Just to keep our BOR readers abreast of national trends, USA Today released an internal analysis of federal tax rates over the past six decades. The results? Americans paid their lowest level of taxes in 2009 since Harry Truman's presidency in 1950.
Kind of makes right-wing and Tea Party types' cries of excessive taxation seem a little… excessive. From USA Today, emphases mine:
Federal, state and local taxes – including income, property, sales and other taxes – consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis (BEA) reports. That rate is far below the historic average of 12% for the past half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.
“The idea that taxes are high right now is pretty much nuts,” says Michael Ettlinger, head of economic policy at the liberal Center for American Progress. The real problem is spending, counters Adam Brandon of FreedomWorks, which organizes Tea Party groups. “The money we borrow is going to be paid back through taxation in the future,” he says.
Taxes paid have fallen much faster than income in this recession. Personal income fell 2% last year. Taxes paid dropped 23%. The BEA classifies Social Security taxes as insurance payments and excludes them from the tax calculation.
Why the tax bite has eased:
•Stimulus law. One-third of last year's $862 billion economic stimulus went for tax cuts. Biggest reduction: The Making Work Pay tax credit reduced income taxes $800 for married couples earning up to $150,000.
•Progressive tax rates. Presidents Clinton and Bush pushed through a series of tax changes – credits, lower rates, higher exemptions – that slashed income taxes for poor and middle-class families. A drop in income now can trigger big tax breaks and sharply lower rates, sometimes falling to zero.
•Sales tax. Consumers cut spending sharply in this downturn, thereby paying less in sales taxes.
That second bullet point is key — a more progressive tax structure relieves the burden on the middle class. However, the third bullet point should give those of us in Texas pause — lower sales tax receipts mean a potentially larger budgetary shortfall for our state and local governments, as we don't pay state income tax.
All in all, however, it is deeply disingenuous for conservatives, Republicans, and right-wing loons alike to complain that our taxes are too high. In fact, they're at historic lows. Maybe, then, political rhetoric needs to be less about lowering taxes and more about how we can budget effectively to continue paying for the promise of America. And maybe, just maybe, we can think about ways to raise revenue to keep our obligations and continue to provide the Social Safety net that helps keep America great.