Politics
Out of context: Reply #6963
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TAX TEA PARTY FANTASY
I have spent most of my life trying to cut taxes. Back in 1977, while a staffer for Congressman Jack Kemp, I helped draft the Kemp-Roth tax bill, which was endorsed by Ronald Reagan and enacted into law in 1981. According to the Treasury Department, this is the largest tax cut in American history.
So one might assume that I was out protesting taxes along with many of my friends on April 15. But going to rallies is not my thing; I thought my time and skills were better spent analyzing tax burdens to see what evidence justifies the sudden appearance of mass protests against taxes.
The first thing I did was look at the U.S. tax burden compared to other similar countries. The latest complete data are for 2006. They show that governments at all levels consumed 28 percent of GDP in the U.S.
Of the 30 OECD countries, we ranked 26, just slightly above Japan and Korea. Only Turkey and Mexico had significantly lower tax burdens.
I published my analysis at Forbes.com and sent it around to some of my conservative friends. The universal reaction was, “So what? Why should Americans care if foreigners are even more overtaxed than we are?”
I thought this was a fair point, so I did another analysis looking only at taxation in the U.S. Even if our taxes are low compared to those in other countries, tax protests might be justified by a rising tax level.
The first thing I did was look for more recent data on taxes as a share of GDP on the website of the Congressional Budget Office. It says that total federal revenues will consume 15.5 percent of GDP this year, down from 17.7 percent last year, 18.8 percent in 2007, and 20.9 percent in 2000.
This is a very sharp reduction in the tax/GDP ratio. As a consequence, the federal government will take less out of the economy in the form of revenue than any year since 1950.