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“Taxes are the price we pay for a civilized society”

It’s a nice quote, but what was the actual tax burden on Americans when Oliver Wendell Holmes Jr. suggested this in 1904?

Not much:

Research shows that from the founding of our nation, 1787-1849 (63 years) federal spending averaged 1.7% of GDP. For the next 51 years, 1850-1900 (including fighting the Civil War) spending averaged only 3.1%. From 1901 till 1930 (including fighting WWI) it never reached 8%, and averaged approximately 3.2%.

I would be more than happy if the United States taxed itself at a similar rate.


Arguments I’m Tired of Hearing; Episode #389567

“Why can’t we go back to the tax levels of 90’s, you know, when America was experiencing a lot of growth and people had jobs”

This classic cum hoc argument ignores the fact the growth of the 90’s led to the dotcom bubble and a recession. There were plenty of accounting scandals (Enron anyone?) to go around. The growth, at least some of it, was not real. The same way increasing housing prices didn’t reflect a true, underlying value (what used to be called a “natural” value).

And there’s still the problem of the mechanism, how will increasing taxes now give us back 3%+ GDP growth? How does it work? The fact of the matter, and I’ve published this graph and other iterations of the idea correlating government spending to GDP growth, the bigger chunk of the pie eaten by government in the form of spending, the slower an economy grows (on average):