The problem with public finances in the US is not just that spending is too high. It is also that income is too low. Tax income as a percentage of GDP in the US is almost the lowest in the developed world, at 24% of GDP compared to, say, New Zealand’s 31%. This, despite the fact that New Zealand’s top tax bracket pays a lower income tax than the United States—33% to 35% respectively. America’s legendary inefficiency in matters of government seems to have created the worst possible solution: a high headline tax rate and low tax collection.
The solution is to rationalise the tax code—easier said that done because it directly challenges monied interests—but it is also to create a culture of paying taxes among corporations and individuals rather than one of tax avoidance, which is legal in letter but not in spirit. There is no reason why Google should be paying only 2.4% of income in tax.
