Dworkin on Taxes and Legitimacy

So, I'm reading Ronald Dworkin's Is Democracy Possible Here. It's especially interesting because it's a relatively pop public affairs book by a top academic political philosopher. You get to see how he thinks his theories cash out in real political terms. Anyway, the aim of Dworkin's Chapter 4 on “Taxes and Legitimacy” is basically to argue that in the U.S. taxes are too low in general and that the Bush tax cuts in particular threaten the legitimacy of the state by undermining welfare spending required to treat citizens with equal concern. But the entire chapter seems to be based on, and vitiated by, a very simple mistake. Dworkin sets up the entire thing on the assumption that the generosity of welfare assistance and social insurance has some kind of internal connection to high tax rates on the wealthy. But that's just plain wrong.
First, the primary issue is budget priorities–what we're spending money on–not tax rates. Everything Dworkin thinks is required for the state to treat people with equal concern (and thereby to secure legitimacy) is a matter of spending money on the right programs. So there just needs to be enough money to do it. And there is. The U.S. could massively expand the generosity of welfare assistance, unemployment insurance, worker retraining, etc. etc., at the cost of a relatively small portion of the budget of the Navy. We could cut taxes significantly across the board and increase the openhandedness of the welfare state if we were willing to significantly reduce spending elsewhere.
I don't sense that Dworkin sees any need for military power that dwarfs the rest of the world's, so why not just admit that the government already has mind-boggling revenues at its disposal, and argue that it ought to spend much more on the kinds of programs that he thinks are required for treating citizens with equal concern and much less on fighter jets and allegedly humanitarian military intervention? Dworkin mentions in passing that all budgetary choices have distributive consequences, and even mentions military spending as an example of this. Indeed, he mentions the war as an onerous fiscal burden. But then he just breezes by to argue that the legitimacy of American democracy is threatened unless we raise taxes on rich people, because otherwise we won't be able to pay for his preferred social insurance scheme. It just doesn't make any sense.
Why the emphasis on raising taxes rather than on spending current revenues less wastefully and more in lines with the demands of justice? Indeed, if you're sniffing for threats to the legitimacy in the status quo system, the fact that a massive portion of current revenues is mispent on the warmaking industry is a much a more plausible candidate than the U.S.'s relatively low top marginal income tax rate. Moreover, if current revenue is spent poorly, you probably shouldn't assume additional revenue will be spent well. (If you're doing non-ideal theory, you've got to stick with it, Dworkin!)
Second, the U.S. tax structure is rather more progressive than most (all?) countries that have the kind of welfare/social insurance state Dworkin is looking for. The top of the American distribution pays a huge portion of overall taxes. Social democracies of the kind Dworkin thinks the U.S. should be more like do indeed tend to take a higher percentage of GDP as tax revenue. But relatively little of this comes from higher marginal income tax rates on the wealthy. Most if it comes from the middle class through relatively high consumption taxes. So if Dworkin's point is that government needs to take a bigger chunk of GDP, so that it can afford to implement the right kind of social programs, then he ought to be arguing that the American middle class needs to pony up.
But, again, the idea that current U.S. revenue is insufficient to finance Dworkin's social insurance scheme is wildly implausible. Even granting all the key normative premises in favor of this scheme (which I certainly don't) it's hard see why Dworkin thinks he has an argument about tax rates at all, rather than an argument about spending current revenue better.