Some people (like me) can get a little excited when discussing (yelling about) tax policy in America. I believe that it is equally important to remember that the rate is not as important as the amount of tax you actually pay. Rates come and go, but the smart ones (cheaters?) understand the loopholes. In preparation for the forthcoming debate on tax rates, tax extensions, and/or tax cuts (call it what you will), I found the information below to be of interest. The summary comes from First Read on MSNBC.com:
Is any provision in tax law “permanent”? And can any specific tax rate be extended “permanently”? No, not if one takes a look at income tax rates, thresholds, and other provisions since the income tax was created in 1913.
The nonpartisan Tax Policy Center at the Brookings Institution and the Urban Institute has prepared an enlightening chart showing how income tax rates have changed since 1913.
- They’ve never stayed the same for more than ten consecutive years.
- The top tax rate has been – at different times – 7 percent, 67 percent, 25 percent, 91 percent, and so on. Congress has changed the top rate, on average, every 2.5 years since 1913.
- Right now the top rate is 35 percent. It applies to taxable income over $373,650. Obama wants to increase that top rate to 39.6 percent, which is what it was in 2000.
- The lowest income tax bracket has also varied widely, from a low of 0.375 percent in 1929 to a high of 23 percent in 1944.
Since 1970, revenue collected from the income tax has averaged 8.25 percent of national income, or Gross Domestic Product (GDP).
Not surprisingly, when the economy is growing robustly, the amount of revenue collected from the income tax increases. And in recessions – such as in 1958, 1983 and 2009 – income tax revenues have declined. The high point came in 2007 when the Treasury collected $1.16 trillion in income tax revenue; when the recession hit in 2009 that revenue plummeted by more than 20 percent. Last year, the amount collected from income taxes was well below the 40-year average: only 6.4 percent of GDP.
So let the tax debate of image and marketing over substance begin.