Conservatives claim that taxes in America are too high. Cross-national data and historical data from the United States raise serious doubts about this claim. As a percentage of GDP, the tax burden in America is low compared with many other advanced capitalist countries. Tax rates for individuals and corporations in America are also comparatively low. Yet conservatives have long complained that taxes in America are too high regardless of historical fluctuations in the tax burden and tax rates, and regardless of economic and geopolitical circumstances. Nowadays, about half of Americans believe that their own taxes are too high. Yet the overwhelming majority feel that taxes on corporations and the rich are too low and that they should be paying more, not less in taxes. Republicans and especially wealthy Republicans are the most likely to be concerned that taxes on corporations and the affluent are too high.

Conservatives claim that progressive taxation in America is unfair to the more affluent because it punishes them for working hard and redistributes their income to less affluent people who are lazy, and therefore don’t deserve it. It is true that some of the revenue collected from corporations and the more affluent pays for programs for the less affluent. But this ignores that even poor people pay taxes. It ignores that most people who receive government transfer payments are children, elderly, disabled, and working people, not slackers. And it ignores the many tax breaks, loopholes, subsidies, and bailouts that the affluent and corporations receive from government – a hidden welfare state – that costs taxpayers billions of dollars annually. In fact, cutting taxes and therefore spending on social programs can exacerbate inequality and undermine social cohesion and political stability, none of which is good for the economy or society. These arguments are supported by cross-national and US historical data.

Conservative myths that justify cutting taxes, especially for the rich and big corporations, persist despite being deeply flawed theoretically and empirically. Why? They resonate with people’s assumptions that human nature is all about pursuing self-interest and that government is a predatory Leviathan intent on maximizing tax revenues in its own self-interest. Sometimes this is true, but evidence suggests that often it is not. Additionally, the conservative myths are ambiguous and flexible, so conservatives can twist them in many ways to support their tax-cutting efforts. They are also simple and easier for the average American to understand than other approaches to tax policy. Huge sums of money are spent propagating these myths through lobbying, political campaigns, think tanks, media, and educational institutions. The visibility of progressive income taxes and the invisibility of regressive taxes and the hidden welfare state make it easy to claim that taxes are unfair to those at the top.

Conservatives claim that high taxes undermine national economic performance. Yet comparisons of economic growth rates across the advanced countries and across the US states provide little support for the idea that high taxes necessarily hurt economic growth. There is also little evidence that high taxes hurt labor productivity or capital investment, or that governments engage in a tit-for-tat “race to the bottom” by competing to see who can lower taxes the most to encourage investment. Furthermore, data do not support the claim that reducing taxes is necessary to improve a country’s international economic competitiveness. Countries can stimulate economic growth, improve labor productivity, and facilitate economic competitiveness in many ways that do not require low levels of taxation. Those that use government revenues to fund education, research and development, and scientific and technological innovation, for instance, do very well even with high taxes.

There are several downsides to having lower taxes that conservatives tend to ignore. Low taxes are frequently associated with worse health outcomes, such as life expectancy and infant mortality. Low taxes are also associated with worse educational outcomes. Less social mobility, lower human development scores, and worse infrastructure are also associated with lower levels of taxation according to cross-national and US data. None of this is good for America’s economic performance or society.

Conservatives claim that high taxes encourage government inefficiency and waste, and that the private sector uses money more efficiently and less wastefully. Why? Because government has become so large that oversight, coordination, and decision-making are difficult, corruption has become a problem, market discipline is absent, government officials are prone to spending revenue carelessly, and measuring government waste and efficiency is hard. Hence, taxes should be reduced to limit government inefficiency and waste. But this assumes that market actors are less wasteful and more efficient than government and that they don’t suffer from many of the same problems that conservatives attribute to government. There is little cross-national or historical evidence to support the conservative claims. In fact, evidence suggests that cutting government revenues and unleashing market forces can sometimes be disastrous for the economy and society, as the Enron and 2008 financial crises proved.

Conservatives claim that high taxes reduce economic freedom of choice so tax cuts are necessary to increase freedom. But freedom is ambiguous. Freedom from taxation can also enable people the freedom to do things that are detrimental to society, as financial crises and corporate scandals illustrate. Moreover, cutting taxes and therefore the resources associated with social programs can limit the freedom of these programs’ recipients to pursue their dreams and aspirations and to pull themselves up by their bootstraps. In that sense, freedom is unequally distributed in America. Poor people have fewer resources and less economic freedom than rich people. Cutting taxes to reduce welfare spending further limits the freedom of less affluent people and does little to increase freedom at the top. This is why cross-national data show that higher taxes are associated with more not less economic freedom. Cutting taxes also limits the government’s ability to provide the public goods that everyone needs.

Conservatives make five claims about why taxes in America should be cut, especially for corporations and the rich. They claim that taxes are too high, hurt the economy, encourage government waste, are unfair, and threaten Americans’ freedom. Their arguments are based on a set of economic ideas called neoliberalism that are much more a matter of fiction than fact. Yet these ideas have become taken-for-granted truths – myths – among conservatives. This chapter reviews the rise of neoliberalism, how it provided conservatives the intellectual foundation for their mythical claims about the benefits of tax cuts, how these myths affected tax policy in the United States, and how politicians have used these myths to justify cutting taxes. Popular as these ideas may have been among conservatives, they are often not supported by cross-national, historical, or public opinion poll data.