I am an equal opportunity tax basher. Watching Democrats and Republicans claim any mantle of fiscal responsibility is like viewing a two-man race whose contestants are running backwards to the starting line. How can you declare anyone a winner when they've never been in the race?
Still, it is scary to see people at Tea Party rallies and other meetings rant on about intolerable levels of taxation from Washington. First, the facts don't support that position. Second, we will need to figure out a way to raise taxes, not lower them, if we're going to make any serious dent in our horrendous budget deficits.
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Our current fiscal spectacle is of more than passing interest to older Americans. It used to be that we spoke about the three-legged stool of retirement -- a pension, Social Security, and personal savings. Now, we talk about the three-legged chamber pot of our fiscal demise -- Medicare, Medicaid, and Social Security. Maintaining benefits in these programs is crucial to the well-being of older citizens. I believe that achieving this feat while cutting taxes is impossible.
According to a recent assessment by the Urban Institute-Brookings Institution Tax Policy Center, a typical family of four will pay 4.6 percent of its income in federal income taxes this year -- the second-lowest percentage during the past 50 years. Typical households, according to Congressional Budget Office data, had a total federal tax bill of 14.2 percent of their income in 2006, the second-lowest in 30 years. Total federal taxes include income, Social Security, and Medicare taxes.
Now, I know that Brookings is on the liberal side of the spectrum, so please let me know if you think there are better measures out there of our tax burden. For example, I'm pretty sure that state income and sales taxes have been going up, and wouldn't be surprised if our total tax hit doesn't look as good as it does at the federal level.
Another way of looking at federal taxes is at the actual tax brackets governing payment rates. Fresh from removing the annual displays of April 15 tax-hate graffiti and effigies, the stalwart folks at the Internal Revenue Service have provided me a history of tax rates dating to 1913. That's the ignominious year when the federal income tax was created. Don't miss that 100th anniversary in a few years, folks -- it's sure to qualify with Guinness as the smallest celebration in history.
In those early years, it was hard to find many folks who paid a lot of taxes. The top federal tax rate was 7 percent. The personal exemption was $3,000 -- a big number in today's dollars. Over the years, that personal exemption went as low as $500 in the mid-1940s ($1,000 for a married couple) and has moved steadily higher to adjust for inflation. For 2010 tax returns due next April, the personal exemption is now $3,650 ($7300 for couples).
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Here, going back nearly 100 years are the lowest federal tax rate and its income ceiling, and the highest bracket and its income floor. Only years when a change occur are listed.
Year Lowest Income Highest Income
Rate Below Rate Above
% $ % $
1913 1.0 20,000 7.0 500,000
1916 2.0 20,000 15.0 2,000,000
1917 2.0 2,000 67.0 2,000,000
1918 6.0 4,000 77.0 1,000,000
1919 4.0 4,000 73.0 1,000,000
1922 4.0 4,000 58.0 200,000
1923 3.0 4,000 43.5 200,000
1924 1.5 4,000 46.0 500,000
1925 1.1 4,000 25.0 100,000
1929 0.4 4,000 24.0 100,000
1930 1.1 4,000 25.0 100,000
1932 4.0 4,000 63.0 1,000,000
1936 4.0 4,000 79.0 5,000,000
1940 4.4 4,000 81.1 5,000,000
1941 10.0 2,000 81.0 5,000,000
1942 19.0 2,000 88.0 200,000
1944 23.0 2,000 94.0 200.000
1946 19.0 2,000 86.5 200,000
1948 16.6 4,000 82.1 400,000
1950 17.4 4,000 84.4 400,000
1951 20.4 4,000 91.0 400,000
1952 22.2 4,000 92.0 400,000
1954 20.0 4,000 91.0 400,000
1964 16.0 1,000 77.0 400,000
1965 14.0 1,000 70.0 200,000
1968 14.0 1,000 75.3 200,000
1969 14.0 1,000 77.0 200,000
1970 14.0 1,000 71.8 200,000
1971 14.0 1,000 70.0 200,000
1977 14.0 3,200 70.0 203,200
1979 14.0 3,400 70.0 215,400
1981 13.8 3,400 69.1 215,400
1982 12.0 3,400 50.0 85,600
1983 11.0 3,400 50.0 109,400
1984 11.0 3,400 50.0 162,400
1985 11.0 3,540 50.0 169,020
1986 11.0 3,670 50.0 175,250
1987 11.0 3,000 38.5 90,000
1988 15.0 29,750 28.0 29,750
1989 15.0 30,950 28.0 30,950
1990 15.0 32,450 28.0 32,450
1991 15.0 34,000 31.0 82,150
1992 15.0 35,800 31.0 86.500
1993 15.0 36,900 39.6 89,150
1994 15.0 38,000 39.6 250,000
1995 15.0 39,000 39.6 256,500
1996 15.0 40,100 39.6 263,750
1997 15.0 41,200 39.6 271,050
1998 15.0 42,350 39.6 278,450
1999 15.0 43,050 39.6 283,150
2000 15.0 43,850 39.6 288,350
2001 10.0 12,000 39.1 297,350
2002 10.0 12,000 38.6 307,050
2003 10.0 12.000 38.6 311,950
2004 10.0 14,300 35.0 319,100
2005 10.0 14,600 35.0 326,450
2006 10.0 15,100 35.0 336,550
2007 10.0 15,650 35.0 349,700
2008 10.0 16,050 35.0 357,700
2009 10.0 16,700 35.0 372,950
2010 10.0 16,750 35.0 373,650
It won't surprise you that the IRS version of this table is overrun with footnotes. You should check them out before making any firm conclusions about income-tax trends. There certainly are lots of ways to spin these numbers when you factor in inflation, tax deductions, other adjustments to taxable income, and an analysis of the tax rates in between the bottom and top brackets. But one way I can't spin them is to say they portray any kind of increasing vise on taxpayers. They don't.
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Reader Comments Read all comments (6)
Wayne of TX 1:25PM May 28, 2010
Lee Coursey of GA 5:17PM April 25, 2010
Lee Coursey of GA 5:16PM April 25, 2010