A new study shows that the take by the Internal Revenue Service is falling fast. Really.
The study was conducted by USA Today and the Bureau of Economic Analysis, and compared tax rates today with those of the past. Here’s what came out:
- Federal, state and local taxes — including income, property, sales and other taxes — ate up 9.2% of all personal income in 2009, the lowest rate since 1950 and below the average of 12% for the past 50 years.
- On average, the federal tax rate has fallen 26% since the recession began in 2007.
- One-third of last year’s $862 billion economic stimulus went for tax cuts. Biggest reduction: The Making Work Pay tax credit reduced income taxes $800 for married couples earning up to $150,000.
- Changes in the tax code under Presidents Clinton and G.W. Bush — credits, lower rates, higher exemptions — cut income taxes for poor and middle-class families, meaning a drop in income now can trigger big tax breaks and sharply lower rates, sometimes zero.
- Consumers cut spending sharply in this downturn, thereby paying less in sales taxes.
The bad news
If the statistics are on target, that’s obviously good news. Here’s the bad news:
- The statistics cover what has happened. They don’t cover what’s going to happen as a result of increased government spending. Many experts say that higher taxes are inevitable.
- As noted, tax revenue has taken a hit in the last few recessionary years. People are spending less and making less, which usually pushes them into a lower tax bracket. After a meaningful recovery, the IRS bite should increase.