I greatly appreciated David Carroll Cochran’s article “Plutocracy or Democracy?” (February 10). Still, I believe he let our bishops off a little too easy with respect to their silence on the transformation of the United States into a plutocracy. He cites an example of a past statement, the magnificent pastoral letter Economic Justice for All, as an example of how the church has spoken out. As he notes, however, that was written twenty-six years ago. It is true that the bishops have more recently sent letters to Congress advocating that when it comes to deficit reduction, legislators should take note of the special needs of the poor, the elderly, and immigrants. But this is relatively weak stuff, given the scope of the current assault on the middle class and the programs on which our unemployed, struggling workers, and poor depend.
Just think of the potential impact if the bishops would launch the kind of effort they have put into the abortion issue, or even the effort they have put into the quickly mobilized campaign to “preserve freedom of choice for religious institutions.” In these actions, they have been united in declaring where they stand.
So why haven’t they been as vocal when it comes to the issues raised by Cochran? I’m afraid that speaks volumes about where their priorities really lie. Does it mean that they are, in fact, quietly pleased with the way matters are going?
David Carroll Cochran has made a breakthrough of great proportions. He has discovered that “simply adopting the tax rates of our northern neighbor, Canada, would instantly return us to surpluses—and still leave us one of the least-taxed countries on the planet.” That finding destroys the arguments of free-market economists and supply-siders who contend that we cannot tax our way out of the yearly trillion-dollar federal deficit.
But I hesitate to jump on this bandwagon. I looked up Canada’s income tax rates for the year 2010. They are as follows: “5 percent on the first $40,970 of taxable income, +22 percent on the next $40,971 of taxable income (on the portion of taxable income between $40,970 and $81,941), +26 percent on the next $45,080 of taxable income (on the portion of taxable income between $81,941 and $127,021), +29 percent of taxable income over $127,021.” Those rates do not strike me as significantly higher than in the United States, certainly not high enough to eliminate the trillion-dollar deficit. I also checked Canada’s provincial and property taxes. They are not higher than ours, from what I could see.
What about corporate taxes? According to Canadabusinesstax.com, Canada’s corporate tax rates are as follows: “Effective January 1, 2011, the corporate income tax rate falls to 16.5 percent [from the 2010 corporate income tax rate of 18 percent]. Yearly tax reductions will see the corporate income tax rate fall to 15 percent as of January 1, 2012. These corporate income-tax reductions, says the Department of Finance Canada, will give Canadian corporations the lowest tax rate on new business investment in the Group of Seven (G7) by 2011 and the lowest statutory tax rate in the G7 by 2012.” Something doesn’t jibe.
The Author Replies
I am grateful to James Fitzpatrick for his close reading of my article. It’s always gratifying when something you write sparks a reader to do more research. Unfortunately, adding up official tax rates is a difficult way to compare countries, since a thicket of deductions, credits, and loopholes mean individuals and corporations can pay very different rates in practice, just as students at a particular college or passengers on a particular flight may each be paying different rates regardless of the officially posted price.
The best way to avoid individual variation and the difference between official and effective tax rates is to look at how much tax revenue countries actually collect as a percentage of their GDP. Among thirty-three developed countries (members of the Organization for Economic Co-operation and Development), the United States ranks fifth-lowest on this measure, while Canada, still in the bottom half at twelfth-lowest, collects around 6 percent more in taxes as a percentage of its GDP than we do. The economists Michael Linden and Michael Ettlinger of the Center for American Progress calculate that collecting enough revenue to bring us up to Canada’s level would return us to a balanced budget with some surplus to spare.
It is true that this strategy goes against the advice of supply-siders, but since such advice is more political rhetoric than economic analysis, and routinely fails in practice, as the Bush administration’s large tax cuts showed once again, undermining Fitzpatrick’s faith in the supply-side gospel doesn’t trouble me. I disagree, however, that I wrote anything questioning the importance of free markets, which, rightly regulated, are consistent with both Catholic teaching and various levels of taxation. After all, even the Wall Street Journal and Heritage Foundation, both politically conservative free-market supporters, have a global index of economic freedom that puts several countries with higher tax revenues ahead of the United States—including Canada, by the way, which this year comes in as their sixth-most economically free country in the world.
David Carroll Cochran
Watch Your Language
Is it possible that you and columnist Charles R. Morris do not know the meaning of “hocus-pocus” (“Hocus Pocus,” February 24)? The phrase is a parody of the words of consecration in the Latin Mass: “Hoc est enim corpus meum.” They are the most sacred words of our faith, the words of transubstantiation. They were ridiculed by unbelievers—“The church is practicing magic.” I think Commonweal owes an apology to Catholic readers.
The Editors Reply
We regret having offended some of our readers by using “hocus-pocus” in a headline. While the term may have been invented by anti-Catholic bigots, it has long since passed into the language as a common phrase for any kind of sleight of hand. Few Catholics, and perhaps even fewer anti-Catholics, are now aware of its etymology.