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- Tax & Taxes
Does paying taxes have to be such a big deal?
Paying more taxes is no big deal in other countries.
Think we pay too much tax in this country? Just take a look at the taxes that the much poorer people in the developing countries pay - and which they do with so much less fuss! Right now we are stuck in a quagmire of unsustainable budget deficits. Our Congress in Washington is pretty much gridlocked on the issue of spending cuts and increasing revenues in order to reduce the burgeoning budget deficits. “Only spending cuts and not a penny in tax increases”, say the majority of Republicans. Across the aisle, the Democrats want to minimize spending cuts, while asking the wealthy to pay more taxes. And the longer this gridlock continues, the country continues to build up deficits by the day (well, actually by the second), that many fear our children and grandchildren will end up paying.
Every nation needs to balance its budget
In the long term, every nation, including our own, has been balancing their budgets. Periodic tax increases have been an unfortunate, but inevitable part of the process of meeting the equally unfortunate and inevitable increase in spending, so that the budgets were somewhat balanced and the deficits were kept in control. The people in developing countries in Asia and Africa, where I’ve lived many years, accept tax increases as almost an unavoidable process of their country’s development. Actually the whole approach to yearly budgets is so very different - the annual “Budget day” is a red-letter day in many countries, with quite a bit of drama being played out on that day. The Finance Minister (that’s the equivalent of our Treasury Secretary) arrives with pomp and fanfare to the Parliament (our Congress), holding a shiny black Briefcase (with his budget proposals), and which he grandly flourishes to the crowds gathered outside the building and to the flashing cameras. A new comer could be pardoned for assuming that the brief case contains goodies to be distributed amongst the poor - while in fact the briefcase holds proposals that will certainly raise taxes almost across board – personal income tax, sales or value added tax, excise and any other tax that all go towards raising the price to the consumer on gasoline, cigarettes, liquor and almost all items deemed “luxury”.
The Finance Minister presents his budget proposals to the Parliament (one of the few sessions when proceedings are broadcast live on national radio and television channels). With minimum deliberations in the Parliament (but with quite a few Congressmen and women dozing off!), and after perhaps a few changes, the proposals are implemented. People groan about the additional burden for some time, and soon it’s back to normal.
Is it really possible to avoid all wastage?
Unfortunately, Government organizations all over have a poor reputation for being efficient. Poorer countries suffer inflation rates higher than ours, and people generally accept some increases in spending every year. And since the budget needs to be balanced (yes, people virtually all over the world expect their Governments to balance the budget), people are almost resigned to increases in sources for Government revenues through increased taxes, and I’m not aware of any other country where elected Congress representatives are asked to sign a pledge that they would not support any increase in tax.
Do countries with strong economies have low taxes?
The answer to that is “No”. There is a lot of whining about our country’s high rate of corporate tax – the maximum being 39%. But virtually none of the corporations pay anywhere near that. In a recent issue of Time magazine, Bill Saporito has said by availing of tax breaks, our corporations pay an effective tax rate of something to the order of only 12%! And are the economies of countries with low corporate tax rates in better shape than ours? The article goes on to state that three developed countries with the lowest tax rates are Ireland, Iceland and Greece. Does anyone need to elaborate the state of those countries' economies? And the developed countries with the highest tax rates? Germany, France, Japan, Belgium and the US. Germany has gradually lowered their maximum rate from 39% to 30%, which is also the rate at which tax is collected, and which incidentally has been proposed here. So a certain level of taxation is required to sustain a country's economy.
The price for democracy
There is a price to be paid for democracy. The checks and balances between our three branches of Government don’t come cheap to the taxpayer. In some of the developing countries, dictators and autocrats ensure these institutions have a minimum role to play. And the government spending is not "out of control" nor are there any entitlement programs that cause huge deficits. We are all aware of what happens to dissidents in those countries. It’s not something one would consider trading, in order to have a small Government.