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John L. Campbell, "Pay Up!: Conservative Myths about Tax Cuts for the Rich" (Cambridge UP, 2025)
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John L. Campbell
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John L. Campbell
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John L. Campbell
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Stephen Pimpair
Welcome to the New Books Network. Welcome to the New Books Network. I'm Stephen Pimpair, host of the Public Policy Channel, and we are joined today by John Campbell, who is the author of Pay Up Conservative Myths About Tax Cuts for the Rich, new from Cambridge University Press. John, welcome. Thank you for joining us today.
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John L. Campbell
Thank you very much, Stephen, for inviting me.
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Stephen Pimpair
So I wonder if you might start us off by telling folks a little bit about who you are and what you do and what brought you to this book.
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John L. Campbell
Well, I am a emeritus, retired now, professor of sociology. I was at Dartmouth for about 25 years and before that I had faculty positions at Copenhagen Business School and Harvard University of Wisconsin. And basically what I do, did and still do, I study in a comparative context how politics and institutions that affect economic performance and political activities and so forth in the advanced capitalist countries. I've been doing this for most of my career. I've been studying taxes on and off for most of that time. I'm interested in taxes in part because they provide an institutional structure that's very important for how capitalism operates and how it operates in different ways in different countries. So that's who I am. And the reason that I wrote the book actually stems from a conversation I had with a good friend of mine over lunch. We were talking about politics, talking about the Trump administration, and he asked me, he said, can you. Can you please tell me why it is that the conservatives are so obsessed with tax cuts? And I thought about this for a minute or two, and I said, well, there are actually several reasons why, which we'll get to a little bit later in this conversation. And we talked about that for a little bit, and then I went home and I couldn't stop thinking about his question. And I sat down with a paddle in front of the fireplace. It was a cold night. And I just outlined five different myths that the conservatives seemed to trot out. And I thought to myself, well, this. This could actually be a book. And I sat down on my computer the next day and I started writing. And a year and a half later, there was a book. So that's how it all came to be. Lunch is a good thing to have with friends.
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Stephen Pimpair
Exactly. Turns unexpectedly into books sometimes.
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John L. Campbell
So I actually feel. Or having lunch with them again, because I might have to write another book.
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Stephen Pimpair
Right. So why don't we start there? Right. The book rebuts five what you. Of what you describe as deceptive myths about taxes. That taxes are too high, that high taxes harm the economy, that high taxes encourage government waste, that high taxes are unfair, and that high taxes threaten freedom. Why don't we take each of those in turn and if you would, for us, give us sort of the, the. The Steelman version of the conservative argument. Right? So give us the best version of the argument and then tell us why they're wrong. So let's start with the idea that taxes in the United States are too high.
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John L. Campbell
Okay? Conservatives are constantly harping about this. They say income taxes are too high. They say corporate taxes are too high. Sales taxes are too high. On and on and on. The fact of the matter is, if you look at this historically, just within the United States, income taxes have come down remarkably since World War II. They're at some of the lowest rates that they have been since World War II, both for corporations and for individuals. Same is true for Social Security taxes. And if you put this into a comparative context, look at how the United States compares to the other advanced capitalist countries. It's amazing that the tax, the overall tax burden in the United States is among the lowest, that is the lowest of the advanced capitalist countries in terms of income Tax rates, which is one of the things that the conservatives like to drone on about. In fact, the marginal tax rates, that is the tax rates in law are actually a little bit on the high side, comparatively speaking. But if you take into consideration tax deductions and tax breaks of all different times for everybody, the effective tax rates are pretty much average. You know, so there's nothing really high about taxes in the United States. And one interesting footnote to this. If you look at the public opinion poll data and you ask people do you think your taxes are too high or too low? People are always the majority complaining, yeah, my taxes are too high. I wish that they would be a little bit lower. But then if you ask them about the taxes paid by different income groups and by corporations, most people will tell you that taxes for poor people are definitely not too high. Taxes for middle income people are just about right. And the taxes for wealthy people and corporations, by a large, large margin people will say they definitely don't pay their fair share. So there you have it. You know, are taxes too high in the United States? I would argue that that is absolutely not the case.
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Stephen Pimpair
So not too high in comparative terms, not too high in historical terms, not too high when you look at particularly upper end in what people think the rates ought to be. But nonetheless, you will have conservatives who will arg were they lower the economy would prefer perform better. Right. That that regardless of how we undertake this comparison, the fact that our taxes are where they are impedes economic activity and economic growth. So, so walk us through why that particular argument does not hold up in your view.
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John L. Campbell
Sure. Well, first of all, I need to be clear about this. I'm not arguing that taxes have no effect on economic performance. That's not the argument that I'm making. The argument I'm making is that contrary to the conservatives who typically say if you lower taxes, all will be well, period. That's a grossly misleading statement. Because if you look at particularly the cross national data comparing the United States to other countries, there is no statistical association between whether your taxes are high or low in terms of the effect that they have on economic growth, the effect that they have on economic productivity, the fact that they have, there's no, there's no reasonable relationship or statistically significant relationship between taxes and prosperity as measured, for example by GDP per capita. There's no statistical relationship between taxes and foreign direct investment in the United States and on and on and on. Now that's not to say that there's no relationship, but the list of variables that affect all those different measures of economic performance that I just went through is a long, long list. Taxes are on it, but by no means are taxes that be all and end all if you wanted to improve economic growth. Now, something that's important to understand about all this, and that is that given the fact that there's no real strong statistical relationship between tax burdens and economic performance, the reason for this is that there are different types of capitalist economies. Some have very high tax rates, very heavy tax burdens, and some much lower. And the example that I wrote about in the book is a comparison between Denmark and the United States. The tax rates in Denmark and the tax burden in Denmark is about the highest it is in any of the advanced capitalist countries, much, much lower in the United States. So there's a huge difference there in the tax regimes of these two different countries. Yet on average in most years economic performance in those two countries is very, very similar in terms of gdp, per capita, productivity, economic growth, et cetera, et cetera, et cetera. So despite the fact that there is wide difference between the two different tax regimes, there's no significant difference in terms of economic performance. Now there is one. There are two caveats to this. One is that there is one important difference between these two countries in terms of economic performance and that has to do with inequality. The poverty rate in the United States is about twice what it is in Denmark. Inequality in the United States is far, far greater than it is in Denmark. And the reason, of course, is that Denmark, because it has a very high tax burden, has a very big welfare state so they can pay for the programs that will absolve you of these inequality and poverty kinds of problems. Whereas in the United States we certainly don't, we certainly don't have that. So that's point one. Point two is that one of the reasons Denmark has such a strong economic performance record and by the way, year in and year out, it's always ranked in the top 10 most competitive economies in the world. The United States is usually in the top 10 as well. The reason the Danes can do it with such a high level of taxation, one of the reasons is because what the state does with the tax revenue that it brings in oftentimes is to invest in things like research and development, education, infrastructure like high speed Internet and so on and so forth, and sometimes points it in very particular directions. I can give you one quick example. I interviewed several years ago, a member of the Social Democratic Party, left leaning party over there. We were talking about this and I asked him, how can it Be with such a high tax rate you do so well economically? He said, well, part of it has to do with the welfare state. He said, what do you mean by that? He said, well, you have to understand, back in the 1970s, Denmark was getting much, much stronger economically and prosperity was rising. People were making more money. And so people's diets started to deteriorate a bit in terms of quality and the food that they were eating. And diabetes started to become a bit of a problem. And so what the Danish government did at that time, and it was a social democratic government at that time, they basically started to take some of that tax revenue that was coming in and invest it in research and development into diabetes prevention, insulin delivery systems and so on and so forth. The result of that, in part was the development of a company that you may have heard of before, Novo Nordisk, which is the biggest insulin delivery system manufacturer in the world and is now so successful, it's remarkably successful, such that when the Danes try to figure out how well their economy has done from one year to the next, they have two sets of figures, one set of figures including everything. And the second set of figures excludes Novo Nordisk and puts them over there all by themselves because it is such a phenomenally successful operation. All of which stems indirectly from the fact that they had high tax rates in the Danish system.
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Stephen Pimpair
So that's a perfect segue, right? The next argument is, well, okay, fine, fine, fine, fine. But the problem with high tax rates is that if you have all of that money flowing into the national government, it will just waste it. It encourages government waste. What's wrong with that particular argument?
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John L. Campbell
Well, nobody's going to argue that the government doesn't have waste, for sure. But what the conservatives imply, but don't always say is that, well, government is wasteful, it's more wasteful than the private sector. Therefore, if we cut taxes and leave more money in the private sector's pocket, that money will be used in more efficient, less wasteful kinds of terms. There are several problems with the argument, one of which is that there's no data to support it. Very, very, very few. Straight up comparisons that are intellectually and statistically rigorous. Comparing the performance of public and private sector organizations, there are a few. There are some that have been done both across countries and within countries, including the United States. Looking at the difference, for example, between public health organizations, how wasteful, how efficient are public hospitals versus private hospitals versus nonprofit versus profit hospitals? And the evidence there is very, very mixed. It's inconclusive which of Those is in fact, more or less wasteful. So there's a big problem there in terms of the data. There just isn't data to make these kinds of comparisons. Second of all, if you think about the American economy over the last 15, 20 years or so, there are some egregious examples of how unbelievably wasteful the private sector can be. And I would point to one that everybody was listening to. This podcast would recognize. The 2007, 2008 financial crisis, right? This was the result of all kinds of wasteful and oftentimes deceitful practices in the financial services industry, beginning with the lending of subprime mortgages to people who really shouldn't have been in the housing market in the first place. That crisis unfolded and it cost the American economy somewhere in the neighborhood of a trillion dollars. This one a t not a b trillion dollars worth of losses in a matter of weeks can point to the Enron scandal. You can point to the Madoff scandal. You know, there's a long list of unbelievably wasteful instances in the private sector which suggests that it's you. You can't make the argument convincingly that private activity is necessarily less wasteful, more efficient than government public sector activity.
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Stephen Pimpair
So let's take the next argument right then. Okay, fine, fine, fine, fine, right. All of that, that's all well and good, but you know what? When all is said and done, it's just unfair, right? That the tax burden lands inequitably on my people, whoever my is, under any given circumstance. And in a just and fair society, tax rates would be lower. What do you do with that kind of argument?
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John L. Campbell
Yeah, what do you do with that argument? Well, first of all, one of the things that conservatives do to support that argument is to say look at the tax burden from individual income tax rich people in the United States. I mean, inordinately large piece of that tax burden. I don't have the numbers off the top of my head, but it's somewhere in the neighborhood of 3/4 of all the income tax revenue comes from the top 20% of income earners. Can't argue with that. But then conservatives say, and so what this means of course, is that rich people and corporations are paying all the taxes and people farther down the income ladder are paying less and people at the bottom don't pay anything, which is nonsense. They pay sales taxes, they pay property taxes, they pay fees for this, that and the other thing. In fact, even some of the poorest people do in fact pay corporate income taxes. I mean, if you have a small little barbershop or a local corner bar, you might not make much money, but you have to pay at least a little bit of income tax. So to say that poor people don't pay their fair share, no. Does it really hold water? Now the second thing that conservatives will say is, well, this isn't a fair system because rich people pay all these taxes and corporations pay all these taxes. The tax revenue is then used to fund programs for the undeserving poor. Right? Welfare state is a welfare state for chiselers and freeloaders. Well, the fact of the matter is that the biggest welfare state programs we have in the United States, that be Medicare, Medicaid, Social Security, almost all of that money goes to people that are either working and sometimes working more than one job, children, you can't expect them to be working and paying taxes. The elderly who are retired now, who've been paying into the system for their entire working life, and people that are on various disability programs. So to argue that all this tax money is being sucked out of the pockets of rich people and corporations and being used to pay for these so called welfare queens, that's the Reagan term, they're basically freeloading off government largesse. It just doesn't hold water because these people are not freeloaders. So this argument about the downward distribution or redistribution of tax revenue is a little bit difficult to substantiate. On the other hand, what's oftentimes neglected in these kinds of arguments is the way tax revenue is collected and then distributed back to people at the top. In corporations, it's the so called hidden welfare state. It's the world of tax breaks, tax loopholes, so called tax expenditures which, which go into the trillions of dollars or not very long periods of time to corporations. And again, we can point to the 2008 financial crisis. There was a phenomenal amount of money paid by the government to prop up, for example, General Motors JP Morgan, and so on and so on and so forth. And if you look at the list of some of the largest corporations in the United States, the Walmarts, the apples, etc. Over the last 15, 20 years, they have garnered billions and billions of dollars in terms of direct subsidies, research and development grants, tax breaks of one form or the other, and so on and so forth. The point being people at the top will argue and conservatives will argue, well, all this tax revenue is being redistributed downward to people that don't deserve it. Well, fact of the matter is there's a big, big, big chunk of it that's going into the pockets of people who are very wealthy to begin with. There's one last bit of, one last bit of information to consider in all this, and that is if you decide to make a big across the board tax cut, such as, for example, the 2017 tax cut and Jobs act from the first Trump administration, who benefits from that? Well, if you, if you think about this in broad terms, people at the top may get, let's just say a 5% tax cut. You know, is Elon Musk going to even notice it? I don't think so. It's not going to have any effect at all on his lifestyle. He can go wherever he wants, he can eat whatever he wants, he can do whatever he wants. Has no effect. A little bit farther down the income scale, if you look at middle class people that get a tax cut, it might help them a bit. They might be able to suddenly afford a new car or fix their roof or pay tuition for their kid to go to college, et cetera, but it's not going to be a huge benefit. Might be a slight benefit. People at the bottom, if you cut taxes across the board, what this is going to mean is that a lot of the welfare programs that they depend upon will be scaled back. Right. And we're seeing that right now with what's going on with Medicaid, for example, in the United States. So tax cuts across the board may in fact have very, very detrimental effects to a significant chunk of the population. And I would add on top of that, if you look at the distributional effect of tax cuts from the first Trump tax cut, 2017, and the more recent one in 2025, where they extended those tax cuts and added a few more things on, the distribution of benefits is highly skewed toward the upper end, the bottom 20% of the, of the, of the population in terms of income earners on average, yet about a 1% increase in after tax income, people at the top 20% will get about a 3% increase in after tax income. And the people in the 1% at the tippy top will get, I think it's about a 3.5% or 3.7% income increase. So these tax cuts have distributional effects that rarely, if ever, get talked about in these conservative arguments. Us.
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Stephen Pimpair
All right, so let's turn our attention to the final argument that you say conservatives make against taxes, and that is that they are a fundamental threat to my freedom, to our freedom, to collective freedom. What is that argument and what is your response to it?
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John L. Campbell
So the argument, in a nutshell, is that if you tax me, you're taking money out of my pocket, and that limits my freedom to spend that money as I see fit. And it's true. If you take money out of my pocket, I can't spend it as I see fit. Fair enough. But there's a distinction that needs to be made here in terms of what kind of freedom are we talking about? Conservatives are talking about what might be referred to as freedom from, that is freedom from the government's ability to reach into my pocket and take away my money. Sure, if you cut taxes, you're going to increase people's freedom from government oppression, if you want to use conservative terminology. But the other side of this is something we might Refer to as Freedom 2, I.e. the Freedom to do as we would like to do. And here's where you run into problems. For example, the 2017 tax cut under the first Trump administration increased people's freedom from tax oppression, to use conservative language. But the promise was increasing freedom from was going to facilitate freedom to invest that money in ways that's going to bring the economy back and improve growth and so on and so on and so forth. It didn't happen that way, though, because there were no strings attached to the tax cuts. Right. And as a result, it had no appreciable effect on corporate investment one way or the other. And the reason for that was that only about 20% of the tax cut for corporations was actually reinvested in things like research and development and new plant and equipment and, you know, things that would be good for the economy. The other 80%, give or take, went to stock buybacks to pay dividends to their investors. And this stuff doesn't have anything to do with improving the economy. So, you know, you can improve people's freedom from, but it's not necessarily going to have positive effects in your freedom to do things that are beneficial for society. Furthermore, there is Something called the tragedy of the commons that environmental people often, oftentimes talk about, such as, for example, depleting, depleting the aquifer underneath cities in Southern California, there's a problem with drought, climate change, and so on and so forth. The concern is if people have freedom to do as they want to, they can use as much water as they want to, water their lawn, to wash their car, to wash their car twice, to water their lawn again, and so on, so so forth. And in the aggregate, this is going to deplete this common pool resource, produces this tragedy of the commons where there's not enough water anymore for anybody to use as they see fit. Well, one way that cities in California figured out could solve this problem, or at least mitigate it to a certain extent, was to now, wait for it, impose taxes on people and cities and communities that used water in excessive amounts and that solved the problem. So here we have an example, a tragedy of the commons example, where the imposition of taxes, the restriction of freedom from, creates a situation which is beneficial to the entire community. So when you talk about taxes can threaten freedom. Well, yeah, but you need to think about this much more carefully in much more detail.
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Stephen Pimpair
So final question for you, John. So as you observe in the book, these are arguments that we've been living with for decades and decades at this point. And as you also, I think effectively demonstrate in the book, there's not a lot of good evidence for most of them, right? These are rhetorical arguments that tend not to be supported by the evidence, and yet they are still everywhere around us. How do you account for that and what do we do about it?
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John L. Campbell
Well, there's. Yeah, now, now we're in the realm of politics. Several things going on here. First of all, there's a certain simplicity and in that sense a certain elegance to the conservative argument because they can make their case for tax cuts in very simple, short, pithy terms, right? I can say, why do we need tax cuts? Well, we need tax cuts because it improves the economy. How? Well, because cut taxes, more money in people's pockets, boost the economy, end of sewer from the left. It takes a lot more time and explanation to convince people that tax cuts are the way to go or the way not to go. So there's a simplicity in the conservative argument which makes it ideal. Or podcasts, for example, for the 10 second sound bite on TV news, et cetera. So that's point one. Point two is money in politics, right? The forces that want their taxes cut have very, very deep pockets. Corporate America, wealthy Individuals can pay a lot of money to lobbyists to go out there and try and affect the tax code in ways that will be beneficial to them, that is reduce their taxes for them. And this gets to the very, very fine grained nature of the tax code itself. There's a great example of this from a few years ago. Louis B. Mayer of Metro Gold one mayor was about to retire and he was due a payout for his retirement of somewhere in the neighborhood of $2.5 million. Now, this was several years ago when $2.5 million was $2.5 million. Right. And the problem was he was going to have to pay income tax on this at a rate of about 90%. Huge. Well, Louis didn't want to do that, so he hired a tax firm to lobby on his behalf and was able to insert, I think it was two short sentences into the tax code, which effectively reduced his tax rate on that $2,500,000 payout from 90% to 20%. So he was paying capital gains tax rather than a personal income tax. Capital gains taxes are far lower than income taxes, generally speaking. Point being, if you've got the money, you can affect the tax code in ways that will be beneficial to you. So being able to pour money into lobbying, being able to support candidates running for office that tap the conservative line about the need for tax cuts, all of this stuff contributes to the fact that we just continue to have these arguments over and over and over again. So it's money and power. That's what it boils down to.
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Stephen Pimpair
You're listening to the Public Policy Channel of the New Books Network, and we have been speaking with John L. Campbell, who is the author of Pay Up Conservative Myths About Tax Cuts for the Rich from Cambridge University Press. John, thank you for joining us today.
- [33:34]
John L. Campbell
Much appreciated, Leon, my pleasure. Thanks a lot, Sam.