December 14, 2017
Federal Taxes Have a Good Side Too
This Donald Duck cartoon, funded by the U.S. government in 1943, urged Americans to pay their income taxes to support the war effort. Paying taxes was a patriotic act, to build up the inventory of war planes and battleships to defeat the Nazis – “sink the Axis!” the narrator bellows.
Nobody liked paying taxes then, and they still don’t. Yet there was a growing awareness as the war played out in the 1940s that taxes – like saving your scrap metal – were necessary to advance the greater good.
Things are different today. There doesn’t seem to be as much room in the public conversation for the benefits that federal taxes bestow, such as Social Security, Medicare, Medicaid (nursing home funding) and the Part D prescription drug benefit for retirees, or for government investments in education, roads, and research – or about who would suffer more if deprived of these benefits.
“Most people who do in fact receive significant forms of economic security from the federal government don’t know it,” argued Molly Michelmore, an economic historian at Washington and Lee University, in a recent interview on New York public radio.
It might be more accurate to say we sometimes take our social programs for granted. After all, Congress passed Medicare way back in 1965, when baby boomers were in grade school or high school. The automatic annual cost-of-living increases for Social Security started in 1975 – the program was initially signed into law way back in 1935.
On the other hand, the public values its government benefits when lawmakers try to retrench, as seen during the recent debates over repealing the Affordable Care Act. The New York Times would soon report, health insurance enrollments “blow past prior years” on Healthcare.gov.
The bottom line: we value our benefits, but paying the price is a different matter. Indeed, three out of four Americans in a 2011 Gallup poll said the federal government “is spending too much on government programs.” Occasionally, a strong pro-spending consensus emerges. Echoing the 1940s war effort, President George W. Bush’s establishment of the Department of Homeland Security was a very popular response to terrorism on September 11, 2001, the worst attack on U.S. soil since Pearl Harbor.
Lawmakers and others have legitimate concerns about the increasingly expensive Medicare and Social Security programs, which are running long-term financing shortfalls. This brings us to the tax cuts winding through Congress now. Proponents advance a “supply side” argument: lower tax rates will put more money into investors’ and businesses’ hands and generate sufficient economic growth to offset the cuts.
But to the extent that the cuts increase the federal deficit, they will increase the pressure to curb Social Security and Medicare spending.
Perhaps the risk of reductions in these middle-class programs will shift the narrative back to more appreciation for how taxes, while unpleasant, benefit our lives.
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