Here James Fallows shows a chart (reproduced at right) that indicates how taxes as a % of GDP are very low in the U.S. as compared to other developed nations. Then he suggests that in order to solve the deficit problem we need to raise taxes. This is a total non-sequitur. The higher the GDP a country achieves, the lower the tax/GDP ratio should be. Suppose you live a hypothetical country where GDP is $100 per person, and taxes are $30 per person, and things are generally ok – the military is big enough, there are enough roads, etc. Then you as a country develop very quickly, so that GDP doubles to $200 per person, would you also want to double the tax money sent to the government to $60 per person? Only if you are obsessively fond of the government. The government is there to keep us safe and secure, and to provide infrastructure. These needs clearly should not scale linearly with how rich we are. When we become a lot richer, we should strive to become a lot more entertained, not a lot safer and securer, unless we are, to begin with, very unsecure and unsafe.
(chart from OECD)
4 Responses to I hate how everything is a % of GDP