A Shrinking Burden; Pain Withheld: For Many, Tax Time Is Losing Some of Its Bite
From a working mother cleaning hotel rooms for a little more than the minimum wage to a computer-company executive bringing home almost half a million dollars a year, Americans across the economic spectrum will pay less of their income in federal taxes this year than they did 20 years ago.</br></br>You read that right. It may be hard to believe when every street corner seems to have a politician claiming you're overtaxed and need a tax cut. But an analysis by the Deloitte & Touche accounting firm for The Washington Post shows that Reagan-era cuts for higher-income taxpayers, Clinton-era help for the working poor and targeted tax cuts contained in the 1997 balanced-budget agreement have all helped keep federal taxes for most Americans lower than they were in 1979.</br></br>"To the extent that the economy has made everybody better off, they're better off and they're not paying as much tax as they would have under the old rules," said Clint Stretch, director of tax policy for Deloitte & Touche.</br></br>This analysis might help explain why some of the oomph has gone out of the impact of tax-cut promises. Robert J. Dole's pledge to cut taxes across the board did little for his losing 1996 campaign against President Clinton. And recent polling indicates that Republican calls for another tax cut don't seem to excite many Americans. Most seem to prefer improving education or overhauling Social Security. Republicans argue that a tax cut is necessary because, by their analysis, when federal taxes are measured against the size of the overall economy, the federal tax burden is as high as it has been in more than half a century.</br></br>Federal tax revenue is projected by the Congressional Budget Office to hit 20.7 percent of the nation's gross domestic product this year (GDP is a common measure of the size of the economy). That would mark the second-highest level recorded since the dawn of the modern income tax in 1913. Tax revenue hit its highest level ever-- 20.9 percent of GDP--in 1944, when the federal government was extracting enormous amounts of tax revenue to finance World War II.