Update: This post continues to draw traffic even after five years and despite this group blog being abandoned. It is cross-posted at The Spiral Staircase, which is my personal blog and is still active. Feel free to comment either place.
Original post: The comment by Bazzer about flattened tax structures, my rejection of the idea, and Adam Gurri’s invitation to expand on the topic prompts me to describe more fully why I reject Reagan’s success in flattening the tax structure — a process that continues unabated today. Let me start by contrasting the American and European social models, albeit briefly.
I attended a lecture last month by T.R. Reid called the “European Social Model.” That term refers succinctly to the welfare state, which in Europe has none of the negative connotations it does in the U.S. High tax rates in European support a variety of human services, including socialized medicine, unemployment insurance, welfare, and free public education through university. Although the specific levels of support vary among European states, Europeans are justifiably proud of their collective accomplishment in caring for each other and creating a humane social contract. Recent uprisings in France over employment rules make a great deal of sense from within that context, though from an American perspective the agitators appear positively insane.
In the U.S., considering our history of tax revolt, we categorically flee from the idea of socialized anything. Nonetheless, we have socialized education (through high school), socialized defense (we should go back to calling it the Dept. of War, IMO), socialized roads, and socialized medicine in the form of Medicare/Medicaid. Levels of support and benefit for human services are considerably lower in the U.S. compared to Europe, and our overall tax rates are lower. It’s more of a continuum than a toggle switch.
However, I doubt anyone in the U.S. could be justifiably proud that we frankly allow our fellow citizens to literally live on the street and die of exposure and/or starvation. In that respect, we are inhumane, and Europeans think we’re insane for allowing it to persist in what is arguably the richest country in the world. Of course, the rich and powerful, who stand to gain from tax rates lower than those in Europe and lower than U.S. tax rates from the 1960s, say, have succeeded in flattening the U.S. tax structure. What used to be a fairly progressive structure (high earners paid a high percentage) has moved incrementally toward a regressive structure (low earners pay a higher percentage when various penalties are factored in, such as the inability to exploit tax loopholes for not having enough money, or Social Security taxes on all of one’s income instead of the first $84K only, or even sin taxes on alcohol and cigarettes).
The flabbergasting thing to me is that the poor have been convinced that possibility of hitting it big (winning the lottery or being a rapper, mostly), which only happens to a miniscule number of people, makes protecting immense wealth advantageous to them even when they don’t have it. Hope is kept alive — and the underclass with it. The range from top to bottom of the socioeconomic scale has been widening for 50 years in the U.S., whereas in Europe, except for a few royal and aristocratic families, it’s been narrowing.
Which model delivers better social justice? For my money, the European social model.