Wednesday, April 20, 2011

Taxed enough in 1949

Most people seem to think that income tax rates keep inching upwards.  For example, in 1997 a New York Times/CBS poll asked "By the end of Bill Clinton's term in office, do you think income taxes--the percentage of your income you pay in federal taxes--will be higher, lower, or about the same as they are today?"  52% said higher, 6% said lower, and 42% said about the same.  In 2005, they asked the same question referring to "By the end of George W. Bush's second term in office":  41% said higher, 9% lower, and 47% about the same.  In October 2008, a Gallup/USA Today poll asked "Four years from now, do you think your federal income taxes will be--a lot higher, a little higher, the same, a little lower, or a lot lower...if Barack Obama is elected president (in 2008)"  49% said higher, 29% lower, 18% about the same.  For John McCain, the numbers were 49% higher, only 15% lower, and 31% about the same.
 If I'd been asked, I would have said that income tax rates had stayed about the same over the last 30 years.  Reagan lowered them, then raised them, then Clinton raised them and Bush lowered them, so on the whole not much change.  Actually, when looking at historical statistics on the budget recently I saw that in 2010 personal income tax revenues amounted to 6.2% of the GNP, the lowest level since 1949.  Of course, that's partly because of the recession--unemployed people don't have much income on which to pay taxes.  But this I estimated a trend for the "full employment" --what income tax revenues would be if unemployment were 4%.

The figure indicates that income taxes have been dropping and are about where they were in the late 1950s.  Of course, the numbers in the figure are from a statistical model, but if you want raw numbers, you can compare 2010 to 1982 and 1983, when unemployment was about the same but personal income tax revenues were 9.2 and 8.4 percent.

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