The WSJ this AM has a super editorial where they skewer many myths we see repeated here daily. The biggest is that the Bush tax cuts caused this deficit (they didnt). Or that we need higher tax rates to close the deficiit (we dont).
The current tax structure has provided a return of 18.5% of GDP. That is historically the optimum amount. Returns are lower now because of slow growth and lingering recession.
Review & Outlook: Obama's Real Revenue Problem - WSJ.com
The current tax structure has provided a return of 18.5% of GDP. That is historically the optimum amount. Returns are lower now because of slow growth and lingering recession.
Review & Outlook: Obama's Real Revenue Problem - WSJ.com
more at the source.President Obama was right about his audacity, if not always the hope. Six months after he agreed to a bipartisan extension of current tax rates, he is now insisting on tax increases as part of the debt-ceiling talks. At his press conference yesterday he repeated this demand, as well as his recent talking point that taxes are lower than they've been in generations. Let's examine that claim because it explains Washington's real revenue problemslow economic growth.
Mr. Obama has a point that tax receipts are near historic lows, but the cause isn't tax rates that are too low. As the nearby table shows, as recently as 2007 the current tax structure raised 18.5% of GDP in revenue, which is slightly above the modern historical average. Even in 2008, when the economy grew not at all, federal tax receipts still came in at 17.5% of the economy.
Today's revenue problem is the result of the mediocre economic recovery. Tax collections in 2009 fell below 15% of GDP, the lowest level since 1950. But remarkably, tax receipts stayed that low even in the recovery year of 2010. So far this fiscal year tax receipts are growing at a healthy 10% clip, so the Congressional Budget Office (CBO) January estimate of 14.8% of GDP is probably low. We suspect revenues will be closer to 16%, but even that would be the weakest revenue rebound from any recession in 50 years, and far below the average tax take since 1970 of 18.2%.