By: Bob Lucore
One of the most persistent, and pernicious, myths about the U.S. economy is that we are “overtaxed” as a nation. In spite of the fact that we have been cutting taxes for years now, those on the right side of the political spectrum consistently argue that taxes are too high. Now, we have the Republican candidate for President trying to portray President Obama as a tax-raiser-in-chief.
The data, both historical and comparative, is clear. We are not overtaxed; rather taxes are at record lows.
The nonpartisan, Congressional Budget Office (CBO) released a report last week that provides data starting in 1979 and ending with 2009 (the most recent year available), which calculates that the average federal tax rate for American households is at its lowest rate in 30 years. The report says that federal taxes for all U.S. households averaged 17.4 percent in 2009. That is “the lowest level since the CBO began the data series in 1979,” according to the report. In 1979, the average was 22.0 percent. The 2009 figure was lower than 2008 (18.4 percent) and the previous low was 19.4 percent in 2003. Over the thirty year period the average was 21.0 percent. Taxes have not been raised since 2009, and we should expect that the years after 2010 and 2011 will show similar data when it becomes available.
So, U.S. taxes are historically quite low. How do we compare to other countries? Data from the Organization for Economic Cooperation and Development (OECD) show that only two countries (Chile and Mexico) have lower taxes as a percent of total economic output (combined federal, state and local taxes as a percent of Gross Domestic Product or GDP). The U.S. ranks 26th out of the 28 countries for which OECD data are available. Twenty-one of the 28 advanced economies have combined taxes in excess of thirty percent. These and other instructive figures are summarized here, by Citizens for Tax Justice.
At a time when the GOP and candidate Romney are arguing that we need to cut taxes—and at the same time cut the deficit—these figures provide a needed dose of reality.
By contrast, President Obama has proposed extending the Bush era tax cuts on those who make less than $250,000 per year, and allowing the tax rates on the very rich to return to Clinton-era levels. He has also supported the “Buffett rule” that would ensure that the very-rich pay a fair share of their income in taxes. These proposals would drastically increase revenue, and our historically low tax rate for the middle class would remain the same.
Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. . He taught economics for several years at Centre College and Colorado State University and is currently studying Library and Information Science at San José State University.Back