seems ridiculous that pundits and politicians are able to claim in all seriousness that the U.S. is slipping towards socialism. The truth is that America remains a decidedly capitalist place.

(Photo by voteprime)

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