Winding down from tax season
April 17 came and went, and those who still had not completed their taxes were without a doubt, having a stress-infused day, trying to meet this year’s filing deadline. Although the IRS has already received most taxes, we still have all these numbers flowing through our minds. This is the time of year to really reevaluate what we pay in taxes, what our future tax plans are, and whether what we pay today differs at all to what we paid in previous eras. President Obama recently signed into law several tax increases, such as taxes on cigarettes, pharmaceuticals, medical services, and tax penalties on people without insurance.
However, during a town hall speech televised on CNBC on September 20 2010, President Obama said, “our tax rates are lower than they were under Ronald Reagan, and they’re much lower than they were under Dwight Eisenhower.” That claim alone raised a lot of red flags and sent people searching to find out if that is true.
Today, the top tax rate is 35 percent on incomes at $373,650 or over. According to the Tax Foundation, under Eisenhower’s presidency the top tax rate averaged 90 percent; much higher than today’s rate. During Reagan’s presidency, the top rate was lower than it is now under Obama for one year, but for the other seven years it was higher.
As great as the numbers sound on the surface, more than two-thirds of all taxes paid by Americans are not through income taxes. Why look just at these tax rates alone? It offers an incomplete look as it ignores payroll, sales, and property taxes, any of which could have been much lower in previous presidencies than they are today.
However it is done, tax breaks would give people more economic power by enabling them to spend more of their income, which would lead to more jobs, more business investments, and ultimately more Gross Domestic Product growth. If the greatest political powers recognized that tax cuts would actually improve the economy with its domino affect, then the country would be back on track to digging itself out of this deep recession.