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Taxes with a Capital Tea

March 25, 2010

I’ve just stumbled on this informative analysis of activists in the Tea Party Movement, written by economist Bruce Bartlett and published in Forbes magazine. He and former Bush speech-writer David Frum — just today ousted by the American Enterprise Institute for suggesting on Sunday that health care was the GOP’s waterloo — conducted a survey of a recent Tea Party event. I recommend reading the whole article, but here are a few interesting excerpts:

The first question that was asked concerned the size of government. Tea Partyers were asked how much the federal government gets in taxes as a percentage of the gross domestic product. According to Congressional Budget Office data, acceptable answers would be 6.4%, which is the percentage for federal income taxes; 12.7%, which would be for both income taxes and Social Security payroll taxes; or 14.8%, which would represent all federal taxes as a share of GDP in 2009.

Tuesday’s Tea Party crowd, however, thought that federal taxes were almost three times as high as they actually are. The average response was 42% of GDP and the median 40%. The highest figure recorded in all of American history was half those figures: 20.9% at the peak of World War II in 1944.

So this group, at least, has an inflated sense of how “socialistic” the US government is.

To follow up, Tea Partyers were asked how much they think a typical family making $50,000 per year pays in federal income taxes. The average response was $12,710, the median $10,000. In percentage terms this means a tax burden of between 20% and 25% of income.

<snip>

According to calculations by the Joint Committee on Taxation, a congressional committee, tax filers with adjusted gross incomes between $40,000 and $50,000 have an average federal income tax burden of just 1.7%. Those with adjusted gross incomes between $50,000 and $75,000 have an average burden of 4.2%.

I find these numbers a little startling myself, but I believe they’re accurate. Apparently even I am susceptible to populist libertarianism. Finally, there’s this:

Tea Partyers also seem to have a very distorted view of the direction of federal taxes. They were asked whether they are higher, lower or the same as when Barack Obama was inaugurated last year. More than two-thirds thought that taxes are higher today, and only 4% thought they were lower; the rest said they are the same.

<snip>

As noted earlier, federal taxes are very considerably lower by every measure since Obama became president. And given the economic circumstances, it’s hard to imagine that a tax increase would have been enacted last year. In fact, 40% of Obama’s stimulus package involved tax cuts. These include the Making Work Pay Credit, which reduces federal taxes for all taxpayers with incomes below $75,000 by between $400 and $800.

According to the JCT, last year’s $787 billion stimulus bill, enacted with no Republican support, reduced federal taxes by almost $100 billion in 2009 and another $222 billion this year. The Tax Policy Center, a private research group, estimates that close to 90% of all taxpayers got a tax cut last year and almost 100% of those in the $50,000 income range. For those making between $40,000 and $50,000, the average tax cut was $472; for those making between $50,000 and $75,000, the tax cut averaged $522. No taxpayer anywhere in the country had his or her taxes increased as a consequence of Obama’s policies.

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3 comments

  1. I feel some sympathy for the people being asked these difficult questions.

    I certainly didn’t know taxes as a percentage of GDP.

    Most probably assumed they were being asked the average federal tax rate (with the answer 40%) – which is still high.

    As to Obama’s policies raising taxes – I think the sunsetting of Bush’s taxes (not enacted on Obama’s watch) is being incorrectly attributed to Obama by the crowd.

    For quite a few people – this is a 2% increase in tax rate – starting in tax year 2010.

    So taxes are going up – but not due to Obama policies – a distinction probably lost on the crowd.


  2. The number to watch is the percentage of GDP going to taxes, social security and health.

    In most of Europe this is between 40 and 50 percent. For the US you can use ~30% for taxes and SS + 14% for health. It’s the cost of civilization.


  3. And the CBO reported today that Federal debt will rise to 90% of GDP within the decade.

    When an irresistible force
    Such as you
    Meets an old immovable object like me
    You can bet as sure as you live.
    Something’s gotta give
    Something’s gotta give
    Something’s gotta give.

    (With a hat tip to Johnny Mercer)



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