Download Americans think they pay high taxes but they don`t

Americans think they pay high
taxes but they don't
Study shows 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.
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According to Dan Walters, "Sorting through the tax rhetoric is not easy. Reliable, up-to-date
numbers are hard to find, and there's no universal agreement on how data should be interpreted.
But here's a shot. The most comprehensive data on state and local tax burdens – you have to
combine the two to make meaningful comparisons – are maintained by the Washington-based
Tax Foundation. And it uses the most commonly accepted measure: taxation as a percentage
of personal income, which takes into account the wide state-to-state income variations"
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Believe it or not, tax bite is down
Sunday, May. 08, 2011
WASHINGTON – Here's a dirty little secret that most Americans don't want to hear: We're
undertaxed.
That may sound like heresy; nobody wants to pay more taxes. But by historical standards, what
we pay in federal taxes – rich, poor and everyone in between – has gone down.
At a time when Washington is wrestling with how to end federal budget deficits and trim the
national debt – huge questions expected to dominate the nation's politics through the 2012
elections – the fact that Americans are undertaxed compared with U.S. historic norms is central
to the discussion.
This fact is separate from the politically charged questions of whether government spends too
much, the fairness of who pays how much and what we value or don't in government spending.
It's simply that our tax burden is low in the long view of U.S. history, and there are many ways to
measure that central truth.
One way is to look at the trend of total federal revenues, 81 percent of which come from income
and payroll taxes, 9 percent from corporate taxes, 3.5 percent from excise taxes and 6.5 percent
from other sources, according to the Office of Management and Budget.
The post-World War II historic average is that federal revenues equal about 18 percent of the
U.S. gross domestic product, the broadest measure of annual economic production. In the year
2000, after the longest economic expansion in U.S. history, federal revenues equaled almost 21
percent of the economy. As a result, Washington cut taxes in 2001 and 2003.
Revenues plunged to around 15 percent of the economy in 2009 and 2010 amid the deep
financial crisis, and dipped even further this year, to 14.4 percent, the lowest level since 1950.
Meanwhile, federal spending soared this year to 25.3 percent of the GDP, the highest since 1945,
the last year of World War II.
The difference between spending and revenue yielded the federal budget deficit: $1.6 trillion, the
highest ever.
Don't like that tax measure? Here's another: Americans across all income classes paid lower
effective tax rates in 2007, the last year of complete Internal Revenue Service data, than they did
in 2000. The effective tax rate is what people pay after all exemptions and deductions. This is
according to the most recent comprehensive look at taxes by the nonpartisan Congressional
Budget Office.
The highest 20 percent of tax filers saw their total average federal effective tax rate fall from 28
percent in 2000 to 25.1 percent in 2007, according to the CBO. That's considerably lower than
the current top marginal tax rate of 35 percent, and lower than the 27.5 percent effective rate in
1979, the first year that CBO data are available.
For the wealthiest 1 percent of filers, the effective tax rate fell from 33 percent in 2000 to 29.5
percent in 2007. The poorest 20 percent of filers saw their effective rate fall from 6.4 percent to 4
percent.
That's not to say the wealthy don't pay taxes – the top 1 percent paid 39.5 percent of all U.S.
income taxes in 2007 – but taxes take a smaller share of their wealth today than historic postWorld War II norms.
"They've been coming down for everybody, but we're taking more income at the top. Even if
their rates are lower than they used to be, you are applying those lower rates to much larger
income," said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center who
spent 22 years as a CBO tax and income analyst. "The share of revenue being paid at the top end
rises as their income rises, too. But looking at the trend in effective rates, the rate has come
down" for all income groups.
The CBO data are instructive because 2007 was the last year before the U.S. economy slipped
into recession and nearly crashed. Comparing with 2000 is equally instructive because it's the
final full year before the Bush-era tax cuts. They became the Obama tax cuts last December
when he agreed to extend them until Dec. 31, 2012.
"It's hard to argue that we're overtaxed, and we're low by world standards," said David Wyss,
chief economist for the New York ratings agency Standard & Poor's.
Joseph Thorndike, a tax historian and visiting professor at the University of Virginia, concurred
that Americans are "undertaxed relative to historical averages."
However, he cautioned that what Americans pay in taxes can't be seen in isolation from what
their government is spending.
"I think it's half of the discussion," he said. In his view, the high level of today's deficits and debt
dictates two responses: Federal spending must fall and taxes must rise.
"The hard reality that people should be alerted to is these taxes are going up. They have fallen for
most of us to varying degrees, but it is hard to imagine a scenario where they don't all go up."
Still doubtful? There's yet another way to gauge the tax burden, using data from the Commerce
Department's Bureau of Economic Analysis that go back to 1929. The bureau's data on personal
income make it possible to guess roughly what portion of income goes to the taxman.
Under this calculation, Americans on average saw 17.3 percent of their income go to federal
taxes in 2009 and 2010. The last time the percentage was this low was 1975, and during the late
1960s.
One commentator replied to the facts with the typical biased rhetoric and ethnocentric rantings
that scapegoat illegal aliens and put all the blame on unions, working people - anybody but the
people really responsible for the economic mess we are in ― the rich CEOs who are living large
while everyone else struggles. He wrote (anonymously):
" Who except a pointy headed liberal in their right mind would even begin to ask the question, of
course we are over taxed and under served. So much state money goes to illegal aliens, welfare
recipient (a lot of the welfare caused by illegals driving down wages), state workers, and
boondoggle programs its pathetic. Only by starving the beast can we ever hope to get the state's
attention and get back to where most people can have a middle class living."
――――――――-Sadly, many people in the middle class ignore the facts and believe this kind of ideological
garbage.
―――――――――Do tax billion-dollar subsidies to Big Oil companies, who are making record profits in the
hundreds of billions of dollars, lower gas prices, as proponents of such corporate welfare claim?
The big business and big-oil-friendly Bush administration followed that philosophy. What
happened? Did gas prices go down as the proponents of oil subsidies claimed? Prices have
climbed hugely since the Bush years and now exceed $4/gallon.
Does giving big tax breaks to the wealthy and big business really stimulate the economy and
create jobs, as the right wing Conservatives claim? The Bush Administration certainly did that borrowing from our grandchildren's future to give away tax breaks mostly to the rich that will
total more than a trillion dollars over the first 20 years (unless reversed). Ok, so what was the
result? If they were right, we should have a booming business climate and historically low
unemployment, widespread prosperity in the middle class, a balanced federal budget, and a
lowering of the national debt. Instead, the Bush "business-friendly" polices and deregulation,
anti-tort legislation, and his expensive giveaways to multi-millionaires and billionaires has done
the exact opposite: it bankrupted the country, triggered the worst recession since the 1930s,
brought double-digit unemployment, a decrease (not an increase) in new business development
and startups, a housing and mortgage crisis for the middle class, and an Un-Christian slashing of
the humane safety net services for the poor, the sick, the disabled and the elderly, etc. It is true
the Bush pro-business and lower tax polices made the rich richer. The CEOs who screwed up the
economy were bailed out by the biggest corporate welfare program in U.S. history and the
people who caused the problems have "landed on their feet" making the same or even higher
unjustified and obscene salaries and multi-million dollar bonuses while the rest of the nation
struggles. Bush inherited a balanced budget that was paying down the federal debt, and turned a
surplus into the biggest deficit in US history up to that time. Bush started a war that was fought
on false pretenses and never paid for it and also never raised taxes to pay for the other war we
started on terror in Afghanistan either.
The only amazing thing is that people look at these facts and dismiss them or make excuses so
they can continue to believe the propaganda and twisted logic that comes down from multibillionaires and from Billionaire Rupert Murdock's media empire. Even worse, they ignore the
huge corporate welfare giveaways and attack poor peopplook for a scapegoat and blame all of
the nation's woes on Mexican farm workers. It is not just cruel and anti-Christian, it is downright
stupid