In last week's post, Tax Tea Parties Misstate U.S. Tax Burden, Bruce Bartlett's Forbes' column this week is Tax Tea Party Time, Part Two:
Last week, I presented data comparing taxation in the United States to other major countries and concluded that Americans are not especially overtaxed. The almost universal reaction to this analysis was, "So what?" Just because foreigners are even more overtaxed than we are doesn't mean that we aren't overtaxed.
Fair enough. But what if we compare U.S. taxes today to those in the past? Are Americans more heavily taxed than those in earlier years, and do polls show greater dissatisfaction with taxes today?
To answer these questions, I looked at the effective federal income tax rate–taxes paid as a share of income–for a family with the median income. The median is the exact middle of the income distribution–half of families are above and half are below. It's as close as we can get, statistically, to the typical American family.
As the table shows, in 2007, the most recent year available, the median family paid 5.91% of its income to the federal government in the form of income taxes. This is half the tax rate paid in 1981 before the Reagan tax cut took effect. Although the 2007 rate is up very slightly from its 2003 low point, it is still well below the rate that prevailed from the 1950s through the 1990s.
Effective Tax Rate on the Median Family
Year
Rate
Year
Rate
Year
Rate
Year
Rate
Year
Rate
1958
6.96
1968
9.21
1978
11.07
1988
9.30
1998
7.98
1959
7.49
1969
9.92
1979
10.84
1989
9.36
1999
7.88
1960
7.77
1970
9.35
1980
11.42
1990
9.33
2000
8.02
1961
7.94
1971
9.27
1981
11.79
1991
9.30
2001
6.71
1962
8.30
1972
9.09
1982
11.06
1992
9.18
2002
6.53
1963
8.68
1973
9.45
1983
10.38
1993
9.18
2003
5.34
1964
7.56
1974
8.99
1984
10.25
1994
9.17
2004
5.38
1965
7.09
1975
9.62
1985
10.34
1995
9.28
2005
5.69
1966
7.48
1976
9.89
1986
10.48
1996
9.33
2006
5.85
1967
8.00
1977
10.42
1987
8.90
1997
9.32
2007
5.91
Some may wonder about marginal rates–the tax on each additional dollar earned. This year, the median family will face exactly the same marginal tax rate it has faced since 1987: 15%. This is down substantially from the 1970s, when the median family paid as much as 25% on the marginal dollar of income.
Thus, it is hard to find evidence that taxes are rising or unusually high. This is confirmed by poll data. According to Gallup, only 46% of Americans think their federal income taxes are too high–the lowest percentage recorded since 1961. In 2000, 65% of people thought their taxes were too high; last year the figure was 52%. …
Maybe this week's tax protesters would have been out protesting even if McCain were president, but I don't think so. I believe this was largely a partisan exercise designed to improve the fortunes of the Republican Party, not an expression of genuine concern about taxes or our nation's fiscal future.
