The core belief that animates the modern conservative movement is that taxes are too damn high and getting higher all the time. They believe that rampaging government at every level — local, state and federal — takes more and more of their hard-earned money, leaving the private sector barely enough resources to sustain itself.
In fact, I’d love to ask delegates to the 2012 Republican Convention in Tampa this month one simple question: As a share of the economy, how much have total taxes increased over the last 50 years? Most would probably guess that it has doubled or tripled.
The real answer is that it has not changed at all. As a share of gross domestic product — and that’s the standard measure of tax burden accepted by most economists, both liberal and conservative — taxes at every level today amount to roughly 25 percent of the economy, just what they did back in the early ’60s.
In other words, the image of an ever-gluttonous government that serves as the basis of modern conservatism is false.
The chart above, compiled from decades of federal data by the Tax Policy Center, has a lot of smaller stories to tell as well:
– Local and state taxes account for the same share of the American economy today as they did back in the 1930s, which means it is unchanged for 80 years.
– As a share of GDP, taxes on corporations have fallen to less than half of what they were back in the 1950s.
– The only type of taxes to have grown as a share of the economy in the last 50 years have been federal payroll taxes, used to finance Social Security and Medicare and generally hitting the working and middle classes. For the last 30 years, revenue surpluses generated by Social Security have been diverted out of that program and used to run general government programs.
– To shrink then-rising deficits, President Clinton signed tax increases into law in 1993 at considerable political cost to himself and his party. The results are evident in the chart in the form of gradually rising revenue from the individual income tax. What the chart does not show is that despite GOP predictions of economic calamity after those tax increases, we went on to enjoy the longest period of economic expansion in our nation’s history.
Thanks to that rising revenue, we were also able to reclaim control of our nation’s fiscal destiny, slashing the annual deficit to zero. That proved temporary. Major tax cuts in 2001 and 2003 did not produce the economic boom that their backers had promised, but they did set off another cycle of rapidly increasing deficits.
A gradual return to the Clinton-era tax rates — not just for the wealthy, but for everybody — would allow us once again to reclaim control of our national finances. (And yes, at this point significant spending cuts will be required as well.) But in a political climate dominated by false notions about taxation, that option is simply not open to us.
– Jay Bookman