Total tax take at modern low, yes, low
How can this be true? I'm sure there are many ways to slice and dice the analysis, but apparently the total of all federal, state and local taxes represents the lowest percentage of all U.S. income since 1950.
USA Today has the workup, from the Bureau of Economic Analysis.
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Comments (7)
Eric, your link is busticated.
I'm looking forward to the details, and more coverage of this important fact. Both pundits and political leaders repeat ad nauseum that we're overtaxed, yet the facts don't bear that out. Why do we let them keep saying it?
I would prefer to see the total percentage of income paid (directly and indirectly) by a middle class taxpayer, including FICA, Medicare, Income, Sales, Excise, and Real Estate taxes.
Considering only FICA and Medicare, we are already at 7.65%, which makes the remainder of the claimed 9% not only suspect but ridiculous.
This fact is unfortunately drowned out by the chorus of "we're overtaxed, we're driving away jobs, taxes keep climbing," etc etc. This is why when a party recommends a tax increase on the wealthy to cover 13% of the 3 billion dollar budget gap, while cuts and accounting shifts (which I admit I don't understand) cover the remaining 87%, the opposition acts as if this is the most egregious tax increase in the history of the state.
A simple person would think that perhaps the parties could split the difference, and raise 200 million in taxes (thus fixing the hole with 93% cuts/shifts, 7% taxes). But Pawlenty's version of compromise does not allow for such radicalism, so off to special session/government shutdown we go...
John I- Payroll taxes are capped at 106800, so a lot of income in this country (albeit not in a lot of people) is not taxed at that 7.65%. This is why stats like this should be reported with means and medians, to avoid the skewing of the mean by the "relatively" small number of outliers. This is especially true in income, where the very rich can skew the mean A LOT, and it is not balanced out by the very poor, since there is a limit to how little one can earn, but not on how much.
Dimitri,
While I referred to the middle class taxpayer, who typically does not meet the current FICA max even if he and his wife together earn more than that, I cetainly concur that statistics which do not reveal the median tax burden are examples of how to lie with statistics.
Reduced tax revenue should come as no surprise during an economic downturn. As housing values fall, so do property taxes, as people tighten the purse strings, less sales tax revenue is collected, as people lose jobs, they stop paying income tax. Stimuli packages provide tax relief, as the federal government mails out checks to Americans. If unemployment hit 20%, imagine how low the average tax burden would be.
If the economy recovers, so will tax revenue, and the average American's tax burden.
John does have a point:
The rich benefit more from tax avoidance loopholes, and thus pay a smaller proportion of their income in taxes than does the middle class.
If we really did a good job of closing these loopholes we could increase revenue while holding marginal rates constant, or even lowering them a bit.
And if we closed the loopholes on corporate taxes we could do the same (while US corporate marginal income tax rates are higher than Europe, payments as a proportion of revenue are smaller).