It has been reported that Americans paid the lowest tax rates in 30 years to the federal government in 2009. This is due in part to the tax cuts President Obama sought to combat the Great Recession. This revelation comes from information released by Congressional budget analysts. A sharp decline in income — especially among the wealthiest Americans, who pay the highest tax rates — also played a role, according to the report by the nonpartisan Congressional Budget Office.
Household income fell 12% on average from 2007 to 2009, with income among the top 1% of earners decreasing by more than a third. Interestingly, during the very time the anti-tax movement was emerging, which some believe to have become the most powerful force in American politics, the data show that folks were sending the smallest portion of their income to the federal government since 1979. You may recall it was then that Republicans took control of the U.S. House of Representatives and the “no new taxes” message played a key role.
The average tax rate paid by all households during President Obama’s first year in office fell to 17.4%, down from 19.9% in 2007, according to the CBO. The 2009 rate was significantly lower than the previous low of 19.4% in 2003 and well below the 30-year average of 21%. The CBO reported that the tax burden — which includes all forms of federal levies, including income, payroll and corporate taxes — lightened for households across the board, the result in part of President Obama’s signature “Making Work Pay” tax credit and other tax cuts passed as part of the 2009 economic stimulus package. That’s something that has largely been ignored by the media and the cable talk-show hosts.
The lowest fifth of earners benefited the most, according to the CBO, sending just 1 percent of their before-tax income to the federal government in 2009, compared with 5.1% in 2007. The top fifth of earners paid 23.2%, compared with 24.7% in 2007. The average federal income tax rate also reached a new low, settling at 7.2% in 2009 — two points lower than in 2007, the CBO said. Although detailed data are available only through 2009, the CBO said more recent estimates suggest that effective tax rates remained at historically low levels in 2010 and 2011.
Tax rates have never been lower than under President Obama. But that doesn’t mean the government doesn’t need more revenue – it clearly does – and the need is quite evident. We have fought two of the longest and most expensive wars in U.S. history on borrowed money. Also, under the Bush Administration in 2003, Medicare Part D was passed by Congress, but with no accompanying funding source to pay for it. That created a $15.6 trillion unfunded liability for the federal government. This sort of thing was commonplace during that era. President Obama has pledged to let the George W. Bush-era tax cuts expire for the roughly 2% of households that make more than $250,000 a year. The President has urged lawmakers to extend the cuts through 2013 for the vast majority of households and to do it now. The cuts, enacted in 2001 and 2003, are scheduled to expire in January.
The President has fought hard to cut taxes for the middle class by a total of $3,600 a year. Because Americans are still fighting to make ends meet, Congress should do the right thing and extend the tax rates for the middle class. Hopefully, a miracle will happen and the GOP leadership in Congress will act in a bi-partisan manner, do the right thing on this critically important issue, and help the economic outlook for all Americans. If they don’t, the voters should remember it in November.
Source: Washington Post
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