UK tax actionNovember 30th

Union (PCS).

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PCS campaigns update November 2011

Dear Virginia Wednesday 30 November will see up to 3 million workers taking strike action in the largest co-ordinated action for a generation in the UK. PCS members will be at the forefront of this action, taking a stand against the government's unfair plans to slash public sector pensions. Even if you're not a PCS member, you can still support our campaign. Sending an email to your local MP from the PCS site is free and easy and can make all the difference. It only takes a minute, and the more emails sent, the better chance we have of winning our campaigns. Please email your local MP in support of our campaigns today. Also in this edition: Use our updated pensions calculator to see what the changes could mean for you Email the prime minister and tell him why you are striking on 30 November See what events are taking place in your local area on the day  Thank you for your support.

The Effect of Individual Income Tax Rates on the Economy, Part 7: 1988 - 2010

Ken Houghton at Angry Bear - 14 hours ago

by *Mike Kimel* [UPDATE: Graphic title corrected below. h/t Eric Whitaker] This post is the seventh in a series that looks at the relationship between real economic growth and the top individual marginal tax rate. The first looked at the period from 1901 to 1928, the second from 1929 to 1940, the third from 1940 to 1950, the fourthh looked at 1950 - 1968, and the fifth from 1968 to 1988. Because the Reagan era is so pivotal in the American psyche, it was also covered again in the sixth post, which looked at the period from 1981 to 1993. This post will look at the period from 1988 to... more »

Early Take On Obama's Speech | ZeroHedge

Early Take On Obama's Speech | ZeroHedge

Early Take On Obama's Speech

Submitted by Tyler Durden on 09/19/2011 11:23 -0400

• Greece

From Peter Tchir of TF Market Advisors

The only surprise in the speech so far is that he hasn't told Transatlantic Holding Inc., that they should accept Buffett's offer.

Now we can get back to trying to figure out what new plan Greece and the Troika come up with to justify repeating the process again a few weeks from now. And just how much QE is going to be announced Wednesday.

His "fairness" speech leaves something to be desired. His math is even more interesting. I wonder what the effective tax rate of a single person making 50k is? Without any deductions or rebates, the effective tax rate is 17.25%. I bet that very few single people making 50k pay an effective rate of more than 15%. I suspect that many people making over a million pay an effective tax rate greater than 15%. So much for math.

"Billionaires" Find Unrest Among Their Subjects

he "Billionaires" note that people on the street are noticeably angrier with the current state of affairs. WAMM (Women Against Military Madness) has been interviewing people all summer at Nicollet Mall on Farmers' Market Thursdays. We weren't able to get video of all the people who are furious with the possible government default. At the beginning of the summer, people were hesitant to talk with us and now they are lining up to express their frustration.

The Effect of Individual Income Tax Rates on the Economy, Part 4: 1950 - 1968

by Mike Kimel 

The Effect of Individual Income Tax Rates on the Economy, Part 4: 1950 - 1968

This post is the fourth in a series that looks at the relationship between real economic growth and the top individual marginal tax rate. The first looked at the period from 1901 to 1928, the second from 1929 to 1940, the third from 1940 to 1950. This week we look at 1950 - 1968. 

Before I begin, a quick recap... both the 1901 - 1928 period and the 1929 - 1940failed to show the textbook relationship between taxes and growth. In fact, it seems that for both those periods, there was at least a bit of support for the notion that growth was faster in periods of rising tax rates than in periods when tax rates were coming down. In the 1940 - 1950 period, we did observe slower economic growth following a tax hike and faster economic growth followed a tax reduction. However, that happened when the top marginal tax rate was boosted above 90%. 

There were also a few other findings that might be surprising given the poor acquaintance Americans have with data. For example, the so-called Roaring 20s were a period in which the economy was often in recession. The New Deal era, on the other hand, coincided with some of the fastest economic growth rates this country has seen since reliable data has been kept. Additionally, rather than leading to faster economic growth, the economy actually slowed, a lot, during World War 2. 

Real GDP figures used in this post come from Bureau of Economic Analysis. Top individual marginal tax rate figures used in this post come from the IRS. As in previous posts, I’m using growth rate from one year to the next (e.g., the 1980 figure shows growth from 1980 to 1981) to avoid “what leads what” questions. If there is a causal relationship between the tax rate and the growth rate, the growth rate from 1980 to 1981 cannot be causing the 1980 tax rate. 

Now that the preliminaries are done, if I was following the same pattern I followed in other posts I'd post a graph showing real GDP growth rates and tax rates. But this time I'm going to hold off on that graph for a few more paragraphs. Instead, I want to discuss an extremely pervasive myth about the period, and how that affects our understanding of economic of the era. The myth involves the so-called Kennedy Tax Cuts. Ask most economists and they'll tell you: the economy was in the doldrums until Kennedy cut taxes from 91% to 70%. After that shot in the arm, growth took off like a shot. There is a second myth, but it is more confused: the myth of the idyllic 1950s. That one says that there was rapid growth in the 1950s because the US had little economic competition, what with the rest of Free World haven't been destroyed during World War 2. It doesn't reconcile that well with the Kennedy tax cut myth since, of course, for the Kennedy tax cuts to pull the economy out of the doldrums caused by a 91% tax rate, the economy has to be in the doldrums rather than idyllic when tax rates are 91%. 

So let's look at what happened. The graph below shows growth rates for the period. (I'm not including tax rates quite yet... that comes later.) 

Well, growth rates in the 1950s weren't steady. There were a lot of ups and downs. During three years in the 1950s, growth rates equaled or exceeded those in Reagan's best year. But it was also a period in which in which there were two recessions (and two more between 1945 and 1950, and another one in 1960) and the economy actually shrunk in two different years. The 1950s can't be characterized as idyllic nor as the doldrums. 

Now, there is a point in the graph that seems consistent with the idea that Kennedy did something that was a game changer. Kennedy took office in January 1961, while the economy was going through the downward part of the cycle we had seen repeated since 1950. And then... instead of the economy continuing on its downward trajectory, growth picked up and accelerated (with one blip), staying (mostly) above 5% through about 1965. LBJ of course, took office when JFK was shot on November 22, 1963 so in this version of history, presumably, the end of the Kennedy boom came about when LBJ started inflicting socialism on us. The only fly in that ointment to that story, of course, is that while hitting the same growth rate as Reagan achieved in his best ever year was not uncommon in the 1950s when the top marginal tax rate was 91%, it stopped happening after JFK. 

Which is all well and good, except for one detail apparent in the graph below which shows both the growth rate and the tax rate: 

As figure 2 shows, the cut in the top marginal rate occurred in 1964 (91% to 77%) and 1965 (77% to 70%). Yes, the Kennedy tax cuts were pushed through by LBJ after Kennedy was dead, and growth rates had already been fast and getting faster for several years before they occurred. Worse, real growth in the 1960s reached their peak - the acceleration that had begun years earlier all of a sudden came to a halt - when the tax cuts occurred. For the remainder of LBJ's term, growth remained strong, but not as strong as it had been earlier. For instance, the average of the annual growth rates of the 1961 to 1962, 1962 to 1963, and 1963 to 1964 years when tax rates were 91% was 5.41%. The average from 1966 to 1967, 1967 to 1968, and 1968 to 1969, after the tax rates were dropped was 3.49%. (Yes, I know, in his last year LBJ raised tax rates back to 75.25%, but even then it was well below the 91% before the tax cuts.) 

This is not, repeat, remotely consistent with the myth I keep hearing about the Kennedy tax cuts. 

So far in this series... it seems the evidence has been at least weakly against the idea that tax cuts lead to faster economic growth in the 1901 - 1928, 1929 - 1940, and 1950 - 1968 periods. The 1940 - 1950 period does seem to behave consistently with that notion, though it is worth noting that it happened when tax rates were above 90%. Next post in the series: 1968 - 1980. 


As always, if you want my spreadsheets, drop me a line. I'm at my first name which is mike and a period and my last name which is kimel (note that I'm not from the wealthy branch of the family that can afford two "m"s - make sure you only put one "m" in there) at gmail period com. 

'March of the Million': Over 460,000 protest across Israel

'March of the Million': Over 460,000 protest across country

By JPOST.COM STAFF AND MELANIE LIDMAN
09/03/2011 22:18

Demonstrators in Tel Aviv's Kikar Hamedina take part in huge rally demanding social justice; Student Union chair to PM: "Let us live in this country"; Large demonstrations in J'lem, Haifa, Afula.

   An estimated 460,000 people gathered across the country on Saturday evening to protest for social change as part of the "March of the Million," Channel 10 news reported.

Over 300,000 people were in Kikar Hamedina in Tel Aviv where a huge rally was taking place after a march through the streets of the city.
RELATED:
Protest leaders want gov't regulation of rent, tax policy
Alternative tent protests cast doubt on 'social leaders'

Student Union Chairman Itzik Shmueli called on Prime Minister Binyamin Netanyahu to "Let us live in this country," during a speech at the rally in Kikar Hamedina.

"Mr. Prime Minister, take a good look at us: We're the new Israelis," he told the hundreds of thousands of people who had gathered as part of the social protest movement rally.

"We want only one thing: To live in this country. We want not only to love the State of Israel, but also to exist here respectfully, and to live with dignity," he said.

Protests were taking place in 20 different cities across the the country including in Jerusalem, Haifa and Afula.

The demonstration was billed as the climactic street protest of a movement that has seen tent cities sprout up and forced quality-of-life issues into the forefront of the political debate.

An estimated 25,000 demonstrators crowded into Paris Square, opposite the Prime Minister’s residence in Jerusalem. Toddlers sitting on shoulders blew plastic trumpets, teenagers in youth movement shirts danced and sang “My Bibi has three apartments” to the tune of “Haman’s Hat Has Three Corners,” and die-hard activists waved their well-worn signs as thousands thronged through the King George Street.

“We came because the older people also need to come and show their support and encourage the younger generation,” said Hani, a 60-year-old Jerusalem resident marching with her husband. “There’s a real chance that something will change, things have already changed,” she said. “There’s a change in thinking, there’s hope for optimism, that the way things were is not the way things are going to be.”

Other demonstrators expressed more cynicism. “I’m pessimistic but trying to be optimistic, I’m doubtful that there will be a big change, but even if there’s a small change it will be something,” said Lehi, who pushed her 11-month-old son, Tom, in a stroller. Tom had been to many of the protests so far, said Lehi, adding that perhaps someday he’ll be able to look back and say he was at the Million Man March in Jerusalem. “I hope when he is older he will go out and demonstrate for the things that are important to him,” she said. “This struggle is not just important to make a change, it’s important for the country, that the country stands up. People need to go out and demonstrate for what’s important.”



The High Court of Justice ruled on Friday that the Transport Ministry would run increased numbers of trains and replacement bus services on Saturday night, to allow people to travel to Tel Aviv to take part in the "March of the Million" protest.

The emergency hearing was the result of a petition filed by attorney Shraga Biran of the 'Awakening In Jerusalem' social movement, after Israel Railways announced plans to close the Jerusalem - Tel Aviv and Beersheba - Tel Aviv lines on Saturday night.

The petition argued that the rail line closures made it impossible for those without private transport to travel to Tel Aviv to attend Saturday night's social justice protest march.

As part of the judgment, made by Supreme Court Justice Hanan Melzar, Israel Railways have placed a notice on their website stating that extra trains will run on the Tel Aviv coastal line and that the Transport Ministry will run replacement bus lines on the Tel Aviv-Beersheba and Tel Aviv-Jerusalem routes.

Joanna Paraszczuk contributed to this report.

Back

The chart above shows the percentage of adjusted gross income (AGI) that different income groups of Americans pay in federal income tax. We chose the top categories ($500,000 to $1,000,000, and over $1,000,000) and matched them up with the some middle class numbers ($30,000 to $40,000, and $50,000 to $60,000). The data in these sets comes from IRS Publication 1304.

As you can see, there are two major points: one, the overall percentage both groups pay in federal income taxes has fallen over the last twenty years or so, and two, when Congress makes a major income tax policy change, it affects the top earners much more than other groups.

Adjusted gross income is defined as income minus adjustments, meaning after deductions. Of course in addition to federal income taxes there are employee contributions to Social Security, which are usually 6.2% of earnings (but are 4.2% in 2011 because of the payroll tax deduction) up to $106,800, which subsequently has a greater effect on the income below that limit than above. There's also Medicare withholding, which is 1.45% of earnings, and since both are set rates, they by nature have greater effect the less you earn.

Income taxes are also progressive in nature, meaning that as earners move up the ladder, they pay a higher rate on larger amounts of income, but only the income that reaches the next bracket. So for the 2011 tax year, a single person who has an AGI of $8,500, the limit of the bottom bracket, pays 10% on their taxable earnings. The person who makes $10,000 pays 10% on their taxable income up to that first bracket limit ($8,500) and then 15% on the income in the second $1,500, and so on. The highest rate is 35% on income above $379,150. 

On point one, progressives have long pointed out the drop in taxes paid by upper income earners: in 1986 those making more than $1,000,000 paid 40.2% of their AGI in income tax, and in 2009 that percentage was 24.2, after hitting a low of 22.1% in 2006. The drop after the Tax Reform Act of 1986 is evident, then growth after the Budget Act of 1990 and the broken promise of "no new taxes," the slight continued increase after the Budget Act of 1993 under President Clinton, then a gradual drop in the 1990s until the more pronounced fall after the Bush tax cuts.

The taxpayers in the middle class rungs though, saw a steady decline over that time period. Those in the $50-$60k category went from paying 15.5% of their AGI to federal income taxes in 1986 to paying 6.3% in 2009, and earners who made $30-$40k went from 12.2% in 1986 to 4% in 2009. Simply, many Americans are paying less in taxes over this time period. 

Talking Points Memo on Facebook

The second point here is that as you can see from the numbers, when Congress makes a major change in income tax policy, most adjustments are going to affect the top earners. And not just in a narrative that fits around tax cuts for the rich at the expense of all other taxpayers: the chart also shows increases in the percentage of AGI paid by those with high incomes in times of recession, like in 1990 and 1993 (when taxes were raised) and even after 2007-2008. The obvious exception here is the early 2000s recession, when the Bush tax cuts went into effect, and AGI paid in taxes by the rich plunged as government surpluses disappeared. 

Of course, the current (2006-2009) slim increase in AGI paid by high earners could also mean that those in the higher income tax brackets are seeing more money come in, and subsequently have to pay more out in taxes, versus the middle class payers who have seen wages stagnate in the last few years and therefore had to pay less. The Congressional Budget Office has been documenting the rising inequality gap, and this could provide some secondary proof of that trend. 

And of course, this chart and analysis is about federal income taxes paid on wages, and for the high end earners, there are many more forms of typical income.

MPR on the state of the SHUTDOWN

The Daily Digest

Posted at 6:46 AM on July 8, 2011 by Tom Scheck (0 Comments)
Filed under: Daily Digest

It's the eighth day of the shutdown. It will be the longest state shutdown in the nation since 2002 if it goes through Sunday.

No talks are scheduled for day. Gov. Dayton put forward the last offer on Wednesday. GOP legislative leaders haven't made a budget offer since the shutdown started more than a week ago.

The Mondale/Carlson Commission suggests permanent spending cuts and tax hikes on income, alcohol and cigarettes. The proposal wasn't fully embraced by any of the sides in negotiations.

Commission Co-chair Wayne Simoneau discusses the "third way." Listen to the interview here.

GOP House Majority Leader Matt Dean writes an open letter to Gov. Dayton.

The Department of Human Services is a complex agency at the heart of the budget battle.

The Star Tribune talks to Minnesotans with an annual income of $1 million or more and finds that some are hostile and others are lukewarm to the plan.

Grover Norquist, who has never seen a tax he likes and said he wants to drown government in the bathtub, says Dayton is a "fanatic on taxes."

Gov. Dayton had a fifteen minute conversation with Rep. Rich Murray, R-Albert Lea earlier this week.

Shutdown Impact

Minnesota's bond rating has been downgraded.

A judge ruled that licensing operations at DHS can continue.

The GOP is making hay out of Dayton keeping his chef and housekeeper on as essential staff. Dayton's spokeswoman says the governor is paying the chef out of his own pocket.

Tidbit: The House and Senate haven't laid anyone off. A senate spokesman says they will reconsider at the end of July when carry forward fund start to run out. A House spokeswoman says they'll reconsider at the end of August.

The shutdown forces a Duluth mental health facility to close.

MPR says the shutdown's impact on business will only increase.

Iowa's lottery sales have ticked up as a result of Minnesota's shutdown.

A detective for the Commerce Department is at odds with his top brass over whether his work is essential or not.

Former Governor Arne Carlson and Wendell Anderson are a few retired constitutional officers who want to continue receiving their retirement checksduring the shutdown.

Some visitors to state parks on the north shore are disregarding the shutdown.

Food inspectors will be shorthanded at fairs.

Under the Dome

DFL Sen. Linda Berglin took a job with Hennepin County. She wouldn't say if she'll leave her post in the Legislature

MN Tax Incidence Study

Nearly 60% of Minnesotans find themselves making the lowest quarter of incomes in the state.

Executive Summary

http://taxes.state.mn.us/legal_policy/Documents/other_supporting_content_2009_tax_incidence_study_links.pdf

This study reports the distribution of calendar year 2006 Minnesota state and local taxes in relation to taxpayer income, along with projections for calendar year 2011.  It answers the question, “Who pays Minnesota’s taxes?”  The major objective is to provide taxpayers and policymakers with important information on the equity or fairness of the overall distribution of Minnesota taxes.  

This is the tenth biennial tax incidence study prepared in response to the statutory requirement enacted in 1990.

The report estimates 1) how the total state and local tax burden on Minnesota households varies by income range, and 2) how the burden of each component of the overall state and local tax system is distributed across Minnesota households.   Aggregating the impact of each component yields an estimate of the distribution of the total tax burden.  The estimates include taxes with an initial impact on businesses, such as the corporate franchise tax and the sales tax on business purchases, as well as taxes imposed directly on households.  The initial impact of taxes imposed on Minnesota households and businesses is discussed first.  The analysis then proceeds to estimate the final incidence of taxes on Minnesota households, after taxes imposed on businesses have been shifted to those who 

bear the final burden.

The report:

 Analyzes  $22.1 billion in taxes collected in 2006, a total that represents over
99 percent of all state and local taxes.
 Identifies the shares paid initially by households (64.8 percent by Minnesota
residents and 2.8 percent by nonresidents) from the share paid initially by business
(32.5 percent).
 Estimates the extent to which the business taxes are shifted to consumers (in
higher prices) or labor (in lower wages), rather than being borne by owners of
capital (in lower rates of return).  Also estimates the extent to which the ultimate
burden is “exported” to nonresident owners of capital or nonresident consumers.
 Calculates average household tax burden by income range.  That burden consists
of taxes imposed directly on households, such as the income tax or consumer sales
tax, plus the household share of taxes initially imposed on business but shifted to
households, the ultimate payers.   Income is defined to include all forms of cash
income, both taxable and nontaxable.
 Presents results by population decile, each decile including one-tenth of all
households (the lowest-income 10 percent in decile 1 and highest-income
10 percent in decile 10).
 Projects the 2006 results forward to 2011, accounting for the effects of both law
changes and economic growth on the mix and level of state and local taxes.2

Conclusions of the research are:
 Of the total $22.1 billion in 2006 taxes, 83.9 percent of the burden ultimately falls on Minnesota residents ($18.5 billion).  The remaining $3.5 billion of the tax
burden is exported to nonresident consumers or nonresident owners of capital
 In 2006, the state and local tax burden on Minnesota households averaged
11.2 percent of income, down from 11.6 percent in 2004.  But half of that drop is
due to use of an expanded definition of income in this year’s study.
 The local tax share of tax revenue rose from 25.8 percent in 2004 to 26.7 percent
in 2006 and is projected to rise significantly to 31.7 percent in 2011.  The state tax
share fell from 74.2 percent in 2004 to 73.3 percent in 2006 and is projected to fall
to 68.3 percent in 2011.
 The share of state and local revenue derived from consumption taxes fell from
33.7 percent in 2004 to 31.8 percent in 2006 and is projected to fall to 30.3 percent
in 2011.  The share of income tax rises between 2004 and 2006, but falls in 2011.
The property tax share declines slightly between 2004 and 2006, but is projected
to increase substantially by 2011.
 The business tax share of total tax revenue falls from 33.2 percent in 2004 to 
32.5 percent in 2006 but is projected to rise to 32.7 percent in 2011.
 After allowing for the shifting of business taxes, the Minnesota tax system in 2006 was somewhat regressive (and significantly more so than in 2004).  In contrast to the results shown in recent studies, effective tax rates were above the 11.2 percent average for  all except the tenth decile. The Suits index, a measure of the progressivity or regressivity of a tax or tax system, fell from  -0.024 in 2004 to  -0.053 in 20061
. This change suggests a significant increase in overall regressivity,
in large part due to greater income inequality in the stronger economy.2
 Minnesota’s refundable income tax credits and property tax refunds for
homeowners and renters substantially reduce overall regressivity.  In their
absence, the 2006 Suits index would fall from -0.053 to -0.075.
 Incomes are expected to grow by only 15.5 percent between 2006 and 2011.  Tax receipts are forecast to grow at a slightly higher rate, raising the overall effective tax rate to 11.4 percent.
 The  population-decile  Suits index is projected to fall only slightly to -0.051 in
2011. Income growth is expected to outpace  tax  growth in  the  lowest three
deciles; the reverse is true in deciles 4 through 10

Only Little People Pay Taxes

brianjmatis/Flickr

Why a janitor ends up with a higher tax rate than a millionaire, and seven more charts that show how the richest Americans beat the IRS.

— By Dave Gilson

Mon Apr. 18, 2011 3:00 AM PDT

Click here for more charts on America's growing income gap.

"We don't pay taxes. Only the little people pay taxes," billionaire hotelier Leona Helmsley famously (and allegedly) sniffed. She wasn't entirely correct: The superrich do still pay taxes. The wealthiest 1 percent of taxpayers pay 32 percent of all income tax collected by the federal government.
But the superrich don't pay as much as they used to—and thanks to a combination of tax cuts and preferential tax policies, their tax obligations can be less demanding than the so-called little people's. In fact, the very wealthiest Americans' tax burden has been steadily dropping for years, even as they've enjoyed astounding income growth not seen by the vast majority of Americans.










Tax rates for the wealthy have fallen substantially since they peaked in the 1940s. During the past 30 years, they have been cut at a much faster rate than middle- and low-income taxpayers'.
Just how much of a windfall are tax cuts for the wealthy? The extension of the Bush tax cuts passed last year will provide $146,000 in annual tax savings, on average, to each of the wealthiest 0.1% of Americans.
















The superrich get an additional boost from relatively low tax rates on capital gains. Income from long-term investments, which makes up a larger portion of wealthier taxpayers' incomes than middle- and low-income taxpayers', is taxed at lower rates than wages.










Payroll taxes (deductions for Social Security, Medicare, and unemployment insurance) are mostly paid by the bottom 90 percent of earners. When they're factored in on top of income tax, the gap between the tax rates at the very top and everyone else shrinks even more—so much that the effective tax rate for people earning more than $370,000 is nearly the same as for those earning between $43,000 and $69,000 a year.















Payroll taxes now make up nearly as much of federal tax revenue as individual income tax. Meanwhile, revenues from corporate taxes have decreased significantly over the past 50 years.
















Corporations exploit various loopholes and tax breaks to reduce their IRS bills—perhaps none more notoriously than General Electric. Though the corporate tax rate is 35%, GE has paid nothing near that for nearly a decade.















Leona Helmsley's distaste for paying taxes eventually landed her in federal prison. But the rich have little need to break the law to avoid the tax collector. As Martin A. Sullivan of Tax.com recently calculated, a New York janitor making slightly more than $33,000 a year pays an effective tax rate of nearly 25%. And the effective tax rate for a resident of the Park Avenue building named after Helmsley, earning an average of $1.2 million annually? A cool 14.7%.









More Mother Jones charty goodness: 11 charts that explain America's income gap; how the rich get richer; how the poor get poorer; and who owns Congress?

Advertise on MotherJones.com

Sources

Share of taxes: Tax Policy Center
Top 400 taxpayers: IRS (PDF)
Falling tax rates: Remapping Debate
Bush tax cuts: Tax Policy Center (PDF)
Income vs. capital gains: IRS: Income tax rates (PDF); capital gains tax rates
Effective tax rates: Tax Policy Center
Source of tax revenues: Senate Joint Committee on Taxation (PDF)

Publish Post

GE taxes: ProPublica
Janitor vs. millionaire: Tax.com

Dave Gilson is a senior editor at Mother Jones. For more of his stories, click here. Get Dave Gilson's RSS feed.

Are Taxes in the U.S. High or Low?; NYT

May 31, 2011, 6:00 am

Are Taxes in the U.S. High or Low?

By BRUCE BARTLETT

Bruce Bartlett has served as an economic adviser in the White House, the Treasury Department and Congress. 

Historically, the term “tax rate” has meant the average or effective tax rate — that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.

By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

Just last week, House Republicans released a new plan to reduce unemployment. Its principal provision would reduce the top statutory income tax rate on businesses and individuals to 25 percent from 35 percent. No evidence was offered for the Republican argument that cutting taxes for the well-to-do and big corporations would reduce unemployment; it was simply asserted as self-evident.

One would not know from the Republican document that corporate taxes are expected to raise just 1.3 percent of G.D.P. in revenue this year, about a third of what it was in the 1950s.

The G.O.P. says global competitiveness requires the United States to reduce its corporate tax rate. But the United States actually has the lowest corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development.

 
Revenue Statistics of O.E.C.D. Member Countries, 2010

If taxes are low historically and in comparison with our global competitors, how are Republicans able to maintain that taxes are excessively high? They do so by ignoring the effective tax rate and concentrating solely on the statutory tax rate, which is often manipulated to make it appear that rates are much higher than they really are.

For example, Stephen Moore of The Wall Street Journal recently asserted that Democrats were trying to raise the top income tax rate to 62 percent from 35 percent. But most of the difference between these two rates is the payroll tax and state taxes that are already in existence. The rest consists largely of assuming tax increases that no one has formally proposed and that would be politically impossible to enact at the present time.

Ryan Chittum, in Columbia Journalism Review, responded with a commentary that called the Moore analysis “deeply disingenuous.”

Nevertheless, one routinely hears variations of the Moore argument from conservative commentators. By contrast, one almost never hears that total revenues are at their lowest level in two or three generations as a share of G.D.P. or that corporate tax revenues as a share of G.D.P. are the lowest among all major countries. One hears only that the statutory corporate tax rate in the United States is high compared with other countries, which is true but not necessarily relevant.

The economic importance of statutory tax rates is blown far out of proportion by Republicans looking for ways to make taxes look high when they are quite low. And they almost never note that the statutory tax rate applies only to the last dollar earned or that the effective tax rate is substantially lower even for the richest taxpayers and largest corporations because of tax exclusions, deductions, credits and the 15 percent top rate on dividends and capital gains.

The many adjustments to income permitted by the tax code, plus alternative tax rates on the largest sources of income of the wealthy, explain why the average federal income tax rate on the 400 richest people in America was 18.11 percent in 2008, according to the Internal Revenue Service, down from 26.38 percent when these data were first calculated in 1992. Among the top 400, 7.5 percent had an average tax rate of less than 10 percent, 25 percent paid between 10 and 15 percent, and 28 percent paid between 15 and 20 percent.

The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment.

Recovery, Taxes, Government Spending, and Astonishing Stupidity

By BuzzFlash

Created 02/28/2011 - 9:35pm

LARRY BEINHART FOR BUZZFLASH AT TRUTHOUT
The current economy is routinely and universally referred to as the worst recession since the Great Depression.
It makes sense, therefore, to look back at government tax and spending policies during the Depression and what the results were.
1932 -- Hoover raises [1] the top tax rate from to 25 to 63 percent.
1933 -- Roosevelt comes into office. He begins spending at the same time that the new tax hike comes into effect. The Depression bottoms out.
1934 -- Recovery begins [1]. The GNP rises 7.7 percent, unemployment falls to 21.7 percent.
1935 -- New government spending [2] on public works and rural electrification. A push to strengthen labor and raise wages. New taxes through the creation of Social Security.
The GNP grows [1] another 8.1 percent, and unemployment continues to fall.
1936 -- The top tax rate is raised [1] again. This time to 79 percent.
GNP grows a record 14.1 percent; unemployment falls even further.
1937 -- Roosevelt is afraid of deficits! He cuts spending [1] for 1937.
There's a new recession. It continues for a year.
1939 -- The U.S. borrows [1], resumes deficit spending, this time on a military build-up. The recession ends.
1941 -- America enters World War II.
In economic terms, it's the New Deal on steroids. The top tax rate goes up to 91 percent [1]. Nonetheless, government spending is so high that by 1945 the deficit is 123 percent of GDP [1]. Unemployment is ended by employing 16 million people directly in the armed forces and millions more producing war material and supporting the military.
The Great Depression is finally over.
When taxes were raised the economy improved. Every time. Deficits had no negative effect on the economy. Indeed, when deficits were at their highest, the economy boomed.
After spending was cut -- to balance the budget -- a recession immediately followed. When taxes were raised and government spending resumed -- with deficits -- that recession ended.
When taxes were raised again, and government spending went sky high, the Great Depression finally ended.
So here we are. We refused to raise taxes. The recession continues. Now, we're going to cut spending.

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Source URL: http://blog.buzzflash.com/node/12418

Links:
[1] http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html
[2] http://www.amatecon.com/gd/gdtimeline.html

VIdeo: Tax Foundation President Scott Hodge Testifies to Minnesota Legislature on Corporate Tax Reform

http://www.taxfoundation.org/publications/show/27030.html


On February 1, 2011 Tax Foundation President Scott Hodge testified to Minnesota's House Taxes Committee on proposals to lower or eliminate the state corporate income tax.  [yes, really !]

Must go to link - video will not embed - highly controversial.


Some states ARE raising the rates:  Check out Illinois ....