WILLisms.com: Trivia Tidbit Of The Day: Part 485

« Quotational Therapy: Part 145 -- Obama, McCain & The 100 Years In Iraq Comment. | WILLisms.com | Trivia Tidbit Of The Day: Part 485 - Trade Beneficial To Us All. »

Trivia Tidbit Of The Day: Part 485 - Big Tax Increases On The Way.

They're Coming-

If Congress and the next President fail to extend the expiring Bush tax rates, this is what taxes will look like in America:

By historical standards, federal revenues relative to GDP, at 18.8% last year, are high. In the past 25 years, this level was only exceeded during the five years from 1996 to 2000. Still, we stand on the verge of a very large tax increase, one that will occur unless the next Congress and president agree to rescind it. Letting the Bush tax cuts expire will drive the personal income tax burden up by 25% – to its highest point relative to GDP in history. [The Coming Tax Bomb]
This would be the largest increase in personal income taxes since World War II. It would be more than twice as large as President Lyndon Johnson's surcharge to finance the war in Vietnam and the war on poverty. It would be more than twice the combined personal income tax increases under Presidents George H. W. Bush and Bill Clinton. The increase would push total federal government revenues relative to GDP to 20%.

Why this large tax increase? The tax code changes enacted in 2001 and 2003 are scheduled to expire at the end of 2010. If they do, statutory marginal tax rates will rise across the board; ranging from a 13% increase for the highest income households to a 50% increase in tax rates faced by lower-income households. The marriage penalty will be reimposed and the child credit cut by $500 per child. The long-term capital gains tax rate will rise by one-third (to 20% from 15%) and the top tax rate on dividends will nearly triple (to 39.6% from 15%). The estate tax will roar back from extinction at the same time, with a top rate of 55% and an exempt amount of only $600,000. Finally, the Alternative Minimum Tax will reach far deeper into the middle class, ensnaring 25 million tax filers in its web.

Let's be perfectly clear, here. This is not hypothetical, based on proposals and plans and programs announced by Obama or Clinton. No, this is absolutely what will happen without action. This is the auto-pilot scenario. This does not even count any of the additional tax hikes being tossed around right now.

How these enormous tax hikes would help the American economy or maximize liberty is a mystery.

-------------------------------------

Previous Trivia Tidbit: Lazy Or Lucky.

Posted by Will Franklin · 8 April 2008 01:35 PM

Comments

To put this change in perspective, the highest percentage of GDP represented from 1946 onward is 2000's 10.3%, in which incomes inflated by the Dot-Com Stock Market Bubble provided massive amounts of revenue into the government's coffers.

By contrast, in the recession that followed, personal income tax revenues plunged (along with incomes following the bursting of the unsustainable Dot-Com stock market bubble) until reaching a low of 7.4% in 2003.

And in case you're wondering, once these tax increases are fully phased in, the distribution of taxable income will shift so that it will only represent anywhere from 7.2% to 8.8% of GDP in any typical year (basically, the same as always.)

Of course, GDP will be lower too, so it's kind of a foolish thing to do in terms of hoping to generate tax revenue as they'll also be shrinking the pie (while hogging a bigger share of it.)

More fun, and links to source data, here!

Posted by: Ironman at April 8, 2008 03:11 PM