Taxes at 60-Year Low--But Are They Still Too High?

What does this figure actually mean?

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This week, the Associated Press issued a report pointing out that federal taxes are lower than they've been in 60 years--going back to the Truman administration. This may come as surprising news to members of the vehemently anti-tax Tea Party. However, conservative commentators have been quick to note that the low taxes are due, in no small part, to the sluggish economy. In other words, just because taxes aren't high doesn't mean the Obama team is scoring any political victories. Here's a look at the two sides of this conversation:

  • Taxes Are Low!  "In the current budget year, federal tax receipts will be equal to 14.8 percent of the Gross Domestic Product, or GDP, the lowest level since Harry Truman was president," the Associated Press reports. "For the third straight year, American families and businesses will pay less in federal taxes than they did under former President George W. Bush." The AP story goes on to note that "the poor economy is largely to blame, with corporate profits down and unemployment up. But so is a tax code that grows each year with new deductions, credits and exemptions. The result is that families making as much as $50,000 can avoid paying federal income taxes, if they have at least two dependent children. Low-income families can actually make a profit from the income tax, and the wealthy can significantly cut their payments."

  • Take That, Tea Party  Steve Benen at The Washington Monthly adds some numbers. "This is only looking at federal taxes, and doesn't reflect state and local taxes," Benen points out. "But a USA Today analysis found last year that if we include everything--federal, state, and local taxes, including income, property, sales, and other taxes--the percentage of personal income that's paid in taxes is still at its lowest level since 1950." He rounds out his blog post by quoting Michael Ettlinger, head of economic policy at the Center for American Progress, who said in 2010, "The idea that taxes are high right now is pretty much nuts."

  • Look Closer, admonishes William Jacobson at Legal Insurrection. "There is a little something left out of the AP story, namely... that under the current tax structure tax revenues will soar to an all time high as a percentage of GDP once the economy picks up," Jacobson writes. "In addition to leaving out the context of the 'lower' taxes, the AP also misuses the term 'lower taxes.' What it means is 'lower tax revenues' which is not the same thing. But who reads or fact checks the details anyway?  Certainly not AP."

  • Yup, Taxes Are Due to Skyrocket, writes Paul Caron at TaxProf Blog. "As the economy recovers," Caron writes, "taxes (as a percentage of the economy) will surge to post-World War II highs (principally due to record individual income tax collections)."

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