Five charts that will make you feel better about paying your taxes

April 15, 2013

It's tax day!

Okay, that exclamation point is probably a bit unwelcome. If it was grammatically correct to end a sentence with a sad face, that would probable better reflect your feelings. But Post style rules don't let me substitute emoji for punctuation.

But even if they did, that sentence shouldn't end with a sad face. Your 2012 tax return has a lot to recommend it. Here's why, in charts.

1) Taxes were really low in 2012.

 

Tax revenues are only expected to be 15.8 percent of GDP in 2012. They've not been above 16 percent of GDP since 2008. But before 2008, you have to go back to 1950 to find a year when they were below 16 percent of GDP. So taxes really were historically low last year.

That's not necessarily a good thing. It's partly attributable to the weak economy, and partly attributable to the huge raft of tax cuts passed to strengthen the economy (the payroll tax cut, the extended Bush tax cuts, the stimulus tax cuts, etc). But the facts are the facts: Taxes were really low in 2012.

Of course, this is also a reason to feel worse about your taxes next year. In 2013, they're expected to jump back up to 16.8 percent of GDP, in part because the economy is getting better and in part because we've raised taxes.

2) Tax rates are low, too.

The Congressional Budget Office has the data on the "effective federal tax rate" paid by all income quintiles since 2009. That is to say, the real tax rate that people actually paid on their taxes -- so it includes payroll taxes, and deductions, and all the rest of it. And guess what? It's been falling! And it's fallen, in particular, for low-income folks.

That, by the way, is the reality of "the 47 percent": Many working class folks aren't paying high federal income taxes (though they're still paying payroll and state and local taxes). Though some Republicans seem unnerved by the progressivity of the code today, presidents from both parties -- including Ronald Reagan, Bill Clinton, George W. Bush and Barack Obama -- have worked hard to cut the federal income tax burden on lower-income Americans to the point where it can be wiped out completely.

3) America's tax system is the most progressive in the developed world.

 

Yep, it's true: America's tax system is harder on the rich and easier on the poor than, say, the French system, or the German system, or the Swedish system. All those countries rely heavily on value-added taxes, which are more regressive.

The catch is that all those systems then take those tax revenues and push them into much more expansive social welfare states than America has. So, overall, their total tax-and-transfer systems are more progressive than ours. More on that here. But I'm trying to make you feel better about paying your taxes, not worse.

4) Your taxes are going towards insurance and defense, not "waste and fraud." 

 

In 2011, CNN asked Americans what they thought the federal government spent on various programs. The results were astonishing: Respondents thought 10 percent of the budget went towards foreign aid. The real answer (using 2010 numbers) was half of one percent. They thought 10 percent went to food assistance. The real answer was 2.8 percent.  They thought five percent of the budget went towards PBS. The real answer one-hundredth of one percent. And so on.

The truth is that the federal government, as seen through the budget, is a massive insurance conglomerate with a large standing army. Social Security, Medicare and Medicaid make up almost half of federal spending. Defense is a bit less than as fifth. That's not to say we're spending the right amount on those programs. It's just to sat your money isn't going to "waste and fraud," or to a bloated foreign aid budget. It's going to big, visible and broadly popular programs. That's why deficit reduction is so hard.

5) You're actually not that upset about your taxes.

From about 1965 to 2003, a large majority of Americans felt their taxes were "too high." In recent years, however, more and more Americans believed their taxes fair. There have even been a few years were most Americans thought their taxes were either "fair" or "too low" (though "too low" is, to be sure, an extremely rare answer). So historically speaking, you're actually not that upset about paying your taxes. Or, at the least, you're not as upset as you used to be.

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There's a big caveat here. These numbers don't include state and local taxes, which hit poorer Americans much harder, and which thus make the total taxes people actually pay much more regressive. More on that here. The U.S. tax code is also more complicated than it needs to be, and the corporate code, in particular, is a mess. But we can talk about all that another day. I'm trying to cheer you up here.

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Neil Irwin · April 15, 2013