The easiest task in the world may be to persuade people that they are paying higher taxes than folks in other communities, states and countries, but there is never a shortage of people taking on the task.
President Trump, who hopes to register his first presidential success this fall by slashing rich Americans’ taxes, has said in a variety of forums, including a rally the other day in North Dakota, that the United States is the highest-taxed country in the whole world.
Back in poor Arkansas, the legislature has hired, with your tax dollars, a corporate consulting firm to advise it on whose taxes to cut and by how much. You should have no trouble guessing who will benefit when the golden day arrives. Right-wing think tanks are pumping out studies showing that Arkansans are saddled with higher taxes and bigger and more wasteful government than their fellow citizens across the country. It works because polls show that most people nearly everywhere already believe they are taxed more than their neighbors.
Last month, the Arkansas Democrat-Gazette published an op-ed from the Advance Arkansas Institute, which calls itself a free-market think tank, claiming that Arkansas’s taxes and outsized government were far out of line with the rest of the country and were holding the state back.
Trump and the Arkansas academics are just flat wrong.
There will be, by the way, no more laments about the growing national debt. The coming tax cuts and big defense-spending hike will send U.S. budget deficits back over the trillion-dollar levels left by George Bush. If the debt gets too unwieldy, Trump said last year, the U.S. will just declare bankruptcy and walk away from the debts, as he often did.
Trump cites no source for his figure, because there is none. The highest marginal income tax rate for corporations at 35 percent is about tops in the world, but the real, effective tax rate is far below that. Many big corporations, including Trump’s, pay no taxes.
But Trump was talking about everyone’s cumulative taxes. Of the 32 countries of the developed world, the United States ranks 13th. Its taxes are about a third of the taxes paid by the average person in Luxembourg, but more than the struggling countries of Chile, Hungary, Greece, Turkey and Slovakia. Americans tie with the Irish. Norwegians, Swedes and Icelanders pay far more taxes than we do.
The spoiler for the Advance Arkansas Institute’s claim about Arkansas’s outsized tax burden came at the outset, where the author invoked Gov. Winthrop Rockefeller as the gold standard for conservatism. She said that Rockefeller, the first Republican governor since Reconstruction, stood for low taxes and small government, but then big-taxing-and-spending Democrats took over. The truth? Rockefeller tried to raise taxes far more than any governor in Arkansas history. He said the unhealthiest and worst educated state in the country had to invest in the people and services.
In 1969, he proposed a slate of tax increases that would have raised state spending by 50 percent, mainly for education and health services. His income tax bill took the top rate to 12 percent, the highest in America, although he would have been one of the few paying 12 percent. The Democratic legislature defeated every bill, so he called a special session in 1970 and demanded again that it pass the program. When the Democrats again crushed every bill, he renounced his oath to serve only two terms and ran again. The man who defeated him reduced his income-tax bill to a small fraction of his rates and passed it. The man who actually did raise more taxes than any governor in history was Mike Huckabee, a Republican.
But what about the actual tax numbers today? States and local governments raise and distribute their revenues in so many different ways that fair comparisons are hard to make. A good measurement of the relative tax burden in the 50 states is the IRS’s deductions for state and local taxes. It’s measured to the penny. Texas, cited usually as a low-tax state, has a much greater deduction per capita than Arkansas. While Texas does not have a personal income tax, its property taxes are multiple times higher than Arkansas’s and it reaps tens of billions from extremely high taxes on minerals, a broader sales tax and a big business franchise tax.
If Arkansas is such a big government spender, as the free-market expert claimed, what does it spend it on? Teacher salaries, which are the biggest expenditure in Arkansas’s budget, still rank 43rd in the country, up from 50th when Rockefeller was governor but still far behind the nation as a whole. The number of government employees in Arkansas is much lower than all the states near our population size. Exactly where is the bloated government?
There is this: We spend lots more on prisons than do most. The conservative Democrat-Gazette published an editorial last week saying we need to spend lots more to lock up more people. Highway taxing and spending per capita in this sparsely settled state is a little higher than most.
Never mind. Arkansas is going to follow the paths of the free-market paladins, Louisiana, Kansas and Oklahoma. Wait for it.