Justice for All

The fundamental belief underlying Democratic Socialists like Bernie Sanders and Alexandria Ocasio-Cortez is that the United States is an unjust nation. This injustice must be remedied by spending on massive federal programs to remedy the injustice.

By the way, in case you were not aware, the Social Democrats have re-branded themselves as "Justice Democrats". After all, they recognize that most Americans are rightfully wary of socialism. However, how can anyone be against "justice"?

Justice Democrats support the following:

Medicare for all
Free child care
Free college education
A guaranteed income
A "Green New Deal" with trillions of investment in sustainable energy development
"Investment of trillions" in rebuilding the nation's  infrastructure

They specifically mention spending "trillions" in the last two points but the reality is that each of these programs would cost trillions of dollars.

However, these "Justice Democrats" are vague and evasive when it comes to how these programs would be paid for. Their typical answer is that there is plenty of money to pay for all of this if we get "the rich" to pay "their fair share",  close "tax shelters" and tax Wall Street. They often point to European countries and suggest that they are the model for how it can be done.

This tweet is an example of those on the Left making the point that those of us in the United States are woefully under-taxed compared to Europeans and there is plenty of room to increase taxes to pay for increased federal spending.

This data comes from a OECD report entitled "Revenue Statistics 2017" that examines tax revenue trends in the OECD. It takes account of tax revenues at all levels of government among OECD nations. The OECD is comprised of 34 countries that have traditionally been market economies. You will notice that it does not include China, India, Russia and many other growing economies around the world.

It also misstates the correct U.S. percentage from the report--it is 26.0%, not 25.5%.

The list of countries above also omits other countries in the OECD such as Mexico (17.2%), Chile (20.4%), Ireland (23.0%), Turkey (25.5%) and Switzerland (27.8%) that have lower tax burdens or are very close to the U.S.

It is also interesting to note that tax revenues as a percentage of GDP is only 9.4% in China and 10.6% in Russia according to the most recent year reported by The World Bank. These are countries run by communists. The fundamental principle of communism is that government should exist to serve the interests of the proletariat (the working class) above all else. However, these countries are taxing and spending considerably less than the OECD countries.

However, where this data is most misleading is not explaining the significant differences in the sources of tax revenue. The simple fact is that when there are high rates of taxes as a share of GDP it necessarily follows that there are high rates of taxation on the middle and lower income classes.

The only way that you can maintain a high tax share across a country is to maintain a high tax burden on everyone. Taxes do not just fall primarily on the rich in these high tax countries, they fall heavily on everyone.

Let's look at where the tax revenue comes from the United States compared to the OECD averages in the report, as well as France and Sweden, the two highest taxed countries in the report. This chart compares the percentage of tax revenues from various sources as a percentage of total tax revenues.

Keep in mind that taxes on individual income, corporate income and property taxes are generally considered to be taxes targeted at the rich. They are progressive in nature. The more you make or have, the more you pay.

Consider the percentage of income taxes paid by various income groups in the United States. In the latest data available (2015) the top 50% of income earners paid 97.2% of all individual income taxes. In fact, the top 1% alone paid 39.1% of all individual income taxes. Compare that to the amount of the bottom 90%, combined (29.4%).

Social security taxes, value-added taxes and other consumption taxes (such as state and local sales taxes) are broad-based and generally apply to everyone across the board. As a result, they are considered regressive taxes as the burden falls disproportionately on lower incomes.

Consider the chart above, in the United States only 40% of the tax burden is borne through broad-based regressive taxes such as Social Security, Medicare and sales taxes.

The OECD average is over 60%. In France, it is 68%. In Sweden, it is 62%.

This also explains why you are seeing riots in France over an increase in taxes on fuel. It is yet another regressive tax in France that will hit working people the hardest.

Looking at specifics, if the United States were to raise similar amounts in social insurance contributions as is the case in France, it would have to levy additional taxes equal to 6.9% of GDP. That would require $1.4 trillion of additional taxes on payrolls. To put that in context, all Social Security, Medicare and unemployment tax collections for the 2018 fiscal year in the U.S. totaled only $1.2 trillion.

If the United States were to raise similar amounts in consumption taxes as Sweden, it would need to implement a value-added tax or national sales tax that would raise an amount equal to 9.2% of GDP. That would require prices on all goods and services in the United States to be increased by $1.9 trillion per year. To put that in context, that is greater than the entire amount of individual income taxes collected by the federal government in fiscal 2018 ($1.7 trillion).

It should also not be forgotten that despite the calls for more federal spending by the Socialist and Justice Democrats, the United States still ran a $779 billion deficit in fiscal 2018 with current levels of spending.

The Justice Democrats claim that their proposals for Medicare for all, free college, a guaranteed income and the other items on their platform are overwhelmingly popular with voters.

Opinion polls in the United States demonstrate that these policy positions are overwhelmingly popular. Indeed, throughout the industrialized world these ideas are considered moderate. This is a movement about freedom and justice. And it’s a movement of, by, and for working people. If the Democrats refuse to embrace this platform, they’ll continue to lose, either to Republicans or to us.

I don't doubt it. Who wouldn't want more free stuff?

However, in the real world, everything has a price tag.

It is easy to say someone else is going to pay the bill. Everyone likes it when someone else picks up the tab for us.

However, what is your answer if the FICA rate on your paycheck doubles or everything you buy goes up in price by 10% or more due to a new value-added tax?

What is your answer if your freedom is seriously curtailed in the process? Government decides who gets the free college tuition. Government decides which school you can attend. Government decides which doctor or hospital you can go to. Government decides whether you qualify for that hip replacement surgery. Government decides who cares for your children.

Make no mistake, this is the only way the Justice Democrat agenda works. It cannot work any other way.

The rich don't earn enough to pay these types of bills. You could tax them at 100% and it still wouldn't be enough.

And even if you could, there would still never be enough money to provide enough free stuff for everyone.

This socialist agenda would mean that tax costs would have to be increased massively on everyone and everyone would also have to accept a substantial loss in their freedom compared to today to accomplish what Justice Democrats want.

Keep all of this in mind as you hear more about these ideas over the next two years.

I predict you will hear a lot about all the "free stuff" these Democrats want to give you leading up to the 2020 election.

You will hear nothing about how it will be paid for other than we will get the "rich" to pay their "fair share".

Don't believe it.

However, if they are able to implement their agenda I have no doubt they will also provide justice in who pays the taxes to fund this agenda.

You might have heard the phrase before.

 "Justice for all."