37°Federal taxes historically low
Feb 09
2011
Taxes too high?
Actually, as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way.
And for the third straight year, American families and businesses will pay less in federal taxes than they did under former President George W. Bush, thanks to a weak economy and a growing number of tax breaks for the wealthy and poor alike.
Income tax payments this year will be nearly 13 percent lower than they were in 2008, the last full year of the Bush presidency. Corporate taxes will be lower by a third, according to projections by the nonpartisan Congressional Budget Office.
The poor economy is largely to blame, with corporate profits down and unemployment up. But so is a tax code that grows each year with new deductions, credits and exemptions. The result is that families making as much as $50,000 can avoid paying federal income taxes, if they have at least two dependent children. Low-income families can actually make a profit from the income tax, and the wealthy can significantly cut their payments.
"The current state of the tax code is simply indefensible," says Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee. "It is hemorrhaging revenue."
In the next few years, many can expect to pay more in taxes. Some increases were enacted as part of President Barack Obama's health care overhaul. And many states have raised taxes because — unlike the federal government — they have to balance their budgets each year. State tax receipts are projected to increase in all but seven states this year, according to the National Council of State Legislatures.
But in the third year of Obama's presidency, federal taxes are at historic lows. Tax receipts dropped sharply in 2009 as the economy sank into recession. They have since stabilized and are expected to grow by 3 percent this year. But federal tax revenues won't rebound to pre-recession levels until next year, according to CBO projections.
In the current budget year, federal tax receipts will be equal to 14.8 percent of the Gross Domestic Product, or GDP, the lowest level since Harry Truman was president. In Bush's last year in office, tax receipts were 17.5 percent of GDP, just below their 40-year average.
The lack of revenue, combined with big increases in spending, means the federal government will have to borrow 40 cents for every dollar it spends this year. The annual federal budget deficit is projected to reach a record $1.5 trillion.
Lawmakers from both political parties vow to tackle the nation's financial problems. Republicans in Congress promise big spending cuts, and Obama says he wants to reshape corporate taxes, closing loopholes to pay for lower overall rates. Few in Washington, however, are calling for big tax increases, at least in the short term.
"America's tax system is clearly broken," Donald Marron, a former economic adviser to Bush, told the Senate Budget Committee at a recent hearing. "It fails at its most basic task, which, lest we forget, is raising enough money to pay for the federal government."
At the request of The Associated Press, The Tax Institute at H&R Block compared 2008 and 2010 tax bills for families at various income levels, showing how their taxes have changed since Obama took office. Taxpayers are filing their 2010 tax returns this spring, while 2008 was the last full year that Bush was president. The scenarios assume that each family had the same income, filing status and number of dependent children in both years.
Income tax rates remain unchanged. But many taxpayers are seeing their bills drop under Obama because of more generous tax credits for college students, working families, homebuyers and the working poor. Many of the changes were enacted as part of the big economic stimulus package passed in 2009.
Congress also extended Bush-era tax cuts through 2012. Lawmakers let Obama's Making Work Pay tax credit expire at the end of 2010, but they replaced it with a one-year cut in Social Security payroll taxes that is already showing up in workers' paychecks.
Some scenarios:
— A married couple with two young children and a combined income of $25,000 will pay no federal income taxes for 2010. Instead, they'll get a payment of $7,085 — up from $6,700 in 2008. The larger payment comes mainly from a more generous Earned Income Tax Credit, which provides subsidies to the working poor. They will also get a $1,000-per-child tax credit. The example illustrates how complicated tax returns can be, even for low-income families, said Kathy Pickering, executive director of The Tax Institute at H&R Block.
— A married couple with two children, including one in college, and a combined income of $50,000 would pay no federal income taxes, instead getting a payment of $734 from the government this year. However, they did better in 2008 when they netted a $1,234 payment from the government. That's because Obama's Making Work Pay credit was worth less to them than the Bush-era economic stimulus payment they received in 2008.
— A single person making $50,000 while paying interest on a student loan would have a 2010 tax bill of $5,325 — a $63 decrease from 2008. The difference is due to an inflation-based increase in the standard deduction and personal exemption.
— A married couple with two children, including one in college, with some modest investments and a combined income of $200,000 will see their federal income tax bill drop by $780, to $28,496. Their tax bill is lower than in 2008 largely because itemized deductions are no longer limited for high-income families.
—A rich couple with two kids in college, larger investments and a combined income of $1 million will see their taxes drop by $6,740, to $277,699 in 2010. Their tax bill is lower than in 2008 because they were able to defer a larger portion of their income to retirement accounts, and because itemized deductions are no longer limited for high-income families.
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12:55 PM
Taxpayer says
I just KNEW 0bama was the magnificent source for LOWER TAXES. I just knew it. It is exactly like the two year extension of the George W. Bush tax cuts is has NOW the alchemy of 0bama's tax cuts. It must be MAGIC! Ha! Ha! What GREAT liberal propaganda. It is AMAZING! All from the AP-0bama. Now who would have figured? "You LIE!!!" (Rep. Joe Wilson, R-SC) Joe Wilson, you have NO idea how much TRUTH you blurted out for the world to see.
02:05 PM
6079 Smith W says
"Atlas Shrugged Part 1" out Apr. 15:
http://www.youtube.com/watch?v=6W07bFa4TzM&feature=player_embedded
I've started popping the popcorn!
POTUS Reagan once remarked that one of his favorite movies was "Reds."
I wonder if Mr. Obama will make ASP1 one of his favorites? He'd most likely cheer for Wesley Mooch.
12:22 PM
6079 Smith W says
As they say in TX: All hat, no cattle.
12:10 PM
goofus says
Not me Brutus, I need two more trolls please.
11:19 AM
brutus smith says
Moderators have removed this comment because it contained personal attacks. Discussion Guidelines11:08 AM
Pete says
Where does it STOP?!?!?!?!?!?
Tax breaks will now be given for breast-feeding supplies, the IRS says. The tax break changes come about in light of a Harvard study done by the Harvard Medical School that stated, “if 90 percent of mothers followed the standard medical advice of feeding infants only breast milk for their first six months, the United States could save $13 billion a year in health care costs and prevent the premature deaths of 900 infants each year from respiratory illness and other infections.”
Read more: http://www.thirdage.com/news/tax-breaks-offered-breastfeeding-mothers_2-11-2011#ixzz1DfQ70KxW
11:01 AM
6079 Smith W says
10:36 AM
goofus says
Brutus, if you want a million dollars, apply yourself and come up with a gourmet burger for McDonalds and go on the Food Network and get your own show. You could name the show The Progressive Burger Flipper.
09:54 AM
Pete says
I have been working steady. One unenjoyment check 20+ years ago.
How about you? When was the last time you saddled up to a government funded check? Last week? Yesterday? How much of a tax consumer are you currently or in the past?
09:52 AM
brutus smith says
Moderators have removed this comment because it contained personal attacks. Discussion Guidelines09:51 AM
brutus smith says
Who wants a failed contractor?
09:46 AM
goofus says
IMF CALLS FOR ALTERNATIVE TO $$ AS WORLD'S RESERVE
09:42 AM
6079 Smith W says
http://en.wikipedia.org/wiki/Zimbabwean_dollar
09:17 AM
Pete says
I do quite well actually. Not as good as I used to, but I get by without too much trouble.
And in this biz I may make the list when it rebounds. Burger flippers and basement dwellers, not so much of a chance
09:14 AM
brutus smith says
Failed contractors aren't worth much either.
07:15 PM
6079 Smith W says
02:57 PM
Pete says
Burger flippers, no matter how good, are not worth a million bucks.
Maybe if you bettered yourself you can pay that. But fry cook does not seem to appear on the Forbes list anywhere for highest paid professions.
02:36 PM
brutus smith says
Pay me a million and I'll gladly pay the 35%.
02:37 PM
Pete says
What I find funny is that the one(s) screaming for the 90% income tax rate on the wealthy is more than likely part of the almost HALF of US workers that pay no Federal Income Tax at all.
Would be interesting to see what their perspective on income tax is if the Feds took 35% of their pay every week
01:09 PM
6079 Smith W says
@ Factitious:
You assume that an 'ol socialist like bs wouldn't agree with 100%. Heck, he wants to put right-wingers in concentration camps! LOL.
High net worth individuals are responsible for approx. 30% of consumption in the U.S. and since consumer spending comprises about 70% of U.S. GDP, raising taxes appreciably on them will adversely affect the overall economy.
Increasing taxes on capital (investments) will cause it to go offshore where it will be more favorably rewarded.
I’m a big proponent of the Laffer Curve – there is an optimum point where taxation becomes detrimental to economic growth.
Remember when the Dems stupidly had their luxury tax on yachts? About the only thing that it did was cause businesses to close and thousands of workers to lose their jobs. It never produced the predicted revenue.
http://www.nytimes.com/1991/07/21/nyregion/new-luxury-tax-trimming-boat-sales.html
01:02 PM
goofus says
What about the cash only crowd. There is a ton of money out there that isn't taxed. People working for cash do exist, whether it's a friend doing a little side job on your house or the local street corner pharmaceutical sales rep. The current system is broken, we need to think about a major tax overhaul,if nothing less than doing away with the IRS and instituting a national sales tax. Everybody would then get taxed equally. Joe six pack and his case of beer or Richie Rich in his new BMW purchase.
12:37 PM
Factitious says
"Why stop there, why not 100%?"
SW, that's an ad absurdum arguement and you know it. One could likewise say, "If 90% is too high, why not reduce it to zero?"
Neither is going to happen because, wingnutty fantasy aside, this is a question of optimization.
Flat tax can't work because the end point is intense wealth concentration that's so unstable it will result in a police state and probable collapse.
When we had a 90% marginal tax rate, it could be reasonably argue that it was too high, or that it kicked in too low, but now taxes are much flatter and marginal rates much lower, and it just doesn't follow that even lower and flatter is better -- it's pretty obvious that we've overshot the mark.
Earned income should be taxed at a LOWER rate that investment income, and kick in later. Marginal rates need to be higher, but perhaps the brackets could be higher.
And the notion that you need to let the wealthies escape taxes so the poor can have jobs is just a propaganda-driven extortion scheme.
12:09 PM
6079 Smith W says
Twinkie writes:
Why stop there, why not 100%?
11:54 AM
goofus says
http://www.nationaljournal.com/whitehouse/exclusive-obama-to-cut-energy-assistance-for-the-poor-20110209 Oh Oh , they must mean rich.
11:53 AM
Pete says
McDonald's has announced that its fourth-quarter profit rise of 2 per cent was helped by more frequent customer visits to the fast-food giant.
McDonald's said its quarterly earnings rose to $1.24 billion, or $1.16 a share, from $1.22 billion, or $1.11 a share, in the same quarter of 2009.
Hey, do ya get a bonus since their profits were up?
11:49 AM
goofus says
http://www.omaha.com/article/20110210/NEWS01/702109884/0#get-ready-for-higher-food-prices
still harping on the rich, you know Brutus if you put as much energy into applying yourself and pull yourself out of the basement, as you do blogging, you could be rich tooo.
11:43 AM
kURT says
Find it interesting that both sides @ the top mentioned they are looking at ENTITELEMENTS. The word SocialSecurity was also mentioned by them, interesting.
11:39 AM
brutus smith says
The country was doing pretty good when the "affluent" were taxed at 90%.
10:22 AM
6079 Smith W says
@ Twinkie:
Yea it's all about those wars and not taxing the @#$% out of the affluent. LOL
Soc. Security, Medicare, Medicaid and new and improved ObieCare have absolutely nothing to do with the level of U.S. debt.
http://online.wsj.com/article/SB10001424052748704570104576124500502739410.html?KEYWORDS=Strong+growth+has
10:11 AM
brutus smith says
We're in debt because of health and welfare benefits?? I'm sure it's not because of 2 wars and tax cuts for the rich. Yeah right.
09:51 AM
6079 Smith W says
06:44 AM
Rabbi says
Lower taxes? Under a Democrat? How is this ? This can't be! Where's Taxpayer?
08:22 PM
44846GWP says
Winnie: Increased sales tax?? Where? Ohio? No.
08:20 PM
44846GWP says
Federal taxes are lower, I can tell by looking at what I take home every two weeks. If you want lower taxes and more take home pay, do the following. I. Claim 1 and not zero on your taxes. 2. Contribute as much as you can to your 4O1K in pre-tax dollars. 3. A tax refund is a loan you gave the government interest free, don't do it! A refund is NOT this great thing people think it is. 4. If possible sign up for a Flex spending card and pay for your medical bills with PRE-tax dollars. YOU can have an impact on how much you pay in taxes.
06:21 PM
Captain Gutz says
"The current state of the tax code is simply indefensible," says Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee. "It is hemorrhaging revenue."
Shouldn't the tax code be abolished quickly, before all the money is gone?
05:44 PM
grandmasgirl says
How in the world can low income people make a profit and the wealthy cut their payments? No wonder the country is broke. I pity the poor working middle class stiff!
05:14 PM
wetsu says
"America's tax system is clearly broken," Donald Marron, a former economic adviser to Bush, told the Senate Budget Committee at a recent hearing. "It fails at its most basic task, which, lest we forget, is raising enough money to pay for the federal government."
Therein still lies the problem. Left to their own devices they will never be able to hike taxes enough to satisfy their lust for the people's money. There will always be some pet project or "worthy" enterprise for which it will be necessary to liberate more and more. It's wonderful when they can gamble with somebody else's chips. We have to prioritize. There are great and vital social programs, but the feds have proven woefully inadequate where organizing multiple funding streams for even a single project is concerned, for example. We can point fingers all we want, the "correction" was coming sooner or later. The party based on the income of "boomers" is drying up.
05:02 PM
Taxed Enough Already says
I know they raised my taxes a year ago...I watched my check stub and sent a question to my HR director as to why I was getting less in my bi-weekly check and she explained that we did in fact get a tax increase...and guess what..I make less than $40K a year...so I know I'm not RICH!!!! I don't believe this article sorry SR.
04:23 PM
MiddleRight says
How did I know that Brutus would be first to comment and last to read the entire article?
"In the next few years, many can expect to pay more in taxes. Some increases were enacted as part of President Barack Obama's health care overhaul. And many states have raised taxes because — unlike the federal government — they have to balance their budgets each year. State tax receipts are projected to increase in all but seven states this year, according to the National Council of State Legislatures."
03:00 PM
6079 Smith W says
It’s a specious argument.
Lower Fed income tax rates have been more than offset over the past decade with higher state and local income taxes in addition to increased sales and service taxes.
02:44 PM
goofus says
http://www.cnsnews.com/news/article/obama-s-claim-he-did-not-raise-taxes-rej It was only too long to fit the lamestream media's agenda. Gee, income down, taxes less, who da thunk.
02:15 PM
DEEPsix says
THEY DID RAISE TAXES...
02:14 PM
goofus says
Moderators have removed this comment because it contained lengthy or off-topic excerpts from other websites. Discussion Guidelines12:49 PM
Pete says
But the left wing whack jobs wanted to RAISE taxes now didn't they?
"THE RICH MUST BE PUNISHED!"
Too bad you guys can't go out and get a real job and/or advance yourselves, instead of relying on the sweat and labor of others to fund you
12:43 PM
brutus smith says
Try telling the right wingnuts that.