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Monday, April 17, 2017

Of all developed countries, America self-invests the least because of tax cuts for the 1 percent


Cars rest on the collapsed portion of I-35W Mississippi River bridge after the August 1, 2007 collapse.

As tax day (April 18) approaches, it’s interesting to consider the lie that America is “overtaxed.”

The average developed country reinvests 34 percent of its gross domestic product back into the country and its people.

As of 2014, America only invests 26 percent, which puts it ahead of Korea, Chile, Mexico, and exactly zero other developed countries.
What does this do?

To help illustrate, here’s the breakdown by country of taxes as a percentage of gross domestic product (GDP) in 2014 from the Tax Policy Center: 


Taxes as a share of gross domestic product in 2014.
Taxes as a percentage of GDP. 
Economist Simon Johnson breaks down what this means: 

The U.S. government doesn’t take in much tax revenue—at least 10 percentage points of GDP less than comparable developed economies—and it also doesn’t spend much except on the military, Social Security and Medicare. Other parts of government spending can be frozen or even slashed, but it just won’t make that much difference. That means older Americans are going to get squeezed, while our ability to defend ourselves goes into decline. Just because there’s a bipartisan consensus on an idea, such as tax cuts, doesn’t mean it makes sense. Today’s tax cutters have set us up for tomorrow’s fiscal crisis and real damage to U.S. national security.
What this means is that we’re already not investing much in our country, with the exception of defense. If we cut the few programs we have, we will have less money for infrastructure and economic development.

One example of this is that Trump’s most recent budget proposal includes cuts to the U.S. Department of Agriculture and programs that help small businesses in rural areas. Brian Depew, the director of a nonprofit that helps small businesses get loans in Lyons, Nebraska, said:

The higher of a percentage of population in your county that voted for Donald Trump, the more screwed you are by his budget.
Another example is that the Trump budget proposes cutting job training programs.

All of this we likely be billed as “balancing the budget.” However, because of huge increases in the military budget, discretionary spending will actually increase from $521.7 billion to $574 billion.

If spending increases we’ll simply run bigger deficits, with or without tax cuts for the rich. If we cut taxes for the rich even more, we’ll run even greater deficits. In Trump’s most recent plan, the richest 1 percent will enjoy 47 percent of the benefits of the proposed changes.

What this means is that we’re still not investing in our country and our people, and we’re going to run bigger deficits so that our very wealthiest can pay even less. 

David Akadjian is the author of  The Little Book of Revolution: A Distributive Strategy for Democracy (now available as an ebook).

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