A New York Times analysis finds that most Americans paid a higher percentage of their income in taxes in the '80s than they do now. Can that be?
Republicans are vowing to stand firm against a push by President Obama and Democrats to hike income-tax rates on the wealthiest Americans as part of any deficit-reduction deal to avoid the fiscal cliff, a potentially devastating combination of tax hikes and spending cuts scheduled to hit at year's end. Many Americans, especially Tea Party activists, share GOP lawmakers' conviction that their tax burden is already rising to finance social spending and ever-bigger government. But the truth is, say Binyamin Appelbaum and Robert Gebeloff at The New York Times, "most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid" in 1980, when the election of Ronald Reagan as president ushered in an era of tax cutting. And even when you take Reagan's tax cuts into consideration (he was sworn in in January 1981), "tax rates at most income levels were lower in 2010 than at any point during the 1980s." Does that mean Reagan taxed Americans more heavily than Obama?
Reagan really did tax most Americans more: Tea Partiers love to call Obama a socialist, says Ed Kilgore at Washington Monthly. But in reality, Americans who made less than $200,000 paid more in taxes in "the Golden Era of Reagan" than they have under Obama. One reason is that the share from "relatively progressive income levies" has declined compared to that "from highly regressive payroll taxes." Even those earning over $350,000 in 1982 paid nearly what they do now in income tax.
Nice try. Obama is the one pushing up taxes: Americans did pay more at the time of Reagan's election in 1980 than they did in 2010, says Harvard economist Greg Mankiw at his blog, but that was Jimmy Carter's doing, not Reagan's. The Gipper "did not become president until January 1981, and his tax policy was not fully implemented until a couple of years later (and arguably not until his second term, when we got very significant tax reform)." The Times has it wrong.
"The Gray Lady's misleading headline"
The important thing to remember is just that taxes are low: Republicans are right about one thing — spending needs to be reined in, says Henry Blodget at Business Insider. The Times analysis proves, though, "that today's tax rates are low compared with tax rates in the early 1980s," no matter who you believe presided over the lighter tax burden. Clearly, "taxes are going to have to go up," even with spending cuts, but that still won't make the U.S. a high-tax country.
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Other stories from this topic:
- Analysis: Would going over the fiscal cliff help the U.S. in the long run?
- Opinion Brief: The fiscal cliff talks: What do Republicans want?
- Analysis: What a fiscal cliff compromise might look like