How Feds Spend More on Suburban Educ. than in Poor Schools

Nathan Newman nathan at newman.org
Wed Apr 25 11:49:00 PDT 2001


----- Original Message ----- From: "Doug Henwood" <dhenwood at panix.com>
>
>Who cares if rates are nominally progressive if tax deductions undercut it?

-I think I mentioned this before in a similar context, but there's a -Luxembourg Income Study working paper - I forget the exact cite - -showing that countries with progressive tax systems have generally -lower levels of social spending, so the combined effect of post-fisc -income redistribution is worse. The U.S. has one of the more -progressive tax systems around, but one of the worst income -distributions.

I would be interested in seeing the numbers and wonder if they include local and province taxes in Europe, because while the US has a moderately progressive federal tax system (and I find in hard to believe we beat Sweden on that), our local taxes are incredibly regressive beyond belief, especially in states like Texas and others without an income tax.

I'm not even sure how you completely compare a VAT to a sales tax, since you'd need a model for how much of VAT paid at early parts of the production cycle are absorbed as costs and how much taken out of profits.

You also have to figure out how to compare pension systems between countries with state spending on them versus mandated pensions at businesses versus our system of government subsidies for them. As this study showed, there's a certain sense of arbitrary measurement on "spending" versus tax breaks versus government mandates.

Max and you make the argument that tax fairness is less important than increasing total spending, but I think the causation is the exact opposite. It was only when massively progressive tax systems were adopted in the US back in the 1930s that social spending started to grow. And as the progressivity was dismantled starting in the 1950s and accellerating in the 1970s, including the decrease in corporate taxes as a percentage of the budget, social spending came under increasing pressure.

The tax revolt in California and across the country was all about the failure of the Left to deal with the tax issue.

-- Nathan Newman



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