Our Taxes Are Low

There is no shortage of opinion, spin, ideology and outright propaganda in discourse over the issues of our day. And then there is fact. McClatchy reporter Kevin G. Hall did a little research lately and turned up an interesting set of such facts on the subject of federal taxes. To the contrary of what most conservatives believe and say, federal taxes are at the lowest percentage of national income since at least 1950. Go to the article here.

The historical average since World War II is that 18% of gross domestic product, the broadest measure of the national economy, has gone to federal taxes. When times were prosperous, in the year 2000 after the longest expansion in U.S. history, that percentage grew to about 21%. After the Bush tax cuts in 2001 and 2003 that fell to 15%. And then last year, 2010, it fell lower yet, to 14.4%.

The bottom line is that we are not overtaxed, but undertaxed, not only by world standards but even by our own historical standards. If getting a handle on the deficit is a concern, and it should be for the long term, though in the short term reviving jobs is a far more pressing matter, then there is no way to get there without increasing taxes. The simple math is that revenues are running 4% of GNP below historic norms and spending is running at about 6% of GNP ahead of the norm.

To balance the budget, if anyone is truly serious about it, would require increasing taxes about $600 billion a year and reducing spending by about $900 billion a year. To get an idea of what this would require, immediately withdrawing from both Iraq and Afghanistan would save less than $200 billion. Now, a fair amount of any deficit will take care of itself if the economy improves significantly, and that should be the first order of business. But part of any realistic solution must also include restoring revenues to their historic averages, and that will require a tax increase, particularly on those in the top income levels. As Hall points out, their effective tax rates are the lowest they've been since before World War II.

So when you hear politicians say they have a plan to balance the federal budget without raising taxes, be assured they are spouting ideological rhetoric, not talking any kind of mathematical sense.