NYT: Americans’ tax burdens mostly lower than in 1980

As we debate the fiscal cliff, it’s good to be aware of actual data.

Many Americans, including a broad cross section of the middle class, have been financially squeezed over the last decade or more. In large measure, that was because of a few key factors, including rising health care costs, the housing bubble, and spikes in gas prices.

The squeeze has not been because of higher tax burdens. In the 21st century, the U.S. has cut taxes pretty substantially — part of a longer trend going back to Reagan’s election in 1980.

In a piece today, the NYT doesn’t just look at federal taxation but at overall tax burdens that Americans face.

From the NYT’s Complaints Aside, Most Face Lower Tax Burden Than in 1980:

But in fact, most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.

Households earning more than $200,000 benefited from the largest percentage declines in total taxation as a share of income. Middle-income households benefited, too. More than 85 percent of households with earnings above $25,000 paid less in total taxes than comparable households in 1980.

Lower-income households, however, saved little or nothing. Many pay no federal income taxes, but they do pay a range of other levies, like federal payroll taxes, state sales taxes and local property taxes. Only about half of taxpaying households with incomes below $25,000 paid less in 2010.

The uneven decline is a result of two trends. Congress cut federal taxation at every income level over the last 30 years. State and local taxes, meanwhile, increased for most Americans. Those taxes generally take a larger share of income from those who make less, so the increases offset more and more of the federal savings at lower levels of income.

The NYT piece also talks about spending and revenues as a percentage of GDP.

There’s also a great graphic that details the numbers below.

Total spending at the local, state, and federal level was 36.6 percent of GDP in 2010, up from 30.4 percent in 1980. Much of the increase has been during and since the recent recession.

Three factors contributed primarily to the increase in total government spending (local, state, federal) as a percentage of GDP over the last few years:

  • Obama’s stimulus package
  • a sharp decrease in GDP because of a collapse in the private sector followed by a slow recovery
  • an increased number of Americans qualifying for unemployment insurance, food stamps, and other benefits because of job losses and wage reductions

Fortunately, all three of those factors are in the process of reversing themselves. Stimulus spending has pretty well wound down as we enter 2013, and an improving economy will mean a higher percentage of GDP from private sector activity and fewer government benefits.

Federal, state, and local government revenues meanwhile slipped from 28.6 percent of GDP in 1980 to 26.9 percent in 2010. Again, the recession is in part to blame for the recent decline in tax revenues, and Obama’s original stimulus and followup steps to goose the economy have also involved hefty tax cuts.

Still, it’s worth noting that from 1980 to 2010, federal income taxes fell from 9 percent of GDP to 6.2 percent of GDP. Corporate taxes fell from 3 percent to 2.4 percent.