Hey look, a timely article for a change!  Finally I’m addressing a phenomenon before it happens and not days/weeks after it has passed.  Anyway, you may or may not have heard about the “tea-party” anti-tax movement that’s developing around the country.  This tea-party movement consists of people gathering in various cities on April 15th holding protests about the “terrible taxes burdening americans”, and what they see as America’s coming descent into socialism.  Here’s a quote from one of the two fawning FoxNews articles that were up about it today.  From one of the organizers of the tea party protests:

“People are getting killed — they’re getting hammered with taxes and it’s not the way this country is supposed to be run. … We want to fight back,”

Are people really getting hammered with taxes?  I don’t challenge their right to gather and protest taxes or whatever they want, but they may want to check a few facts first.  And to make it convenient for them, I’ve gathered the pertinent graphs and information after the jump.  I should also note before I begin that not all tea-party participants are claiming taxes are too high and that some are doing this for other reasons (to protest the stimulus, just to express their anger that McCain lost etc), I’m not addressing those concerns here.  But these tea-parties are being billed as “anti-tax protests” so this is a significant part of what they’re organizing for and this article will address that issue.  Anyway, as best as I can deduce, here’s some relevant historical perspective…

Taxes on the Average Family

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First up is this graph showing data compiled from the treasury department.  It only runs up to 2006 but I’m fairly certain the tax rates haven’t changed since then.  It clearly shows that the median-income family of four’s average effective income tax rate is currently at its lowest level since at least 1955.  And Obama’s budget will lower that substantially as described in this AP article.

Also, in this analysis from the Center on Budget and Policy Priorities from 2001 we read, “…this analysis’ update of the CBO data on overall federal tax burdens finds that when households’ total federal tax burdens are considered — including their payroll, excise, and other taxes, along with the income taxes they pay — most categories of households will face a lower average tax burden in 2001 than in any year from 1979 to the present. (1979 is the first year these CBO data cover.) For example, the middle fifth of taxpayers will pay an average of approximately 16.3 percent of income in total federal taxes in 2001, the lowest percentage during the 22 year period examined.”  And once again, for all but the highest earners, these tax rates, already at historic lows, are only going to fall further under Obama’s budget.

Taxes on Corporations

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What about our poor businesses and corporations?  I mean during the election the (misleading) statistic that America’s corporate tax rates are higher than any other industrialized country was thrown around left and right!  And some members of congress have continued to call for them to be lowered further.  As we can clearly see from the accompanying graph, corporate tax rates are also at near record lows.  Whether or not they need to be lowered further from here is a topic for another article.  But the fact that they’re already lower than they’ve been in 50 years should be enough to make tea-party organizers think twice.

It’s been surprisingly difficult for me to find information on what specifically  Obama’s proposed budget would do to corporate tax rates but it seems that it includes a mixture of focused tax breaks and closure of current tax loopholes and there is some uncertainty about how it will end up affecting the average corporation.  But any change in the average rate will be a matter of a few percent and won’t substantially change our position on the graph.

Taxes on the Rich

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Here we go!  Everyone knows Obama’s budget raises taxes on the rich right?  Its part of his socialistic plan for wealth redistribution!  Well this graph shows the top marginal personal income tax rate since 1913 according to the IRS.  And as you can see, the rich have had it relatively easy for the last several years.  The current marginal income tax rate for the rich lies at about 35% and Obama’s budget would move it to a little over 38%, which would be about equal with the 1997 levels on that graph.  And keep in mind we’re talking about the marginal rate.  So it’s only the income the wealthy receive that is above and beyond $250,000 that would be taxed at a higher rate.  Anything they make up to $250,000 would actually be taxed at a lower rate than it was before.  So their overall tax burden will increase by something less than 3%.  And these tax increases aren’t set to kick in until after 2011.

Wealth Redistribution

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A couple more charts and then I promise I’m done.  While we’re on the topic of wealth distribution and tax stratification, lets look at some of that data.  So when pundits and partisans throw around the word socialism in reference to Obama’s tax policies (they also use the term in reference to his spending policies but that’s another discussion) they’re talking about his lowering of the tax burden on the poor and his raising of the tax burden on the rich.  As we’ve already shown, the rich are getting a pretty paltry tax increase and even so, as this graph shows, our tax policies are flatter than they have been in decades.  The tax rates for nearly all households have been dropping since the 60s, but the rates of the richest have been dropping the fastest.

In fact they’ve been dropping so fast that when you take all sources of taxation into account our tax policies are already flat and bordering on regressive!

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When you count sales taxes (which are regressive) and all other kind of specialty taxes (most of which are also regressive), the bottom 20% of income earners in this country pay a larger percentage of their income in the form of taxes than anyone but the highest 20% of earners.  and even then its only 1% less!  So when we are starting with what we see here in this graph, a slight decrease in the tax rates of most and a slight increase in the rates of the rich will not result in a substantially imbalanced tax burden by any means.

So what backbreaking taxes are these tea-parties protesting exactly?  Taxes are at historic lows (some would say they’re irresponsibly low) for almost everybody and for 95% of America they’re set to go down further.  Corporate taxes are also near all time lows and our country’s tax burden is spread fairly evenly amongst all income groups.  The only group facing any kind of tax increases at all are individuals with an income of $250,000 and even then its not until 2011, its less than 3%, and their rate will still be much lower than its been for most of this century.  And furthermore that income bracket voted predominantly for Obama in the last election, knowing full well that increasing their income taxes was one of his campaign promises.  So if these tea parties are being organized to protest increasing taxes we can only assume they’re doing it on behalf of the rich, which seems odd in its own right, but even more so when you realize that most of the wealthy don’t actually want the help.

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