CHART: Taxes Soaring Past Highest Level Ever.
Well! There are a number of problems with this chart, so let’s tackle them in order.
1. The Y axis is tax revenue as a percentage of Gross Domestic Product, right? In truth, I don’t know. “Tax Burden” seems to be a wholly made-up term with no basis in reality. But it’s at least partially based on revenue, which is the most illogical possible methodology for determining the relative rate of taxation because it incorporates the distorting impact of economic performance.
The Heritage Foundation understands this, and also how to lie with statistics. The problem is that they aren’t nearly as good at lying with statistics as I am.
2. Nominal tax rates at a fixed percentage will necessarily generate more revenue in positive economic periods. This is because bad economic times trigger a variety of tax breaks, most notably loss carry-forwards, and typically come coupled with a precipitous decline in capital gains revenues as markets crash. That’s why there’s a big collapse in the 2005-2010 frame.
3. Note how the chart begins in 1975? This is because it marked the end of large declines in nominal tax rates for high-wage-earners as the post-WWII, post-Great-Society tax rates were rolled back. I’m sure whatever fantastical composite “Tax Burden” represents, but I’m sure it was larger “in US history” when top wage-earners were paying 80-90% of gross income.
4. Why no annotation for that bump in 85-90 from the Reagan tax increases?