Tax rates are at historic lows

Tax rates are at historic lows April 19, 2012

Ben Peck of The American Prospect has a list of the “Top Ten Tax Facts.” The whole thing is worth reading — as is the source material Peck links to. Here are some highlights:

1. The government has collected less in taxes as a proportion of the economy in the past three years than it has in any three-year period since World War II, and tax rates are at historic lows.

… 4. Corporate income taxes for the past three years have hovered at just over 1 percent of GDP, lower than for any three-year period since World War II. The average for OECD countries is 3.5 percent.

… 10. Only two OECD nations collect less revenue as a percentage of GDP than the United States — Chile and Mexico.

So if you love lower taxes so much, just move to Mexico already.

If you prefer showing to telling, Chuck Marr of the Center on Budget and Policy Priorities has the “Top Ten Federal Tax Charts.” Marr’s charts illustrate the facts in Peck’s list. Tax rates are at historic lows.

This is a fact. It is a true thing. You can look it up. But as with many facts these days, this fact is rejected by people who feel that facts are only factual if you “believe” in them.

Thus we have one of the stranger aspects of American politics just now: Millions of citizens angry with President Obama for raising their taxes despite the fact that he actually lowered them.

I know this isn’t simply perverse stupidity on the part of these citizens. These folks have been lied too aggressively by a powerful propaganda machine. And those with employer-provided health care might be confusing the bigger bite that premiums are taking out of their paychecks with a bigger bite from taxes.

But still, reality has to count for something. And the arithmetic here is not complicated.

So at some level it really is just stupid and perverse to blame Obama for higher taxes when he has lowered them. Thus at least part of the mandatory response to these folks is to point out — as nicely as possible, if they will allow nice as an option — that they need to shut up, wake up, and move back to reality. Spending your days seething with rage about something that is the opposite of true is not a recipe for personal happiness. (See also: Anti-tax anger directed at the ginormous tax-cut package of the stimulus-providing Recovery Act.)

* * * * * * * * *

Taxes are the one bill I have that I’m required to calculate myself. My Internet provider, my wireless carrier, my electric utility, my water company, my insurance company and the bank the holds my mortgage all just send me a bill. So does the township for our local taxes.

Yet the state and the federal government both require me to fill out a set of forms calculating my own bill. This seems superfluous, since both the state and the federal government will also be doing the same calculations in order to double-check that I’ve done this properly, threatening costly consequences if I get it wrong. So why can’t they just send me a bill?

Matt Yglesias explains why: We have to calculate our own tax bills because it’s more difficult and complicated that way. “Who Wants Taxes to Be More Complicated?” The short answer is that the tax preparation lobby does, and more importantly so do politicians who base their careers on railing against taxes:

Why don’t you just lie on your taxes? You don’t lie because you’re worried that the IRS will catch you. And why do you worry about that? Because all the various entities who’ve paid you over the course of the past year have to submit paperwork about your income. Your employer, your bank, your stock broker, etc. — record and transmit almost all relevant information about your money to the IRS, meaning that if you lie you’ll get caught.

But by the same token, the IRS could simply collect all this information and send you a tax bill. You could read it over, sign at the bottom, and either include a check or wait for your refund. It wouldn’t be fun, exactly, but it would sure be simple.

Needless to say, taxpayers should have the right to dispute the veracity of the IRS’s calculations and submit their own form. And some classes of people are going to routinely have unusually complicated tax finances. Journalists, for example, often have miscellaneous travel expenses related to freelance assignments. People running substantial small businesses will still need accountants.

But for the vast majority of the population, most of the pain of tax compliance could be eliminated by a few keystrokes at IRS headquarters. So why don’t we do it?

Two reasons. One is lobbying by the tax preparation industry to discourage states and the feds from developing easier tax-paying systems, as California recently did. The second is lobbying by anti-tax conservatives. When the Golden State implemented its ReadyReturn system, it did so over the objections of Grover Norquist and his anti-tax pressure group Americans for Tax Reform, which fears that if taxes become less annoying voters might be less unhappy about paying them. After all, if the government did something to make your life easier it would be harder to tout the difficulty of tax compliance as a reason to abolish the progressive rate structure.

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