Aside from the economic reasons I favor smaller government, there’s an intellectual one, too. Namely, I fail to see why I should let someone who makes simple factual and mathematical errors make decisions on my life. Take, for example, this recent meme about Bernie Sanders (I-VT) that’s made its way around my Facebook newsfeed today:
Since this came from the senator’s official Facebook, I’m assuming he did say this (one of the difficult things about the Internet is it is difficult to verify the authenticity of quotes).
It’s hard to know where to start here since there is so much wrong in just these three sentences. I guess let’s start with the big picture:
The senator makes a huge mathematical mistake. He confuses relative with absolute. Yes, corporate income tax’s share of total government revenues has fallen from 33% to 9%, but that doesn’t mean that corporate taxes are any lower. In 1955, corporate tax revenue was $17.9 billion ($158.2 billion in 2014 dollars). In 2014, corporate income tax is $320.7 billion, 102.7% higher than 1955. (Source: Tax Policy Center Inflation calculations are done using the BLS Inflation Calculator)
So, why did corporate tax share of taxes fall? Simple math:
A share (or proportion) of a portion is determined by (X/Y), where X is the portion in question and Y is the total. If X increases and Y increases at a faster pace, then X’s share falls. It does not mathematically follow that X is smaller (although that is sometimes the conclusion drawn, as in this case with the senator).
Second, the senator heavily implies that, in 1955, there was no budget deficit. According to the US government, this is categorically false. Budget deficits have been a facet of American politics for many years, including 1955, and they appear regardless of tax rates. In fact, there is almost no relationship between tax rates and taxes collected (as % of GDP). Regardless of where the tax rates are, revenues have hovered around 18% of GDP.
Which leads us to the third point. The senator says that taxes (or lack thereof) are the cause of a surplus/deficit. Again, that is categorically incorrect. I refer you to the US government. You’ll see that taxes, as a percentage of GDP, were actually lower in 1955 (16.1%) than they were in 2014 (17.5%) (Source: OMB, Historical Tables, Table 1.2). So why was there a smaller deficit in 1955? The government was spending less. Government outlays in 1955 were 16.8% of GDP (leading to a deficit of 0.7%) vs. 20.3% in 2014 (leading to a deficit of 2.8%). So, taxes didn’t shrink. They rose. Just spending rose faster.
So, want to better understand why we have a federal deficit? It’s because spending has outpaced income (and no, higher taxes won’t work).