Bruce Bartlett

Last week, the Tax Foundation released new polling data on Americans' attitudes toward taxation. As always, it is interesting reading.

The most intriguing question to me is this one: "What is the maximum percentage of a person's income that should go to taxes -- that is, all taxes, state, federal and local?"

The question is ambiguous because it is not clear whether people are being asked about the effective rate of taxation (taxes as a share of income) or the marginal rate of taxation (that which applies to the last dollar earned). But either way, taxes are much higher than people think they should be.

According to the poll, 24 percent of people think all taxes should take less than 10 percent of a person's income. Another 43 percent think they should take less than 20 percent. And an additional 22 percent of people think the tax burden should be no more than 30 percent of income.

In other words, two-thirds of Americans think that 19 percent is the most anyone should pay, and 90 percent think that a tax rate of 29 percent should be the maximum.

How does this stack up against actual tax burdens? One way to look at it is to take taxes at all levels of government as a share of the gross domestic product -- the nation's total income. In 2005, taxes came to a little over $3.5 trillion and GDP was close to $12.5 trillion, for an effective tax rate of 28.5 percent.

Another way is to look at the Tax Foundation's "Tax Freedom Day," which calculates the day each year when we stop working for government and start working for ourselves. In effect, this measures taxes as a share of aggregate income. Last year, taxes took 29.1 percent of income by this measure, down from a recent high of 33.6 percent in 2000.

In short, the tax burden is well above the level that at least two-thirds of Americans think should be the maximum and right at the level that 90 percent of them believe should be the absolute limit.

If one thinks in terms of marginal rates, then taxes for many people are much, much higher than the vast majority of Americans think is appropriate. Looking just at the federal income tax, the top rate of taxation is 35 percent, which applies to taxable income over $336,550 (single and married). Those making more than $154,800 ($188,450 for married couples) must pay 33 percent on each additional dollar. The 28 percent bracket begins at $74,200 ($123,700 for couples), and the 25 percent bracket starts at an income of just $30,650 ($61,300 for couples).


Bruce Bartlett

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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