These are Total Receipts from tax revenue sources by year for the federal government:
1950 $39 billion
1960 $92 billion
1970 $193 billion
1980 $517 billion
1990 $1,032 billion
2000 $2,025 billion
2010 $2,162 billion
If you need to see why we are in so much fiscal trouble you need look no further than these revenue growth numbers. We have historically enjoyed a doubling of tax revenues every decade. However, 2010 is barely above total receipts 10 years ago. At the same time, expenditures have exploded over those same years. From $1,789 billion in 2000 to $3,456 billion in 2010. The math is pretty simple. Spending has doubled in the last 10 years just as if nothing has changed. However, receipts have been flat. That is how you end up with a $1.65 trillion budget deficit for this year.
The Democrats want to blame this on the Bush tax cuts. However, the $2,025 billion in revenues in 2000 dropped to $1,782 billion in 2003 due to the after-effects of 9/11. The Bush Tax Cuts were implemented in the 2002-2003 period and by 2007 revenues had increased to $2,568 billion-that is almost a 50% increase in tax receipts in 4 short years. The real estate crash, mortgage meltdown and deep recession then took tax receipts down with the economy. Revenues did not decline because of the Bush tax cuts. They declined because of the economy and increasing taxes would certainly not make it better right now.
Who pays the individual income tax? This is based on 2008 data, the most recent available.
Top 50% of all taxpayers pay 97% of all individual income taxes
Top 10% pay 70%
Top 5% pay 59%
Top 1% pay 38%
Bottom 50% pay 3%
45% of all taxpayers pay $0
You might think this is fair. After all, you constantly hear in the media and from liberals that the rich are getting richer and they should pay more. Let's look at the share of income as well as the share of taxes for each of these groups to better assess fairness.
Share of Total Adjusted Gross Income Share of Taxes
Top 50% 87% 97%
Top 10% 46% 70%
Top 5% 35% 59%
Top 1% 20% 38%
Is this fair? I don't know but it does start to feel uncomfortable when one group is paying almost twice what would be a straight proportionate share based on income. However, this is the very group that President Obama is targeting in his rhetoric. If you read this Wall Street Journal article you will also see that the real tax target will ultimately have to be the middle class as this is where most of the money is as this chart shows. There is simply not enough income in the top brackets.
You might also want to look at my previous post, "How Progressive Do We Want To Be" for a comparison of the United States to other industrialized countries' tax systems. In fact, the U.S already has a much more progressive tax system than all other industrialized countries.
The bottom line is that to have the array of generous entitlements that President Obama and most Democrats want is going to require massive across the board tax increases. It cannot be financed by continually going to the top 1% or 5% of income earners. He needs to be honest with the American people. There is nothing wrong with having this debate. It is a legitimate issue for the American people to decide. Paul Ryan and the House Republicans have had the courage to put a spending cuts proposal out there and President Obama is now spending all his time attacking it. If he thinks this proposal is lacking then he needs to be honest on show the American people what type of across the board tax increases are really needed to fulfill his vision for America. This should be the true debate in the 2012 elections.
Congratulations on getting your tax return filed. Many Happy Returns!
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