Believe it or not, U.S. taxes are at historic lows
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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 federal tax rate is total 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 GDP this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.
PG CHARTThe postwar annual average is about 18.5 percent of GDP. Revenues averaged 18.2 percent of GDP during Ronald Reagan's administration; the lowest percentage during his administration was 17.3 percent of GDP 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 GDP 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.
House Republicans recently released a 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 GDP in revenue this year, about a third of what it was in the 1950s.
The GOP 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 advanced member nations of the Organization for Economic Cooperation and Development.
First Published June 5, 2011 12:00 am
