Joe Biden, if elected President, is going to raise taxes. Many (most?) people who plan to vote for him want him to do so. Of course, when they say “Joe’s going to raise taxes,” they really mean “Joe’s not going to raise my taxes, he’s going to take money from other people to spend on me or on things I consider important.” Including, we can safely presume, more social programs, more welfare, more public money on health care and education, and on and on, in order to make America more closely resemble the European social democracies that the Left envies so much.

As always the case in politics, politicians’ promises don’t align with reality, and that’s especially true in the debate on taxation in America. We are told that Europe gets it right, because they have free health care, free college, robust social safety nets and public pension plans, and all sorts of other things that Americans more generally look to or have to manage themselves. Such narratives are factual in and of themselves, but the narrators either grossly mislead us or are themselves grossly misled. Fact is, such things are not paid for by taxing other people. The Nordic model, that which the Progressives often point at as how things should be, involves and requires a tax code that would have left-leaning voters baying at the moon, making torches, and demanding Whole Foods and Amazon stock pitchforks.

In Denmark, the top income tax bracket is 60%. It kicks in at about $60,000. Under the current tax code in America, a $60K earner pays 22% in federal tax, and anywhere from zero to 9.3% (go, go California!) in state income tax. So, Joe Biden voter, are you cool with your income taxes doubling, in order to support all the spending and public largesse that the Democrats desire?

But wait, there’s more!

European nations all assess a Value-Added Tax (VAT) on consumption, i.e. the goods and services Europeans buy. It’s like a sales tax, but it’s distributed across the supply chain, rather than levied at the final transaction like a sales tax. Tomato-tomahto. America has no national sales tax, and state sales taxes vary from zero (five states) to about 9.5% (go, go Tennessee, Louisiana, and Arkansas!). Denmark’s VAT is… wait for it… 25%. So is Sweden’s, and Norway’s. In fact, all the major Western European economies have VATS over 20%.

Guess who pays those VATs? Not “other people.” It’s not a “progressive” tax, in either nomenclature (as in, it’s disproportionately higher on the wealthy) or in philosophy (it’s “woke”). It’s a tax on everyone and everything. In some circles, it’s considered a fairer tax (see: FairTax) than an income tax is, if it were a substitute rather than an adjunct, but that’s an aside. Fact is, those much admired European nations tax all their citizens on both their income and their spending, at a rate that’s a multiple of what Americans pay, either currently or under Biden’s plan.

So, how are Joe and the Democrats going to deliver all the stuff their supporters expect?

Before I answer that, let me (re)introduce you to Hauser’s Law. Hauser’s Law is a historical observation of post-War American income tax revenue that notes that, no matter income tax rates or the structure of the tax code, tax revenues stay at a long-term steady-state average of 19.5% of GDP. The conclusion is simple: People alter their behavior in response to changes in the income tax code. We are willing to tolerate giving the government 19.5% of our income, in the aggregate and across the years, and the only way to increase revenue long-term is to increase GDP. I’d argue that this is cultural, and it’s certainly not going to change upward when so many continue to expect “other people” to pay, rather than themselves. So, tax policies that promote maximum growth are the correct answer, and that means lower rates and fewer impediments to growth (hey Donald, time to give up on your tariff obsession).

There’s a way around the Hauser’s Law cap: taxing consumption. As in, VAT comes to America. No one’s talking about it, but if government continues to spend as it has been, it has two choices: continue to print money and balloon the national debt, or find another major revenue stream, one that’s not income-based (and no, a wealth tax won’t even make a dent) but consumption-based.

Guess who’s going to be much more heavily burdened by this? Certainly not just “other people.” That’s the reality of the Left’s desire for Europe-style outcomes. They require Europe-style taxation.

The Scandinavians have a higher tolerance for taxes on themselves than Americans do. Whether that’s born of their culture or a result of simply having lived with it all their lives is a(nother) aside. Americans don’t share that attitude, otherwise the Left would be telling politicians “Double or triple my taxes!” Sure, once in a while, you’ll hear or read someone claim “I’m happy to pay more taxes so other people can be taken care of.” That they are already able to (you can make a gift to the United States) but don’t tells us that their claims are hollow. Even if they actually do want to pay more in taxes, they don’t want to be alone. In other words, their altruism and generosity is about masking coercion of others with moral preening. Moreso, I’ll lay long odds that they aren’t willing to tolerate the massive hikes that’d be required to bring America in line with the Scandinavian model (nor are they willing to go along with that model’s other elements, like school vouchers, privatized social security, zero minimum wage, and an affinity for capitalism).

Scratch just under the surface of any tax-increaser and you’ll find some combination of deceit, hypocrisy, ignorance, and detachment from reality. THAT is the truth about taxes and taxation in America.

Peter Venetoklis

About Peter Venetoklis

I am twice-retired, a former rocket engineer and a former small business owner. At the very least, it makes for interesting party conversation. I'm also a life-long libertarian, I engage in an expanse of entertainments, and I squabble for sport.

Nowadays, I spend a good bit of my time arguing politics and editing this website.

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