The Spectacle Blog

Tax Awareness Face-Off: Tea Party Wins

By on 5.12.10 | 10:53AM

Yesterday USAToday published a piece on taxes that took a swipe at the Tea Party. 

Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels.

Federal, state and local taxes - including income, property, sales and other taxes - consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports....

"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress

Needless to say, USAToday and CAP have the facts wrong and the Tea Party has them right. 

Kevin Drum of Mother Jones, hardly a pro-Tea Party outlet, demurs, recognizing that including all payroll and state taxes brings the total bite closer to 30 percent than to 10 percent. Tino Sanandaji explains that USAToday arrives at the 9.2 percent figure by simply leaving all payroll taxes out of consideration, and that if you include all of the BEA's reported government revenues the correct figure is 30.2 percent. 

It becomes extra disgusting when these tricks are used to portray their political enemies as stupid and uninformed. For example, USA-Today portrays Tea Party follower as ignorant, because they are protesting taxes which are only 9.2%, the lowest in 60 years, and declining. The only problem with the story is that taxes are not only 9.2% on average, they are not the lowest in 60 years, and tax rates are not going to decline. 

Remember also that during a recession tax revenue goes down even while tax rates stay the same, simply because firms and people are poorer. According to economic theory burden of taxation for society depends on the effective tax rates, not the tax revenue. 

Lastly, the burden of government includes deficits, which are only delayed taxes (with interest). Are the Tea Partiers supposed to be mucked because they are prudent and take the future into account? 

The last point is the most important. In 2009 total government spending was over 40 percent of national income. One way or another, that is the real tax rate that US citizens ultimately face. 

It is to be expected that a finance reporter at a major newspaper and a liberal think tank economist know more about their subject of expertise than the Tea Partiers, who come from all walks of life and, if the left's reports are correct, are ignorant, backward, and racist. And yet somehow that's not the case. 

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