It’s true: U.S. taxes at lowest point in 60 years


May 17, 2010 - 12:00 AM

Americans paid the lowest percentage of their incomes in taxes in 2009 than at any time since 1950.
Writing in the May 10 issue of USA Today, Dennis Cauchon reported:
“ … Federal, state and local income taxes consumed 9.2 percent of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12 percent for the last 50 years. The overall tax burden hit bottom in December 2009, at 8.8 percent of income before rising slightly in the first three months of 2010.”
Cauchon goes on to explain:
“Individual tax rates vary widely based on how much a taxpayer earns, where the person lives and other factors. On average, though, the tax rate paid by all Americans — rich and poor combined — has fallen 26 percent since the recession began in 2007. That means a $3,400 tax savings for a household paying the average national rate and earning the na-tional household income of $102,000.
“This tax drop has boosted consumer spending and the economy, which grew at a 3.2 percent annual rate in the first quarter. It also has contributed to the federal debt growing to $8.4 trillion.
“Taxes paid have fallen much faster than income in this recession. Personal income fell 2 percent last year. Taxes paid dropped 23 percent. The Bureau of Economic Analysis classifies Social Security taxes as insurance payments and ex-cludes them from the tax calculation.”

CAUCHON ADDS a little more current history:
Taxes fell, he reminds us, because one third of last year’s $862 billion economic stimulus package came in the form of tax reductions. Most generous of the batch was the “Making Work Pay” tax credit, which reduced income taxes $800 for married couples earning up to $150,000.
Then he notes that both Presidents Bill Clinton and George W. Bush pushed through tax changes that lowered rates and increased ex-emptions that lowered income tax rates for poor and middle class families — categories that include the great bulk of the American people. As a consequence, when family income falls, as it has for many these past three years, the income tax rate can drop dramatically, sometimes to zero.
Cauchon also points out that most Americans are aware of what’s been happening: A recent Gallop Poll found that only 48 percent thought that taxes “were too high,” close to a record low for those expressing that widespread, instinctive feeling. A reassuring 45 percent told pollsters they found tax levels were “about right.”
The lower tax burden should last at least through 2010, says Roberton Williams of the Tax Policy Center, a think tank in Washington, D.C., who notes that the tax reductions that came with the stimulus package expire at the end of the year.

ALL INDICATIONS are that, as recovery builds, our national fiscal goals will shift from stimulating the economy by spending more money and reducing taxes to reducing spending and increasing income to bring state and national budgets nearer to balance.
These goals will be far easier to achieve if they are adopted as the reasonable thing to do by both political parties and by a majority of the people. While it shouldn’t be necessary to comment on the obvious, a return to balanced federal, state and local government can be achieved best by raising taxes and reducing spending — duh! duh! and again duh!

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