Monday, February 07, 2011

A taxing question

Taxes for 2010 are the lowest they've been, as a percentage of national income, since 1950. This is true whether you're looking at just federal taxes, or you're looking at combined local, state, and federal taxes.

So why, then, do many people seem to believe that they're overtaxed? My thought: It's because taxes today are fundamentally different from taxes in 1950. In 1950, taxes on ordinary working class and middle class individuals were fairly low -- sales taxes were around 1% in those few states that had sales taxes (vs. average of around 8.5% today), payroll taxes were 1.5% (vs. 7.65% today), and residential property taxes (vs. commercial property) accounted for around 1/3rd of all property tax receipts here in California vs. 2/3rds today. Corporate income taxes accounted for around 30% of income taxes collected in 1950, whereas they account for only around 7% of income tax collections today.

In short: People believe they're overtaxed because they are overtaxed -- but not because overall taxes have risen, but, rather, because taxes have been shifted from the rich and corporations to ordinary people. And if you think this result, which occurred only with the domination of Republican tax policies starting in around 1980, is coincidence, I got a bridge in Brooklyn for sale cheap to the lowest bidder...

-- Badtux the Taxing Penguin


  1. Our tax money in 1950 built a national highway network, a national electrical grid, bridges, other public works...

    Today's taxes can't even maintain the things we bought in 1950.

  2. Actually, Nan, no. Taxes were hiked significantly to build the Interstate highway network, expand the national defense spending (remember that in 1950, the Korean War had not yet happened and we were spending on defense but not to the levels of today), and let's not forget the two biggest spending programs that have come along since then, Medicare and Medicaid. We're trying to maintain an Interstate Highway system, Medicare, and Medicaid, with a level of taxation that couldn't pay for that even in 1950!

    - Badtux the Taxing Penguin

  3. Ah, interesting.

    Sounds like trouble. But if we could lower the expense of medical treatment, it would be like free money.

  4. And if we could flap our arms and fly, we wouldn't need airplanes.

    Modern medicine is expensive. The main reason it's expensive is because it has treatments for so many things like kidney disease and heart disease that were a death sentence in 1950. In 1950, a huge number of things in the Merck Manual (the GP's bible) said "send patient home with palliative care to die." No specialist involved because there was no treatment for things like leukemia. Today, it's a rare illness that has no treatment at all. But treatment for leukemia costs around $1M, because there's only around 31,000 people who come down with it every year, and the cost of the entire infrastructure for treating it must be borne by that small base. Granted, the U.S. is overpaying by about 5% of GDP, but cut back to the levels of, say, France, by capping specialist and diagnostics providers' incomes, and we still end up needing a level of taxation far higher than what we have.

    The problem, though, is that what taxes we *do* have, have been shifted down to the lower and middle classes... leading them to feel overtaxed and oppose taxes, while rich men laugh behind closed doors and corporations continue hiding their income overseas. The way that corporate scam works -- a part made in China costs $1 for the Chinese to make, but the offshore subsidiary that owns the Chinese subsidiary charges the American subsidiary $10 to import the part and the American subsidiary sells the part for $11, thus claiming a tiny profit, while the offshore subsidiary in a tax haven country claims a $9 profit and pays no taxes on it. Nice scam if you can buy sufficient lawmakers to make it legal for you... which corporate America has done, with the results I mention up above in the body of this post.

    - Badtux the Taxing Penguin

  5. You highlight the great untold story of the 20th century -- the shift of the tax burden from FIRE to working people. The rentiers leech money that could otherwise be put to productive use, and stuff it under their mattresses.

    Democrats could've made telling this story an election winner by hammering it home & thereby being the party of the people, to simplify things a bit. Instead we have 2 parties of big business, both of which are happy to tax the shit out of you & me, while activities which add fuck all the economy contribute nothing to the public coffers. They all deserve the Mussolini treatment.

  6. Income redistribution. The republicans accuse the Democrats of wanting to redistribute income from the rich to the poor while all along they have been redistributing from the poor to the rich...and the poor go along with it.

  7. The poor go along with it...

    Some of them actively encourage it. As if they believe they'll win it big in the lottery and instantly be accepted into the billionaire club next week.


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