RSS Feed MenuI have spent most of my life trying to cut taxes. Back in 1977, while a staffer for Congressman Jack Kemp, I helped draft the Kemp-Roth tax bill, which was endorsed by Ronald Reagan and enacted into law in 1981. According to the Treasury Department, this is the largest tax cut in American history.
So one might assume that I was out protesting taxes along with many of my friends on April 15. But going to rallies is not my thing; I thought my time and skills were better spent analyzing tax burdens to see what evidence justifies the sudden appearance of mass protests against taxes.
The first thing I did was look at the U.S. tax burden compared to other similar countries. Vast amounts of such data are compiled by the Organization for Economic Cooperation and Development in Paris and easily available on its web site.
The first thing I did was look at total revenues — federal, state and local — as a share of the gross domestic product. This percentage is the best summary measure we have for the burden of government on the economy.
The latest complete data are for 2006. They show that governments at all levels consumed 28 percent of GDP in the U.S. Of the 30 OECD countries, we ranked 26, just slightly above Japan and Korea. Only Turkey and Mexico had significantly lower tax burdens.
The most heavily taxed countries are Denmark and Sweden, where government takes 49.1 percent of GDP. On average, the OECD countries of Europe had a tax ratio of 38 percent — 10 percentage points higher than the U.S.
Since the level of taxation here is already considered tyrannical by tea party organizers, any tax level approaching that in Europe would surely constitute slavery in their eyes. Of course, anyone who has ever traveled to Europe knows that the people there are no less free than we are.
For the most part, Europeans just prefer to pay higher taxes for universal health care, while Americans have the cost deducted from their paychecks by their employers. If Americans took all the money they pay for health insurance and added it to their tax bills, getting free health care in return, our tax/GDP ratio would be about the same as that in Europe.
Keep in mind that Americans have always been willing to pay higher taxes when they got something they need in return. Every family with children looks carefully at the quality of local schools when buying a house and almost all are willing to pay higher property taxes to get good schools. States and localities with the lowest taxes are seldom the best places to live because of a concomitant lack of services.
I published my analysis at Forbes.com and sent it around to some of my conservative friends. The universal reaction was, “So what? Why should Americans care if foreigners are even more overtaxed than we are?”
I thought this was a fair point, so I did another analysis looking only at taxation in the U.S. Even if our taxes are low compared to those in other countries, tax protests might be justified by a rising tax level.
The first thing I did was look for more recent data on taxes as a share of GDP on the website of the Congressional Budget Office. It says that total federal revenues will consume 15.5 percent of GDP this year, down from 17.7 percent last year, 18.8 percent in 2007, and 20.9 percent in 2000.
This is a very sharp reduction in the tax/GDP ratio. As a consequence, the federal government will take less out of the economy in the form of revenue than any year since 1950.
But what about the average American, I wondered? Is it possible that the tax code has changed in some way that makes families worse off even though the aggregate level of taxation has fallen?
To answer this question, I went to the website of the Tax Policy Center. It has a table that looks at federal income taxes on the median family’s income. The median is the exact middle of the income distribution—half of all families make more, half make less.
In 2007, the latest year available, the median family paid 5.91 percent in federal income taxes. In every year from 1958 — the first year available — through 2002, it paid more. In 1981, before the Reagan tax cut took effect, the federal income tax rate on the median family was 11.79 percent—twice what it was in 2007.
Many commentators complained that these data are meaningless because they are skewed by the large and growing number of Americans that pay no federal income taxes. According to the Joint Committee on Taxation, 43 percent of federal tax returns filed in 2007 had no income tax liability.
My critics, however, misunderstood how the Tax Policy Center data are calculated. They are not affected in any way by the number of people not paying taxes. The data simply look at the median family’s income and use current tax law to estimate its tax liability.
In response, my tea party-attending friends said I had left out payroll taxes. But there has been no change in the payroll tax rate for many years and most people will get back cash benefits equal to everything they pay in Social Security taxes plus a lot more. Anyway, I didn’t see any signs at the various tax protests complaining about payroll taxes.
But what about state and local taxes, my critics replied? This is always a problem area, analytically, because they vary widely from one place to another. However, according to the National Association of State Budget Officers, the aggregate amount of state tax increases this year amounts to just $1.5 billion; all of that accounted for by one state, California. Two-thirds of states either cut taxes or had no increase.
Moreover, in surveying the location of tax protests compiled by a group called FreedomWorks, which organized the demonstrations, the bulk of tea parties appear to have taken place in Texas and Florida, which have no state income tax, or states where there has been no tax change. Few protests occurred in high-tax states; most were in states where they are low.
Finally, in desperation, my critics said that it is not actually the level of taxation today that they are protesting. It’s the implicit tax resulting from large federal deficits that really concerns them.
I might have been willing to buy this argument except for the fact that these same people justified a huge tax cut in 2001 on the grounds that large budget surpluses, which had arisen toward the end of Bill Clinton’s administration, were proof of over-taxation since the government was taking in more revenue than it needed to pay its bills.
Furthermore, the conservative line for the last eight years was that budget deficits don’t matter, as Vice President Dick Cheney famously remarked when Treasury Secretary Paul O’Neill raised concerns about them at a cabinet meeting in 2002. (O’Neill was fired shortly thereafter for not being on-message.) It’s at least a bit disingenuous for conservatives to suddenly change their view on deficits simply because their team is no longer in power.
In my opinion, these tea parties had little, if anything, to do with current or projected tax levels. They were just partisan pep rallies designed to make out-of-power conservatives and Republicans feel better. Secondarily, they were about building audiences for Fox News and right-wing talk radio hosts.
But I will grant that some of those attending tea parties are now genuinely concerned about our fiscal future even though they weren’t during the George W. Bush Administration. (Where, I wonder, were the protestors when Bush and a Republican Congress massively expanded Medicare in 2003?) But it’s not enough just to complain; specific proposals need to be developed that go beyond cutting foreign aid and earmarks — just about the only spending that conservatives ever talk about cutting.
In particular, anti-tax activists need to explain how we are going to cut Medicare by tens of trillions of dollars when its beneficiaries already represent the largest voting bloc in America and its ranks will grow sharply as the baby boom generation retires. Because of rising Medicare costs, we would be facing massive budget deficits in the near future even if Barack Obama had not been elected, Republicans still controlled Congress, and there had been no economic crisis.
Still, all movements must start somewhere. If the April 15 tea parties are really about more than just electing Republicans and increasing Fox News ratings, I may join them next year. In the meantime, protestors need to do a better job of figuring out what they are protesting and devise a real plan for dealing with our nation’s fiscal problem. Otherwise, their efforts will amount to nothing more than hot air.
Jeffersonian // Apr 26, 2009 at 4:07 pm
Mr, Bartlett I wonder why would you even concern yourself at all with the comparibility of other countries tax burdens? The issue is not burden but legality. Does the Constitution grant the federal government the authority to “tax” for the purpose of redistribution? NO! NO! NO! That ios what Social Security, Medicaid, Medicare are. It is taking one person’s property and giving it to another. It is this illegal taking that decreases one’s own resources to benefit another that creates an undeniable sense of injustice, which in response to people rise up and protest. It is also the illegal use of the taxing power to favor certain agendas, without such agendas having gone through the amendment process. For this, look to the proposed cap and trade. As you yourself said, “A movement has to start somewhere”. You would do better in the future to first analyze the legality of that which taxes are taken for, and then to contrast the return given to the taxed, first for true federal benefit, and then even if the use to which said monies are put actually benefit society as a whole, because then an argument can be made for actually granting the federal government the authority for social legislation also.
krove // Apr 26, 2009 at 5:32 pm
The viewers of Fox News may not agree, but the no one can fudge the numbers from the network’s own polling (.pdf) showing that Americans like Barack Obama, and to a lesser extent the Democratic Congress, and want to see both reelected.In the next congressional election in 2010, are you more likely to vote for the Democrat to help Barack Obama pass his policies and programs or vote for the Republican to provide a check on Obama’s power? [question slightly reformatted]Democrat: 46 percentRepublican: 33 percentIf the 2012 presidential election were held today, would you definitely vote to reelect Barack Obama, probably vote to reelect Obama, probably vote for someone else, or definitely vote for someone else? Vote to reelect Obama: 52 percent (37 percent definitely, 15 percent probably)Vote for someone else: 31 percent (23 percent definitely, 8 percent probably)There’s very little good in these numbers for the GOP. Starting first with the 2010 data, fewer Republicans (78 percent) than Democrats (86 percent) want to vote for a congressional candidate of their own party, and Independents lean slightly towards the Democrats (33 percent to 26 percent, with a large 34 percent plurality saying it’s too soon to be pushed in one direction or the other). The 2012 numbers look even worse for the GOP, with President Obama maintaining a robust +21 reelect number, including a +14 number among those definitely supporting or opposing him. Digging deeper into the weeds, 13 percent of Republicans would vote to reelect the President, compared with the 9 percent support he received from Republican voters in 2008, and Independents line up in favor of a second term by a 15-point margin, nearly double the 8-point victory he scored within such voters last fall.You might think that this would lead the GOP to change it’s failing ways. But judging from the past few months, as well as the latest posturing from the party, I don’t know how likely that outcome is.
Cforchange // Apr 27, 2009 at 8:58 am
In the analogy here, do you consider street economics? From my view, the underground cash world is blatently flourishing beyond the middle class. It’s clear from the cars, the corner kids each w/ $10k in their pockets, the AK’s, the $500 sneakers, the bling, the outerbanks beach houses. Just try and legimately remove 10K from the bank – see the effort that takes.Would it make sense that as the street economy grows, the GDP would remain stable despite a national downtrun but tax collections would plummet.On a more innocent scale – just check out the commercials or news stories for bartering your services to make it through these tough times. I’ve heard only one media presentation that includes the fact that these are taxable affairs. Besides the lowering of tax rates, I think we have developed a culture where not paying taxes is OK. The tax code needs to be simplified and it should be enforced. I agree that the recent tea party’s were in part fantasy. The participants didn’t stay on message nor did the message strictly pertain to taxes. However the frustation from the honest folks trying to be good citizens is very valid. Our tax system is broken.
vadum // Apr 27, 2009 at 11:43 am
With all due respect to Mr. Bartlett, his latest op-ed is a festival of nitpicking. He was one in a chorus of Chicken Littles demanding that the TARP program be instituted. His argument was based on little more than the “fear ” he claimed he could see in the eyes of Henry Paulson and Ben Bernanke. (NY Post, Sept. 27, 2008)He was wrong about the fall bailout and he’s wrong now. The market collapsed anyway and the current bear market rally will be over soon enough as investors are disabused of their desperate optimism. The various bailouts are not working now and will not work. The bailouts simply put off the day of reckoning and will end up prolonging the pain for everyone.Moreover, the recent tea party protests were not just aimed at protesting the current tax burden but the future tax burden as the bills come due for the government’s profligate spending. It makes no sense for Bartlett to focus exclusively on the U.S. tax burden –present and future– without taking into account the other things being protested including the fundamental unfairness of using tax dollars to subsidize industry and the Fed’s reckless, Weimar-like expansion of the money supply. The tea parties may not have been as grandiose or focused as some would have liked –protests rarely are– but they are a start and they represent the beginning of a bona fide backlash that will build over time.
bartlettb // Apr 27, 2009 at 4:29 pm
It is true that I supported TARP and would do so again in the same circumstances. Financial markets were in free fall and I believe that this legislation helped stabilize the economy even if it was implemented far less competently than I anticipated. Chalk one final screw-up to the administration most conservatives worshiped for 8 years.I think those that criticize TARP are wrong in assuming that the economy would be no worse today–or even better–if nothing had been done last fall. I think they are Johnny-come-lately deficit hawks who said nothing for 8 years while Bush-the-idiot–their guy–was in power and only decided deficits were a problem once it was clear that a Democrat would be our next president.Nitwits like vadum need to understand that credibility, like respect, must be earned. Going to one stupid tea party does not compensate for looking the other way for 8 years just because a Republican was in office.
barker13 // Apr 27, 2009 at 5:24 pm
Re: Bartlettb; wrote 12 minutes ago –”It is true that I supported TARP and would do so again in the same circumstances.”Strike one!”Financial markets were in free fall…”Oh, please… I don’t even know what that statement means! Financial markets were reflecting the underlying reality of losses. That’s what they’re supposed to do!”…and I believe that this legislation helped stabilize the economy…”Respectfully… based upon what – what besides a crystal ball based announcement that “things would have been worse without TARP.” See… the crystal ball works both ways… mine said “long term, things would have been better if TARP had been rejected.”"Chalk one final screw-up to the administration most conservatives worshiped for 8 years.”Now here you’ve totally lost me.Bush was never a fiscal conservative. Never. Beyond that, while true conservatives were indeed willing to give Bush the benefit of the doubt and their support in his first term, the moment he started losing it in his second term… attempting to appoint his third grade music teacher to the Supreme Court… (something like that, right?)… allowing Hamas to bid on West Coast port security contracts… (again… something like that, right…?)… and especially before the surge when it looked like he had screwed up the Iraq War beyond repair… at that point true conservatives started deserting him in droves. I myself actually left the GOP in early 2006.(BTW… not blaming “just” Bush; obviously the – literally in some cases – corrupt and/or RINO elements in Congress drove true conservatives off the GOP reservation too – perhaps even more so than Bush.)”I think they are Johnny-come-lately deficit hawks who said nothing for 8 years…”I don’t know who you’re referring to, Bruce, but I was screaming for Bush vetos (which never came) all during Bush’s first as well as second term. I don’t know, Bruce… I’m not trying to tag team you, here, but you sure do seem to be creating one strawman after another as well as painting with a pretty broad brush. Finally… calling Vadum a nitwit was uncalled for. Sarcasm and snark is fine… being abusive – without cause – not so much.BILL
bartlettb // Apr 27, 2009 at 6:17 pm
Barker13, you must have been screaming for vetoes with the teeniest, tinest voice–typical of Johnny-come-lately deficit hawks who claim, with no evidence, that they were opposed to Bush’s deficits as well as Obama’s. Did you organize any tea parties against Bush’s deficit? No. If you had you would have been the only one there. All the rest of these fair-weather conservatives that were out protesting on April 15 were home on April 15, 2001, 2002, 2003, 2004, 2005, 2006, 2007, and 2008. Why? Because they are partisan Republicans, not deficit hawks. They ONLY care about Democratic deficits; Republucan deficits are okay.
vadum // Apr 28, 2009 at 1:44 am
Mr. Bartlett, who actually does excellent work, should develop thicker skin and avoid writing op-eds as therapy. This limited government enthusiast stopped cheering for the Bush administration years ago.
barker13 // Apr 28, 2009 at 5:20 am
Re: Bartlettb; 6:17 PM –”Barker13, you must have been screaming for vetoes with the teeniest, tinest voice–typical of Johnny-come-lately deficit hawks who claim, with no evidence, that they were opposed to Bush’s deficits as well as Obama’s.”So… let me get this straight… because I’m just a regular citizen and not a well known politician or columnist my word is suspect?I mean… you’re actually calling me a liar. Not only are you lashing out with the name calling – first attacking Vadum as “a nitwit,” but now you refer to me as a “Johnny come lately” (with absolutely no evidence to back up such a claim) and then proceed to call me a liar.Now as my fellow “regular” posters know, I’m all for freedom of speech and find it extremely distasteful and frankly creepy that the managing editor of this site, Meghashyam Mali, makes it a habit to remove posts at random leaving “blanks” in the conversation, but if there was ever a poster whose obnoxious and intemperate writings warranted a public rap on the knuckles… it’s you, Mr. Bartlett.You ask “Did you organize any tea parties against Bush’s deficit?”No. Though, again, as regular posters/readers who read my posts may recall, I was so fed up with the RINO Congress and Bush after five years of unprincipled incompetence that I actually left the GOP in early 2006 and re-registered as a Democrat to protest what I considered “betrayal” by the GOP.What… you want a political resume? I need to “prove” myself to you….? (*CHUCKLE*) OK. Turned 18 in 1980. Voted for Ronald Reagan. 1984 – student (NU – Boston) volunteer for Reagan/Bush. 1988 – Supported Bush-Quayle. After GHWB broke his “no new taxes” pledge and then allowed the Kurds to be slaughtered post-Gulf-War-One I was active supporting Perot.(Recall… back in 1992 folks like me also engaged in “Tea Party-like” grass roots citizen rallies and such…)(BTW, from ‘92-’94 I became a registered Conservative here in NY but once GHWB was retired and after two years of Clinton I returned to the GOP, re-registering as a Republican in advance of the ‘94 elections where I strongly supported Newt Gingrich and the Republican Revolution.From the mid-’90’s till 2004 I was an extremely active volunteer with the Orange County NY Republican Committee though not formerly a member… a committeeman. Why? Simply because I treasured my independence and want to retain (and did use on occasion) my freedom to buck the Party when I felt the need and even support non-Republican candidates against RINOs when there was the whiff of corruption and/or sheer non-ideological (money driven, personality driven) cronyism tainting a Republican candidate.Oh… stepping backwards… back in 1999/2000 I was a Forbes supporter. (Yeah… got the Christmas cards and everything.) (*CHUCKLE*)Anyway, Bruce, wake up and smell the coffee. While you may disagree with someone, questioning their motivations and basically calling them a liar, fraud, or poser with absolutely no evidence is… pretty lame. To be perfectly honest… I’m shocked. I’m appalled that a “name” columnist whom I’ve always respected has turned out to be such a shrill, thin-skinned, obnoxious person in “real life.”Bill (William R. Barker, Harriman, NY)
barker13 // Apr 28, 2009 at 5:47 am
Bruce Bartlett originally wrote:”Back in 1977, while a staffer for Congressman Jack Kemp…”Yeah. I met Kemp. Once. Back in ‘96, before Dole put him on his ticket.Again… real life is often a disappointment.At the time I was working as a driver for Boston Coach, the livery arm of Fidelity Investments. Anyway… I was assigned to pick up Kemp at a midtown Manhattan hotel and take him to LGA. I was very excited. Kemp was one of my political icons.Well… not after that ride.First of all Kemp’s staff had apparently double-booked so I was greeted by the sight of Kemp having to pay one driver for a ride that wasn’t going to take place…(Oh, yeah… he was abusing his staffer over that one…)So much for fiscal conservatism, huh – even fiscal competence. Oh, well… stuff happens. (*SHRUG*)Well, back to Kemp and his staffer…Kemp’s staffer rode with us. God… to this day I wish I hadn’t witnessed this! It was like a scene out of “Spin City.” Seriously… Kemp came across as a guy who was all facade whom I doubted could wipe his nose without help from staff.(In a way it made sense though… I’m guessing coddled jock – football star all through school and then a stint in the pros – then on to coddled congressman and coddled national political figure.) (*SHRUG*)Kemp also came across as a fairly nasty, self-absorbed kind of guy. (Hey… it was only a 20-minute ride… he was either talking with his staffer or on the phone… but it was enough “contact” to gain an impression.)Me? To Kemp I wasn’t even there except when he literally barked at me to “watch out, man” when some bike messenger almost got himself run over while “jaybiking” in front of us.Anyway… just a brief anecdote.BILL
dalukas // May 1, 2009 at 3:06 am
This is an Interesting article. I did attend the Tea Party here in Little Rock to check it out. The author obviously did not attend one. The tea party rallies werent as much about over-taxation, as they were about the out of control spending our federal government is engaging in. I am sure there were many different political views at the Little Rock Tea Party Rally. One thing is for sure, the people there were fed up with the bail outs and the huge deficit spending in Washington. I do agree with the article regarding the silence of conservatives, when G. W. Bush was massively expanding the role of the Federal Government. How hypocritical. I guess that was the New Tone that Bush campaigned on. However, Obama appears that he will Trump even G.W. With a 3.55 Trillion dollar proposed 2010 budget. Our tax revenue is approximately half that. Just to fund our federal budget the U.S. is borrowing at a cost of around 900 billion in interest payments in 2010 alone. Most of the money is being borrowed from Communist China, who buys a large portion of our Treasuries. I fear that history will repeat itself. Yes the last CPE numbers that were released were tame inflation numbers; however, Mark my words, when the economy does turn around and we have some positive GDP growth, it is inevitable that we will see hyper-inflation. I fear this will lead to a return to double-digit interest rates and out of control inflation. Inflation is the arch-enemy of fixed-income investments. This will drive yields up, just to keep up with the pace of inflation. Our Federal Government simply cant continue to spend trillions more than it collections in taxes without it having a long-term negative effect. We have something like 70 Trillion Dollars in unfunded liabilities (Federal Programs like Social Security, etc. etc. ). There are really only three ways to fund the Federal Governments activities: 1. Raise Taxes 2. Continue to borrow and pay billions in interest payments to countries like China, or just print money . All of the aforementioned is happening now and it will continue to have a negative impact on our economy. What they really need to be doing in Washington is cutting spending. Imagine that, spending less than you make. What a novel Ideal. I did find this a little comical: President Obama presented his fiscal year 2010 budget (i.e., the 12 months from 10/01/09 to 9/30/10) on 2/26/09. The budget projects that government spending will be $3.55 trillion, equal to $9.7 billion a day or $100 million every 15 minutes. At his 1st Cabinet meeting, the president asked his 21-member staff to identify $100 million in budget cuts (i.e., in total, not per Cabinet member) over the next 3 months (source: White House, AP). I guess thats a start, 100 million. (Remember, 100 million is spent every 15 minutes by our federal gov.). Possibly they can start by looking at the $200,000.00 allocated in the 2010 budget for a tattoo removal program in CA. Just because someone now regrets their tattoo doesnt mean the tax payer shouldnt chip and pay for the removal of that outdated body art, right? I am only kidding of course. The tattoo removal program along with thousands of similar programs should be cut. I believe it was the former Prime Minister Margaret Thatcher who said, the only problem with Socialisim is the Goverment keeps running out of other peoples money. Well Said Maggie………….
Moe Lane » Funny: I’ll believe that Bruce Barlett is serious about helping the GOP recover… // Aug 31, 2009 at 9:51 am
[...] Sure, you can join the Tea Parties next year, Bartlett. Just don’t expect to be given a task more involved than [...]
Funny: I’ll believe that Bruce Barlett is serious about helping the GOP recover… - Moe_Lane’s blog - RedState // Aug 31, 2009 at 11:09 am
[...] Sure, you can join next year, Bartlett. Just don’t expect to be given a task more involved than “make a [...]
Did he come to bury or praise Suppy-Side Economics? « The Confluence // Oct 13, 2009 at 8:37 pm
[...] Also worth a read are two Bartlett’s pieces from the blog new majority. The first is Tax Tea Party Fantasy from last spring and Why I Am Anti-Republican from late this summer. It seems Old dogs do [...]
Did he come to bury or praise Suppy-Side Economics? « Sky Dancing in a Man’s World // Oct 13, 2009 at 8:40 pm
[...] wisdom. Also worth a read are two Bartlett’s pieces from the blog new majority. The first is Tax Tea Party Fantasy from last spring and Why I Am Anti-Republican from late this summer. It seems old dogs do [...]