To answer this question, we need to bear in mind several points that I have made over the years in this blog. One point I've tried to make (perhaps ineffectively) is to demonstrate that tax cuts do not necessarily help the economy. I'll not go at this issue again since it is a point I have already made, except to say this. The argument we often here "economists say tax cuts will help the economy" is wrong. I have a number of friends who are economists and they do not say this. They say that the issue of cutting taxes needs to be studied and one cannot assume in advance that a tax cut will either help or hurt the economy. It is a matter to study; not about which to make assumptions.
The second point we need to make to address this question is that we need to try to approach it in a non-ideological way. This point follows from what I said in my previous paragraph. Tax cuts are often associated with right wing politics and with good reason. Conservatives often talk about tax cuts (their historical record is, of course, mixed, but currently tax cuts are associated primarily with the right wing. It gets easy, then, to see a discussion of tax cuts as a left v right debate. I think that we need to put this debate on hold and consider what taxes can and cannot do if we are to have a serious discussion of tax rates.
The third point is that we need to think about what the problems with taxes might be. Several years ago we ran a conference on regional development here at Mount A. As part of this conference, there was a discussion of tax rates and the results of that discussion surprised me. I found that capitalists were not arguing for tax cuts. They liked them (particularly corporate tax cuts) but did not see them as necessary to economic development. Capitalist thinkers (often associated with universities and think tanks) argued for tax cuts but business people did not. Instead, what business people asked for was consistency. In effect, they said this: stop changing the tax system every year. Stop messing around with this deduction and that deduction. Instead, keep things the same for a number of years. We are confident, they said, in our ability to do our job. But, if tax rates, etc., change every year, this adds new expenses to what we do. We'd like tax cuts but what we really want is consistency year after year in the way taxes are done. If we could have that, we can lay our plans and do our jobs. This suggests that the real problem with taxes is not their rate but government tinkering. I'd be willing to accept this point.
With these three points made, we also need to consider what taxes do. Taxes are a way of collecting revenue for public spending. I have found it interesting over the years that the same people who argue against taxes will also be quick to argue that the government should do X or Y. It could be anything: fix up the local ball park, buy a new fire engine for the local volunteer fire department, fix the pot holes in the streets, etc. Yet, all these things cost money. In other words, we (citizens) make demands on our governments (federal, provincial, municipal) and then ask our governments to fulfill these demands at the same time we say "but we don't want to give you any money to complete these tasks." Some things can be put off for a year or should be the subject of longer range phased in planning. I have no problems with that view. I own a home and that is precisely the type of calculation I do with regard to repairs (how much money do I have and what are my priorities? What can I do part of this year part of next year?). This is fair enough. But, it still does not miss the point that governments need revenue because of demands from citizens and these demands are not coming from "special interests." They are coming from ordinary people. Nor are they coming from "welfare bums." They involve things like education, road repair, health care, national defense, environmental protection, policing, amateur sports, libraries, etc. In other words, things that ordinary people use and like and about which there is no debate of their merits (except on the fringes of public life).
Taxes can also be efficient. This is one of those need to study things because it is counter intuitive. The more sophisticated anti-tax perspective is predicated on the idea that the state (collective action) is inherently inefficient compared to individual private market undertaking. Yet, as I said, this is an issue to be studied not assumed. In some instances that state may indeed be less efficient. In other instances -- health care springs to mind -- it tends not to be. Canadians get a relatively good quality health care for their tax dollars. We don't have perfect system people don't like waiting for health care. I don't, at least. But, compared to other actually existing health care systems, Canada's is not bad. Indeed, most of the countries that have better health care systems then Canada actually have more (not less) state involvement. The US health care system is not the disaster most Canadians think it is. It is has some serious problems but so does Canada's. We can debate whose problems are worse, but the point I want to make is that Canadians actually pay less for health care then do Americans on average even when you include what Canadians pay in taxes toward health care. Here, then, is a counter intuitive situation: taxes can save money.
My final point for now: there may be some areas of the economy where the state should not be involved. These will be culturally determined but that does make them less real. Let me continue with my previous example. Let us assume that Americans are an intelligent bunch. Why, then, do Americans pay more for health care? That does not seem like a smart thing to do, does it (to pay more then you have to for something). The answer is that Americans want to maintain a largely private sector mode of health care delivery. And, that is worth something to them and so they are willing to pay more for it. This is a value (and, hence, cultural) and it has an effect on the population. Canadians -- as I've pointed out before -- look at the world differently then Americans. They viewed fully privatized health care as inefficient: it was not providing people with the health care they needed as a reasonable price. Hence, they changed it.
Now, Canadians will have other values -- there will be other spheres of the economy -- on which they do not want tax dollars spent. We have seen, for instance, that Canadians are remarkably skeptical about using tax dollars to fund professional sports (say, to build arenas). Oddly. Americans appear to be less sensitive to this point then Canadians. The Dallas Cowboys got a whole bunch of public money put into their huge new stadium. In thinking about taxes, then, we also need to think about spheres of the economy where we don't want tax dollars spent. This may end up costing us more on average or collectively then if we had the state involved. Tickets to hockey games, for instance, may cost more if the state does not contribute to the costs of arenas. But, we might say "gee, that is OK and we can live with that because we don't believe in spending public money on professional sports teams."
As a first salve in a different discussion of taxes, then, these are the points I would "put on the table": that we should try to be non-ideological, that we should study the issue and not make assumptions about the merits or demerits of state spending; that we need to consider where the problems with taxes lie (for instances in a lack of consistency over time as opposed to the specific rate), that public spending is not inherently inefficient, and that there are value-based spheres of society to which we might not want to see public spending (the direction of tax dollars) directed. These will differ from society to society and so comparison with other countries might in terms of taxes might not be instructive whereas a consideration of Canadian values might be.