Tax Burden At Historic Low?

According to one study the federal tax burden for individual Americans is at a level unseen since the 1950’s:

For the past two years, a family of four earning the median income has paid less in federal income taxes than at any time since at least 1955, according to the Tax Policy Center. All federal, state and local taxes combined are a lower percentage of per-capita income than at any time since the 1960s, according to the Tax Foundation. The highest income-tax bracket is its lowest since 1992. At 35 percent, it’s well below the 50 percent mark of much of the 1980s and the 70 percent bracket of the 1970s.

Even the combined California state and local taxes, while tied for fourth highest in the nation, aren’t particularly high for the state. In 2009 – the most recent year for which data are available – they accounted for 10.6 percent of Californians’ per-capita income, just slightly above the 25-year average of 10.3 percent.

“There’s this impression that there’s a colossal tax burden and that’s not really the case,” said Raphael Sonenshein, a political science professor at Cal State Fullerton. “But if you’re really angry at the government, you’re going to think taxes are too high.”

The recession contributes to lower taxes because many incomes have stagnated or fallen, and fewer retail sales mean less sales tax. But low tax brackets and a series of special deductions are primary factors in the reduced tax burden.

Meanwhile, government spending continues to grow, leading to record budget deficits and a $14 trillion national debt. Some tax hawks advocate holding the line on taxes and balancing the budget by cutting programs. But many economists think higher taxes are inevitable because of the limited trims possible for major expenses such as Medicare, Medicaid and Social Security. Those three entitlements account for 40 percent of federal spending.

The result of that is pretty predictable:

Those lower taxes have helped give the U.S. government the lowest revenues as a percentage of gross domestic product of seven industrialized countries surveyed in 2010 by the Congressional Research Services. (The other countries were Japan, Canada, the United Kingdom, Germany, Italy and France.) The U.S. also had the lowest spending as a percentage of the GDP.

But with the biggest gap between revenues (31.6 percent of GDP) and expenditures (42.2 percent of GDP), the U.S. also posted the largest deficit as a percentage of GDP – 10.5 percent.

That’s just nonsensical. If you’re going to increase spending, which is all we’ve done under two Presidents now for ten years, then cutting revenues makes absolutely no sense at all. Moreover, saying “no new taxes” doesn’t strike me as a governing philosophy so much as it’s a political slogan, and that’s coming from a guy who would prefer that taxes be as low as possible for everyone.

 

FILED UNDER: Deficit and Debt, Quick Takes, Taxes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. john personna says:

    Who are you going to believe? A tax policy center, or joe the plumber?

  2. c.red says:

    It’s nice for another “official” confirmation, but this has been observed and mentioned on a fairly continuous basis by various commentators at this site for the last two or three years.

  3. Southern Hoosier says:

    47% of the population pays no taxes. 10% of the population pays 70% of the taxes.

  4. Southern Hoosier says:

    There is a distinct pattern throughout American history: When tax rates are reduced, the economy’s growth rate improves and living standards increase. Good tax policy has a number of interesting side effects. For instance, history tells us that tax revenues grow and “rich” taxpayers pay more tax when marginal tax rates are slashed. This means lower income citizens bear a lower share of the tax burden – a consequence that should lead class-warfare politicians to support lower tax rates.

    http://goo.gl/7OmSl

  5. john personna says:

    “47% of the population pays no taxes”

    About 47 percent of U.S. households will pay no federal income taxes, which is not at all the same thing.

  6. john personna says:

    “10% of the population pays 70% of the taxes.”

    For what it’s worth, this one also confuses income taxes with “the taxes.”

    Leaving aside State and Local, Federal revenues come from other sources as well: Introduction to Taxation.

    In 2007, income taxes were 45% of federal revenues, less than half.

  7. Southern Hoosier says:

    john personna says: Sunday, April 17, 2011 at 17:41

    “47% of the population pays no taxes”

    About 47 percent of U.S. households will pay no federal income taxes, which is not at all the same thing.

    Since the article was about the income tax burden, I thought income tax was given. I don’t think you can buy anything without paying some tax, hidden or otherwise. That being said, I am sure that someone will come up with some bizarre example of people that actually pay no taxes.

  8. Richard says:

    Mataconis:

    “If you’re going to increase spending, which is all we’ve done under two Presidents now for ten years, then cutting revenues makes absolutely no sense at all. Moreover, saying “no new taxes” doesn’t strike me as a governing philosophy so much as it’s a political slogan, and that’s coming from a guy who would prefer that taxes be as low as possible for everyone.

    Which completely misses the point that real conservatives have been trying to make: Stop the damn spending, and keep taxes low so the economy can grow as it has historically done, which is indeed as ‘Southern Hoosier’ aptly notes:

    “… history tells us that tax revenues grow and “rich” taxpayers pay more tax when marginal tax rates are slashed. This means lower income citizens bear a lower share of the tax burden – a consequence that should lead class-warfare politicians to support lower tax rates.”

    Last line applies equally to pseudo conservatives.

  9. Southern Hoosier says:

    I don’t care how much revenue the Federal government brings in, Congress will spend it faster.

  10. An Interested Party says:

    Stop the damn spending…

    How so? Cut Defense? Social Security? Medicare? That fact is that most people want most of those things…so good luck stopping that damn spending…the sad fact for “real conservatives” is that what they want is not the same thing wanted by most of the American people…a “center-right nation” indeed…

  11. ratufa says:

    For instance, history tells us that tax revenues grow and “rich” taxpayers pay more tax when marginal tax rates are slashed. This means lower income citizens bear a lower share of the tax burden – a consequence that should lead class-warfare politicians to support lower tax rates.

    That certainly puts the “lower taxes in order to starve the beast” crowd in their place.

  12. Southern Hoosier says:

    An Interested Party says:
    Sunday, April 17, 2011 at 18:21

    Stop the damn spending…

    How so?

    OK, if we can’t cut it, how about we freeze it?

  13. c.red says:

    Southern Hoosier – That top ten % owns roughly 85 – 90% of the wealth of the country – so even using your 70% number they are not paying their “share”. As JP points reality is even more skewed.

    sociology.ucsc.edu/whorulesamerica/power/wealth.html

    A few weeks ago someone had a fairly convincing link showing that government spending actually tends to go down or stay level when taxes are increased since they tend to be inacted in a compromise that includes spending cuts. I didn’t keep the link, but since we seem to going with folksy wisdom and blind assertations I’ll just go with it.

  14. Jay Tea says:

    The theme here seems to be “we need to use the tax code to engage in social engineering.” That’s how I read complaints that certain people pay “too little in taxes.”

    The sole purpose of government revenue is to cover government expenses. The social engineering aspect should be on how that burden is apportioned, not at what level that burden is set. What I’m hearing here is that some folks want to use taxes not to provide the government with the funds it needs to operate, but to take money from people that these folks think don’t “pay enough.”

    Someone, please, make the case that the government doesn’t take enough money from the citizenry.

    J.

  15. Southern Hoosier says:

    c.red says:
    Sunday, April 17, 2011 at 18:37

    Southern Hoosier – That top ten % owns roughly 85 – 90% of the wealth of the country…”

    And where did the wealthy, like Billy Bob Gates, get their wealth? They created it. Poor people don’t create wealth. We could do like the Soviet Union use to do, execute the wealthy, that way everyone could be poor, except the ruling elite.

  16. Southern Hoosier says:

    Jay Tea says: Sunday, April 17, 2011 at 18:47
    The sole purpose of government revenue is to cover government expenses.

    I could have sworn the purpose of government revenue was for politicians to reward their supporters and bring home the pork.

  17. c.red says:

    I’m not knocking people with ideas, Bill Gates is brilliant and deserves to be wealthy. (And is, incidently, possibly not your best example: Bill Gates Says Tax The Rich! )

    But everyone at Microsoft and that provides services to Microsoft, down to the Drive Thru Clerks at the Redmond McDonald’s, had a hand in his success and “creates” wealth in our nation. (Except those that inherit it, but different topic). And those Drive Thru Clerks need that four percent income break to get by much more than Mr Gates.

  18. Southern Hoosier says:

    c.red c.red says: Sunday, April 17, 2011 at 19:09
    down to the Drive Thru Clerks at the Redmond McDonald’s

    I am amazed at how many jobs Billy Bob Gates has created directly or indirectly world wide.
    And then most of the multibillionaires creates foundations to give money away. Think of all the students that spend money for tuition and books at MIT and other school, because of Billy Bob and others like him. Poor people don’t create jobs.

  19. wr says:

    Oh, and Bill Gates says taxes on rich people should go up.

    But of course this is a moronic argument for many reasons. The obvious one is that the vast majority of rich people aren’t Bill Gates, just as the vast majority of poor people aren’t Mother Teresa. Many more rich people work for Goldman Sachs, looking for new ways to get rich by destroying the world’s economy.

    But even if they were all Bill Gates — do you think he’s going to close down Microsoft if his marginal tax rate goes by a few percent? Do you think he’ll even notice?

    As for the small business canard, which you will no doubt drag up next, there’s an easy way for small business owners to avoid paying more taxes on their income — hire more people. Those wages are deductible right off the top. So raising taxes will actually lead to higher employment.

  20. Southern Hoosier says:

    wr says: Sunday, April 17, 2011 at 20:26
    As for the small business canard, which you will no doubt drag up next, there’s an easy way for small business owners to avoid paying more taxes on their income — hire more people.

    I’ve never been in business, so I may be wrong. I thought the purpose of a business was to turn a profit and to grow. I never realized the purpose of a business was to hire a bunch of unneeded people, pay them wages and benefits because of the government’s tax code. Sounds like Communism pure and simple where people are guaranteed a job for life, no matter how useless and incompetent they are.

  21. Jay Tea says:

    Bill Gates can pay all the taxes he likes — here’s the link.

    In Massachusetts, the bluest of the blue states, taxpayers can choose two different tax rates. Those who feel they are undertaxed can choose to pay the higher rate. The percentage has NEVER come close to 1% — and has NEVER included such names as Kerry, Kennedy, or Frank.

    Somehow, the left’s idea of generosity is to give away other people’s money.

    J.

  22. An Interested Party says:

    The bottom line is that the government doesn’t take in as much money as it spends…of course cutting spending will have to be part of the equation, but so will tax increases…somehow, the right’s idea of governing is to live in fantasy land, with such things as starve the beast, tax cuts pay for themselves, etc…

  23. Southern Hoosier says:

    An Interested Party says: Sunday, April 17, 2011 at 20:57
    but so will tax increases s…somehow, the right’s idea of governing is to live in fantasy land, with such things as starve the beast, tax cuts pay for themselves, etc…

    “It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

    – John F. Kennedy, Nov. 20, 1962, president’s news conference

    “It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

    – John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

    “Our present tax system … exerts too heavy a drag on growth … It reduces the financial incentives for personal effort, investment, and risk-taking … The present tax load … distorts economic judgments and channels an undue amount of energy into efforts to avoid tax liabilities.”

    – John F. Kennedy, Nov. 20, 1962, press conference

    “A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

    – John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

    “A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

    – John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

    Read more: John F. Kennedy on taxes http://www.wnd.com/news/article.asp?ARTICLE_ID=39517#ixzz1JpiLeZJ5

    I’m glad you know more about the economy and taxes, than JFK did. Ever think about running for president?

  24. c.red says:

    Personally, I’d argue that the customers that bought Bill Gate’s product created the jobs.

    It makes no sense to limit prosperity to just a few people. Bill Gates having a few more millions isn’t going to sell one more copy of Windows. Redistribute (I’m not particularly afraid of the term) some of that money and new people may be willing to spend the money on new goods and luxuries; such as new cars, or vacations to Florida or computers with Windows 7 software. Which expands the economy… a win for everyone.

    Successful entrepeneurs provide ideas (in Bill Gate’s case, it was the idea to steal someone else’s work and actually sell it to people), management, vision, ruthlessness and even inspiration to make something successful.

    But they don’t do it alone, employees and consumers, even the government all play a part in making wealth and we shouldn’t turn back the clock to where there are a few ultra-rich people and the vast majority is just getting by (or not as the case may be).

  25. c.red says:

    Southern Hoosier – as has been pointed out to you before – we aren’t anywhere near the tax rates under Kennedy.

    http://www.truthandpolitics.org/top-rates.php

    If you want to set the top marginal rate to 91% and then have this discussion then you can bring up Kennedy.

  26. Southern Hoosier says:

    c.red says: Sunday, April 17, 2011 at 21:43
    Personally, I’d argue that the customers that bought Bill Gate’s product created the jobs.

    But without Bill’s product, there would be nothing for customers to buy.

  27. c.red says:

    But without Bill’s product, there would be nothing for customers to buy.

    See how it all fits wonderfully together?

    Or perhaps Steve Jobs would be richer than he is now.

  28. Southern Hoosier says:

    c.red says:
    Sunday, April 17, 2011 at 21:58

    But without Bill’s product, there would be nothing for customers to buy.

    See how it all fits wonderfully together?

    Or perhaps Steve Jobs would be richer than he is now.

    Then Jobs would be creating more jobs.

  29. c.red says:

    There’s none so blind as those who will not see

    Go ahead and do the Galt/ Ayn Rand worship thing.

    Without the consumer to buy there would be no product, without the employees that actually do the coding and selling there would be no product, without the entrepeneur with the idea there would be no product. Two out of three of those are being threatened in this country and it ain’t the entrepeneurs.

    I’m not sure I can say it simpler than that and I’m not certain I’m interested in trying. Have a good evening all.

    (Ok, I’m being poetic, there are a whole host of others also required for a successful business; investors, lawyers, government, etc. most of those aren’t in iminent danger either.)

  30. john personna says:

    So people who hate to pay taxed have managed to move discussion away from debt and deficit. Amazing.

    What next, a return to spending being the problem?

    And amnesia on the record low tax rates?

  31. wr says:

    Hoosier — Yes, it’s pretty clear you’ve never been in business. If you had been, instead of collecting disability payments all these years, or whatever you do, you’d know that a dollar to the business can be spent in several ways. It can go straight to the business owner’s wallet, in which case he pays taxes on it. Or it can go back into the business, in which case he doesn’t. You seem to think this is Communism. That’s because you have never run a business.

    Also, you keep bringing up Kennedy on taxes, and never addressing the fact — which I’ve brought up multiple times — that he brought rates down to the low seventy percent range…

  32. Southern Hoosier says:

    wr says: Sunday, April 17, 2011 at 22:47
    instead of collecting disability payments all these years, or whatever you do,

    Spoken like a true liberal, when logic fails, use insults.

    Or it can go back into the business, in which case he doesn’t. You seem to think this is Communism.

    Another liberals trick is to read in falsehoods and then carry the day by answer those falsehoods. Putting your money in your pocket or your business is capitalism. When the government uses the tax code to force business to spend their money the way the government wants them to, that is Communism .i.e creating non existent jobs to hire people. Great way to get unemployment down and make the Pres look good at election time.

    there’s an easy way for small business owners to avoid paying more taxes on their income — hire more people.

    So you are saying its OK for the government to use the tax code to force business to hire people whether they need them or not?

    I never realized the purpose of a business was to hire a bunch of unneeded people, pay them wages and benefits because of the government’s tax code. Sounds like Communism pure and simple where people are guaranteed a job for life, no matter how useless and incompetent they are.

  33. Gerry W. says:

    Great way to get unemployment down and make the Pres look good at election time.

    But the republicans have no answers either. We see what other states do. They lower tax rates or give incentives to bring in business. The business only abandons where they are and moves to better territory. While one side wins, the other loses. Or how about cheap labor. We could create millions of jobs, it is not hard to do. Just pay people a dollar an hour. And in this day and age of globalization, cheap labor reins. Add 2 billion cheap laborers into the free market system and the middle class has to lose jobs and/or has less in pay and benefits. Bush had unemployment down also. All you have to do is borrow to give tax cuts and make a false economy. He got out of Dodge when $hit hit the fan. All of his trickle down did not trickle down. It was a house of cards. You can only ignore the problems for so long.

    Both democrats and republicans have not dealt with globalization. They have not addressed the unemployment issues. Furthermore, ask yourself this. What widgets can be made here and not some other country? I have no answer for this, do you? What small business can you have if factories are closed in your community. What small business can you have if Wal Mart and other stores have those businesses. Like a bakery, gas station, flower shop. We are a nation of immense competition, but with less industry, and that means less upward mobility and movement for the middle class. Again, something that has to be addressed. And what is going to replace the 57,000 factories and 6 million lost jobs that ensued over the past decade?

    Also, something else to ask. If we had tax cuts all these years, why is unemployment so high?True government spending is one problem, but isn’t globalization? And if we need to stimulate the economy, can we keep lowering taxes and ignore the other problems. Is more and more tax cuts the only answer? And if the economy ran good with 70% in taxes on the high end, is taxes the only issue, or is there other issues causing problems when we already have low taxes? And how much can the fed stimulate when they have already stimulated all these years? How much more in tax cuts, low interest rates, cheap products, cheap labor, and cheap dollar can we take? There has to be more in running the country and dealing with problems instead of the same old right wing tax cut and laissez-faire attitude that we see all the time. So far, republicans have not given any answers, just ideology and ideology alone does not make it.

  34. An Interested Party says:

    @Southern Hoosier: A pity you don’t know how to make a better argument, you know, using facts and figures, rather than quotes pulled from a time when tax levels were very different…you needn’t think about trying to join the Oxford Union…

  35. Pug says:

    All the quotes from JFK are nice, but they don’t prove much. In 1964, the top income tax bracket was dropped from 91% to 70%. These days, in the face of massive deficits and two ongoing wars, an increase from 36% to 39% is socialism and will destroy the economy.

  36. wr says:

    Southern Hoosier — This may come as a surprise, but unless you are Humpty Dumpty, words don’t actually mean what you choose them to mean. “Communism” has a specific meaning, for instance, and it isn’t “whatever Southern Hoosier doesn’t like,” which is the way you use it.

    “Communism is when your mother makes you eat spinach instead of allowing you the free choice to eat candy!”

  37. john personna says:

    I think Southern Hoosier is just one of those guys for whom “communism” is any tax level equal or greater than current tax level.

    If you run a few cycles of that, you end up with what we have. A S&P warning on federal finances.

  38. EddieInCA says:

    Facts:

    In 2000, I made almost $52,000 and paid about $7400 in income tax. That’s after my home mortgage deduction and various other deductions and credits for a second income property and a few other things).

    In 2010, I made almost $206,000, and paid about $10,700 in income tax. My deductions included Commissions paid to my agent, mortgage insurance, medical expenses, a 2nd home which (on paper) lost money, a $5000 credit for my IRA, etc. etc.

    Bottom line, there is something screwy with a system where I pay less taxes, percentagewise, the more money I earn. Seriously screwy. I pay an additional “Tax” to myself in the form of savings. I’m not creating additional jobs, nor are most people making more money. They’re hoarding it. The idea that greater wealth at the top creates jobs is just pure bullshit.

  39. Southern Hoosier says:

    wr says: Monday, April 18, 2011 at 10:19
    Southern Hoosier — This may come as a surprise, but unless you are Humpty Dumpty, words don’t actually mean what you choose them to mean. “Communism” has a specific meaning, for instance, and it isn’t “whatever Southern Hoosier doesn’t like,” which is the way you use it.

    “From each according to their ability, to each according to their need.” or simple put the redistribution of wealth. The business men generate wealth according to their ability. The government writes the tax code to force business men to hire people they don’t need. Instead of putting money into their pocket or business (capitalism) the government using the tax code to redistribute wealth. And you said earlier that you support these government program.

    wr says: Sunday, April 17, 2011 at 20:26
    As for the small business canard, which you will no doubt drag up next, there’s an easy way for small business owners to avoid paying more taxes on their income — hire more people.

  40. Southern Hoosier says:

    New Study Shows Tax Cuts Most Effective Stimulus

    http://blog.heritage.org/2009/11/05/new-study-shows-tax-cuts-most-effective-stimulus/
    I think I’ll trust the opinion of the Heritage Foundation when it comes to taxes, rather then a bunch of lefties that think government redistribution of wealth, using the tax code, is not Communism.

  41. Axel Edgren says:

    I think I’ll trust the opinion of the Heritage Foundation when it comes to taxes

    Are they including a projection that unemployment will fall to 2.8 % in that “study” as well?

    In other news, a foundation started by the rich and capital-owning say the rich and capital-owning need tax cuts. The Heritage Foundation is an investment. It would not exist if there weren’t rubes like you for the corporations to target with “studies”.