Some really interesting thoughts on taxes on Patriot Day

Dear James, Daniel and Emily,

Whilst arguing with some people on the inaccuracies and idiocy of the GOP wingnut Teabag protests I had to do some real research and came up with some very good sources and interesting information.

My theory was that people who are protesting high taxes are actually paying the lowest taxes they have paid in a really long time. So I first wanted to find a way to compare dollars, and found that the generally accepted method for determine the effect of inflation is the consumer price index of CPI. And here is a link to an excellent chart for CPI rates. My next step was to find tax tables for historical comparisons, which is very educational on it's own.

I have written before here about the difference between taxable income and real income and tax rates. Very simply for this post taxable income is income after all deductions and adjustments are made, but before any refundable deductions kick in. That is the number that a persons tax rate is based on.

So let's take a hypothetical taxable income of 100,000$ for a married couple (which is a decent amount, more than I make). In 1978 dollars that would be 34,300$, which would have landed you in the 39% tax bracket. In 1988 the equivalent would have been 59,400% which would have landed you in the 28% tax bracket. In 2008 that amount puts you in the 25% tax bracket. So taxes have not gone up, in fact the trend has been steadily downward since the end of the 1970's. So people in that bracket have no justification for complaining about taxes always getting higher.

So my friend that I am arguing with (who is not a wingnut BTW, just your normal conservative) said the real argument is that spending is increasing. If you look at the federal spending as a percentage of the Gross Domestic product (see here for lots of data) the percentage of spending compared to GDP has not changed much since 1968. With the current stimulus that will increase to 22-25%, which is higher. But as a Keynesian by preference I don't view that as a negative.

An interesting piece of information that can be gleaned from these charts is that the percentage of federal income from corporate taxes dropped in 1970 and haven't come close to returning to that number. So we the people, not corporations, have been footing a larger chunk of the bill for federal spending over the last 40 years. Why else do you think corporations have been funding lobbyists etc. to keep the anti-tax spiel going?

In short the media spin on taxes has become overwhelmingly one of all taxes must get lower, when they are at historic lows, and can't get much lower. And at a time when our economy needs more government help, not less, the last thing we should be complaining about is high taxes, when they realistically aren't high.