A spoiler alert, I’m a guest on Rick Reiff’s PBS SoCal show this week with Flash Report publisher Jon Fleischman and FFFF contributor and Fullerton School Board member Chris Thompson for a segment on local political blogs and whether or not we’re going to replace newspapers (my answer is “no”). The program airs the first weekend in November and it was two conservatives against a Liberal (three if you count Mr. Reiff) in what I’d describe as a fair fight. And while I get along reasonably well with Mr. Thompson, I’m more than a little concerned that some people still refuse to be swayed when cold hard facts are presented that might alter their principled viewpoint especially when this person is say…a school board member, like Thompson.
Some context; I have enormous respect for Thompson. I believe he’s a sincere elected official seeking to make a difference as a school board member. He’s not really going to change my mind and I don’t think I’m going to change his. But we have always been able to disagree without being disagreeable and we have excellent discussions which never get nasty (imagine that!) and I’d like to think that will continue to be true even after this post is published.
Our last phone call, some months ago, I mentioned to Chris a USA Today story that said our tax burden is the lowest it’s been since the 1950s. “That’s a lie,” he responded rather forcefully. He cited local property taxes, state taxes, sales taxes, fees and such insisting taxes have never been higher. I only recalled that federal taxes have never been lower and didn’t have the story in front on me. But, knowing we’d be on the program together, I went back and found it. And as it turned out, the tax burden did include all the things Chris mentioned as never being higher are actually never been lower. As a percentage of household income, all of the taxes and fees we pay is lower today than since the Eisenhower administration.
So when we were at the studio, I gave Chris a copy of the USA Today story that showed the total tax burden a family faces are at historic lows.
From the story:
“Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.”
Need something a little more recent? See this story from MSN Money:
Income tax payments this year will be nearly 13% lower than they were in 2008, the last full year of the Bush presidency. Corporate taxes will be lower by a third, according to projections by the nonpartisan Congressional Budget Office.
The poor economy is largely to blame, with corporate profits down and unemployment up. But so is a tax code that grows each year with new deductions, credits and exemptions. The result is that families making as much as $50,000 can avoid paying federal income taxes, if they have at least two dependent children. Low-income families can actually make a profit from the income tax, and the wealthy can significantly cut their payments.
But in the third year of Obama’s presidency, federal taxes are at historic lows. Tax receipts dropped sharply in 2009 as the economy sank into recession. They have since stabilized and are expected to grow by 3% this year. But federal tax revenues won’t rebound to pre-recession levels until next year, according to CBO projections.
In the current budget year, federal tax receipts will be equal to 14.8% of the Gross Domestic Product, or GDP, the lowest level since Harry Truman was president. In Bush’s last year in office, tax receipts were 17.5% of GDP, just below their 40-year average.
The lack of revenue, combined with big increases in spending, means the federal government will have to borrow 40 cents for every dollar it spends this year. The annual federal budget deficit is projected to reach a record $1.5 trillion.
And Bruce Bartlett, a former Republican economic advisor for the White House, Congress and Treasury Department, says under President Obama, our federal taxes are at their lowest level in more than 60 years.
“The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget. The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984. In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.
Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.
This begs the question, with corporate tax rates already this low, why aren’t more corporations creating more jobs?
Now you’d think in the face of non-partisan evidence to the contrary, Chris might change his mind here.
From our email exchange afterwards, Chris writes:
“I glanced through the stuff you gave me. While I did not fact check it…or even finish it, I do not believe that it contains all of the governmental fees, taxes on corporations, import, export, excise, permitting…etc, etc, etc…that all gets passed along to us. You may be right about state and federal income tax rates, but the statistics that I have seen indicate that 50% of the GDP goes to government ultimately in one form or another. What you cannot escape Dan is that regardless of the comparison to history, government is massively inefficient. Where in the private sector do you see decisions being made about retaining employees for the sole purpose of keeping them employed. Where else in the private sector do you see compensation decisions being made primarily on what somebody deserves or needs, vs. what the market will bear.
Do you believe that the private sector would send 11 fire trucks from three cities to a house fire where, by my personal count, there were 111 public employees on the scene with 9 or 10 of them actually attending to the fire?
The city of New York spend hundreds of millions of dollars per year having inferior teachers sit in a room doing nothing because they can’t fire them.
You’ve got my city (Fullerton) attempting to double water rates and tack a larger franchise fee on top of it while they are increasing their own pensions and retroactively spiking all pensions.
It goes on and on Dan. You’re barking up the wrong tree if you’re trying to convince me that what we pay in taxes is reasonable.”
Jon Fleischman, who was included in the string of emails, chimed in with this:
“Not sure I understand the relevance. This is America. Of COURSE we have a lower tax rate than other countries – we’re supposed to. We were founded on the idea of rejected a strong, centralized government that redistributes individual property.”
Fleischman wants even more tax cuts so we can go back to those heady days of the 1950s and 1960s where one parent worked and one stayed home. But in today’s uncertain economy, I’m not sure that’s a great idea. And I’ve worked for plenty of corporations who were massively inefficient on partsof their businesses. To assume that the private sector isn’t wasteful, spends money foolishly or makes bad decisions, one must never have been to an industry trade show.
Of course, Fleischman must have failed basic American History at Santa Monica Community College because I don’t recall the founding principles of the nation including any of that.
Let’s get back to Thompson’s comment on tax rates. There was some email discussion on effective tax rates and marginal tax rates. And most people don’t distinguish between the two. The marginal tax rates is how much tax you pay on what you earn and, today, the top marginal federal tax rate is 35 percent. The effective tax rate is where deductions come into play. To put the effective tax rate into perspective, during the Carter administration, before Ronald Reagan came through with his huge tax cut that benefited the very wealthy the most, the effective federal tax rate including all taxes, particularly corporate income tax, the overall effective federal tax rate for the top 1 percent was 37 percent.
Now we can prove our tax burden is lower today than it has been in the past 60 years several different ways. What has gone up dramatically pinching household budgets is the high codst of buying a home (especially here in Orange County), the high price of healthcare which the Huffington Post reported has doubled in nine years, the cost of putting kids through college (a neighbor sent me a letter from an Ivy League school telling parents how to use their home to finance their kid’s education…classy!), and the price of gasoline and energy have increased dramatically (gas was $1.40 a gallon in January 2001).
So if those Fullerton school kids heed Thompson’s example, hold fast to your beliefs that are unwavering in the face of non-partisan *facts* that might cause you to reconsider your views.
Thompson, a busy guy with the recall and such, wrapped up his email to me in this way: “Fortunately Dan, I’ve got better things to do in the near term than do find stats that prove the earth is, in fact, round. But I’m sure we’ll discuss it again.”
I look forward to discussing it with Chris again. I’m sure we will.